Television New Zealand and Telecom have been in advanced talks to join Sky TV's proposed new digital terrestrial pay television platform with 10 to 14 channels.

The question will be which of the existing channels on Sky satellite TV - such as SoHo and CNN - will have rights deals extended to cover digital terrestrial.

Before Christmas, Sky will be finalising the business plan for the new pay platform and any partners would be selected early in the New Year.

Sky TV chief executive John Fellet said Sky had been "open" to other parties joining the venture and held discussions with several players.


Fellet said two companies' proposals were advanced and had the front running though he declined to name them.

A well-placed industry source said they were TVNZ and Telecom. Both companies refused to comment on speculation.

Both are former stakeholders of Sky who withdrew in its early days before it began to return solid profit dividends, entrenching its dominance of the television market.

For TVNZ - freed of any social obligations and encouraged by the government to work with Sky - partnership would be a segue into pay-TV without challenging Sky.

Strategically it might also remove the prospect of Sky buying TV3 - a major strategic risk facing the state broadcaster.

For Telecom, being split into a retail division, it will ensure access and a relationship with Sky and its unregulated dominance of content.

Sky has the skills and resources to run the new platform on its own but a partnership would quell the growing criticism about its monopoly and deaden demands it should be regulated.

Tentatively branded "Igloo", the new platform is being built to coincide with the digital switchover between 2012 and 2014 when all analogue TV signals will be turned off.

Fellet said programme signals would be delivered through the air using TV masts that are used for existing free-to-air channels.

With the digital switch-over, New Zealanders will have to have a digital TV set a personal video recorder, or a decoder for Sky or Freeview to watch TV.

Fellet said the digital switch marked the biggest change for New Zealand television.

"Igloo" will offer an alternative between free-to-air digital channels on Freeview and a basic Sky digital package, which costs $47.66.

Fellet said its programming and pricing were still being worked out but research suggested it was unlikely to include sport. It would cost about $25 a month.

The new "Sky Lite" would be a boost for Sky uptake which has passed 50 per cent but faces a big challenge attracting new customers to pay-TV.

Sky investigations dubbed "Project Purple" were revealed by the Herald in August.

Sky has been looking at how to use its rights to UHF frequencies left over from when it had four analogue channels closed in March last year.

Under a "use it or lose it" obligation from the Government Sky has to find a use for the frequencies by 2015.

The analogue frequencies will be converted to digital, trebling the number of channels available.

The new platform will allow Sky to pick up customers who want more than a basic Freeview package but who did not want to pay for a Sky basic package.

* Sky is planning a pay-TV platform to run on frequencies left over from when it had analogue channels closed in March last year.
* It is expected to have 10 to 14 channels.
* It is likely to cost about $25 a month, lower than the $47.66 basic package for Sky's satellite service.