John Drinnan: Sky TV dodges rare regulatory bullet

Sky TV chief executive John Fellet. Fellet says that if the company had been doing anything wrong, then the Commerce Commission would have "come after them". Photo / David White.

Sky Television has dodged a rare regulatory bullet with the Commerce Commission opting to not take legal action over anti-competitive programming supply contracts.

The inquiry related to Sky contracts supplying content for ISPs providing pay television services and restrictions on their obtaining content from other sources.

With the advent of Ultra Fast Broadband (UFB) the contracts could have a significant impact on whether new pay-TV services can provide unique content, or whether Sky can control what is shown.

The Commerce Commission inquiry reported back yesterday found "historical" breaches of Section 27 of the Commerce Act.

But its decision to not take legal proceedings extends Sky's charmed run as a largely unregulated virtual monopoly.

Sky chief executive John Fellet was relaxed about the findings.

Despite the inquiry findings of past contracts aimed at restricting competition, he did not believe Sky had done anything wrong.

"I guess if they had they would be coming after us," he said.

Contracting arrangements had developed over the years, said Fellet.

The Commerce Commission warning said that if further evidence came to light, it could issue legal proceedings.

The decision does not restrict other parties from taking legal action. Industry groups have been complaining for years about Sky's dominance of pay-TV, and have been increasingly focused on content.

Politicians have resisted calls for more oversight and transparency.

Now criticism of past Sky dominance has been backed up, it may reduce the vehemence with which politicians support its unregulated status. National has been a strong supporter but Labour also resisted stronger oversight of pay-TV.

Telecommunications Users Association of New Zealand chief executive Paul Brislen said the Commerce Commission approach reflected the limitations of the Commerce Act.

Since an investigation was launched Sky had renegotiated many of its contacts leading the Commission to say that the anti-competitive aspects restricting access to alternative programmes were historical and so no longer applied.

Market developments mean those particular parts of the contracts are unlikely to have that effect now or cause harm in the future, said commission chair Mark Berry.

"We believe that Sky entered into historical agreements with RSPs [retail services providers] that had the purpose, effect, or likely effect of substantially lessening competition," Berry said.

Significantly the Commission said: "There appeared to be sufficient content of all types available outside of Sky's exclusive contracts to put together an appealing pay TV package."