TVNZ decision pits Telstra against Sky

By RICHARD BRADDELL

Pay TV operator Sky Television will face the brunt of national competition from a digital satellite-to-the-home joint venture unveiled by TVNZ and Telstra Saturn yesterday.

While the joint venture so far amounts only to the memorandum of understanding signed in Auckland yesterday, both parties are confident it will culminate in a full agreement by Christmas.

The agreement would result in around 16 channels of free-to-air and pay television broadcast nationwide from an Optus satellite.

It would give TVNZ a cheap way of meeting its Government charter while accelerating Telstra Saturn's nationwide coverage.

Sky chief executive Nate Smith welcomed the joint venture as providing Sky's digital service access to TVNZ's free-to-air service because the digital signal could be picked up by Sky satellite dishes.

"I think it's great news," Mr Smith said.

But TVNZ spokesman Liam Jeory said that nothing had changed because although the free-to-air signal would be provided free to customers with the right decoders, in the absence of prior commercial agreement the key to its encoding would not be made available to Sky users.

Sky shares slipped 11c to $2.81 in a generally dull market.

While many of the details have still to be determined, TVNZ's Rick Ellis and Telstra Saturn's Jack Matthews said the deal had been worked on for some months and they were confident it would be completed by Christmas.

It was only media speculation that had prompted its announcement yesterday.

For Telstra Saturn, the agreement gives national coverage for its pay TV business in the second quarter of next year rather than as it completes the much more time consuming rollout of its wireline cable network.

It also enables it to develop a customer base of bundled long-distance, internet and pay TV customers before it constructs a local wireline network.

A joint-venture company will be created which will take over the management of TVNZ's recently acquired transponder on the Optus B1 satellite.

According to Mr Ellis, the cost to TVNZ will probably be at the lower end of a range between $3 million and $10 million, a far cry from the $200 million cost previously mentioned for TVNZ's now-abandoned digital rollout.

Given that the joint venture is bearing the development costs, it appears likely that Telstra Saturn will be chipping in the lion's share of its funding and will thus have control.

In addition to offering TVNZ's free-to-air TV One and TV Two channels, its capacity will be offered to the other free-to-air operators as well as a possible Maori channel.

The company will also provide a "digital head-end" for Telstra Saturn's pay television services. At present, Telstra Saturn's Wellington network is analogue, but it will be progressively converted to digital, from the time its Christchurch cable TV and telecommunications network becomes operational in February.

The joint venture will contract to TVNZ for the sale of television and related advertising and sponsorship for Telstra Saturn's subscription business.