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Regulator probes Sky TV content contracts, approves Igloo JV

Wednesday 16th May 2012

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The Commerce Commission has launched a probe into Sky Network Television's content contracts with internet service providers that may be hindering competition in New Zealand’s pay-TV market.

The investigation was announced as the regulator approved Sky’s Igloo venture with Television New Zealand, a low-cost pay-TV platform. Chairman Mark Berry said its investigation into Igloo found potential difficulties new entrants face in winning a share of New Zealand's pay-TV market because of News Corp-controlled Sky’s deals with ISPs.

"While this was not part of this investigation, we are aware of concerns that access to content and Sky's contracts with internet service providers may be hindering competition," Berry said in the statement. "As a result, we have now opened a separate investigation under sections 27 and 36 of the Commerce Act."

Sky's content arrangements have come under greater scrutiny since the antitrust regulator launched an investigation into the drivers of broadband uptake after the government stumped up $1.5 billion to build a national high-speed internet fibre network.

The antitrust regulator decided Sky and TVNZ's Igloo joint venture, which will offer user-pays and free-to-air content over Sky TV’s spectrum and may be open to using ultra-fast broadband in the future, will make little difference to the level of competition in the pay-TV market.

"When we looked at two possible future scenarios, one with TVNZ's involvement in the joint venture, and one without, we found the level of competition was essentially unchanged," Berry said.

The deal puts relatively narrow restrictions on TVNZ relating to linear pay-TV via digital television, leaving scope for both broadcasters to compete for other pay-TV services including video on demand and pay-TV over the internet, Berry said.

"We also found that a number of other potential competitors may enter the market," he said.

Sky invested $12.75 million for its 51 percent share in Igloo while TVNZ invested $12.25 million for the remaining 49 percent. The platform is forecast to attract 7,000 subscribers at June 30, 2012 and 50,000 subscribers at June 30, 2013.

TVNZ has been increasing its footprint in new commercial ventures having shed its charter for public broadcasting, but has insisted this latest tie-up with Sky won't dent its commitment to free-to-air digital platform, Freeview.

Last week, ASX-listed supplier of streaming and online movies Quickflix took a jab at Sky's content arrangements, saying they are a barrier to the uptake of video internet services.

Sky failed in its bid to have content excluded from the commission’s review, which it had argued could become a quasi-regulatory inquiry if content arrangements were found to be a barrier to uptake.

Sky's shares fell 0.5 percent to $5.45 in trading yesterday, and have gained 3.4 percent this year.

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