Sky TV critics find voice as Igloo joint venture looms

John Fellet. Photo / Natalie Slade

Sky Television chief executive John Fellet is confident its pay Igloo TV joint venture with Television New Zealand will start in May or June, despite a Commerce Commission investigation into the way it was set up.

Amid increasingly vocal criticism of Sky TV with the arrival of a new competitor on the pay TV market - Quickflix - Fellet says the launch will go ahead as planned. But the joint venture has come at a pivotal time in the market when critics of Sky's dominant role are becoming more vocal.

TelstraClear chief executive Dr Allan Freeth has been critical of its deal, which means it can charge only for programming it receives from Sky. Under the terms of its deal, it could leave "at any time" he said.

Freeth told the Herald yesterday he was not overly concerned about Igloo, but said arrangements in TelstraClear's deal with Sky were outdated.

He even hinted TelstraClear might abandon its "restrictive" deal for rebroadcasting Sky material and deal directly with Hollywood, a deal that would cost it money and pay TV customers in the short term. He said that criticism was "coming to a head".

But Government ministers strongly backed Sky TV.

Both Communications and ICT Minister Amy Adams and her predecessor, Steven Joyce, have praised Sky TV - and both insist they see no need to regulate pay TV.

Sky spokeswoman Kirsty Way defended restriction on unbundling content - sport is its key asset - saying New Zealand was a small country and Sky had delivered a good service for New Zealand.

Asked about criticism of Sky, Fellet dismissed some critics of Sky and its approach to content as "blaming Sky's successes for their problems".

He pointed a finger at TV3 owner MediaWorks, which called loudly for regulation at a recent Commerce Commission seminar, saying problems were because its owners, Ironbridge, had taken on too many debts - not because of content.

The arrival of Quickflix signals the days of unchallenged dominance may be over. The Government remains resolutely hands-off Sky, but it is still not clear whether the Commerce Commission will delve into the workings of a market Dr Freeth says is dysfunctional, but the Government says is working well.

As well as the Commerce Commission inquiry into Igloo, Sky is facing two other developments.

The first is a report by Telecommunications Commissioner Dr Ross Patterson on a study of the new Ultra Fast Broadband - the draft of which will be published on May 25.

UFB is to be the conduit for pay television services as it becomes focused on the internet.

The second is whether there are any barriers to uptake, such as content. There is no requirement for Dr Patterson to take this route, and even if that did lead to calls for the Government to regulate - which is far from certain - the Government would not be required to do so.

But Dr Patterson has presided over a rare examination of the pay TV sector as it merges with telephony. His term comes to an end soon, and he has confirmed that he has sought reappointment from the Government.

A well placed source said that Sky TV and TVNZ had lobbied against Patterson being reappointed, but both broadcasters rejected that assertion.

CLOUDY SKY
* New pay TV internet service Quickflix is up and running while the Sky-TVNZ joint venture Igloo TV is preparing to launch by June.
* The Commerce Commission is investigating whether Igloo breaks merger rules and looking at market dominance issues.
* A Telecommunications Commissioner's study report due out on May 25 on Ultra Fast Broadband might include an inquiry into content that would look at Sky TV trade practices.
* Big Sky content customer TelstraClear says it may exit content deal with Sky and deal directly with Hollywood for TV shows and movies.