Regulator probes Sky - TVNZ Igloo venture

Sky TV boss John Fellet. Photo / Natalie Slade

The Commerce Commission has launched an investigation into whether the new pay-TV platform Igloo breaches its merger rules.

The regulator is looking into whether joint venture partners Sky TV and Television New Zealand met obligations under Section 47 of the Commerce Act.

Igloo aims to launch a cut-price pay-TV service, providing 11 channels for about $25 a month.

A commission spokeswoman said Section 47 related to commission approval for a merger.

"A person must not acquire assets of a business or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market."

She declined to define the issues faced by Igloo in the investigation.

The commission was aware of timing for the planned start-up of Igloo in May or June, and the investigation would take account of those plans.

She declined to specify which market was being examined and whether it included dominance of the television content market, saying this would not be spelt out in an investigation.

The Igloo announcement in December marked a growing alliance between Sky and TVNZ.

While ostensibly a joint venture, Igloo is largely controlled by Sky TV.

It gives the state broadcaster a valuable foothold in pay TV, including the advent of internet downloads.

For Sky it creates a "Sky Lite" package for people who do not want to make a commitment to a full package, but allows them to be targeted to upgrade to a full service.

If successful, Igloo would likely make it more difficult for a rival pay TV venture to start here which would be good for both Sky and the state broadcaster.

Yesterday, Sky TV and TVNZ both confirmed approaches from the Commerce Commission and said they were helping the regulator with its inquiries.

But Sky TV chief executive John Fellet said the Commerce Commission action would not affect the planned launch of Igloo in second quarter of 2012.

"It might affect the merger but it would not affect Igloo. We were always going to do it," he said.

He assumed the commission had received a complaint but the commission declined to confirm or deny this, saying that it did not affect the handling of the investigation.

Channels planned for Igloo include BBC World News, UKTV, BBC Knowledge, Vibe, Kidzone24, MTV Hits, National Geographic, Animal Planet, Comedy Central, Food TV and TVNZ Heartland.

It will also have free-to-air channels.

Igloo expects to attract 50,000 subscribers within two years - providing about $10 million of one-off revenue from the set-top box and $15 million in subscriptions. One of Igloo's biggest selling points will be flexibility, with customers able to prepay each month and cancel at will.

None of the programming will be in high definition.

SKY LITE

* The Igloo service will offer a set-top box for less than $200 and 11 channels for about $25 a month.
* Sky has a 51 per cent share of Igloo and TVNZ has 49 per cent.
* The platform is due to start in May or June.
* Igloo will allow downloads of movies and sports for an additional charge.
* The two broadcasters say it will provide more consumer choice but critics say it will entrench their market dominance.