Did New Zealand spend $1.5 billion on a network for Sky TV?

A $45 per month Sky TV subscription is the centrepiece of Vodafone’s Red Home fibre internet package launched on Friday.

It’s a smart move combining broadband, phone and television that plays to Vodafone’s existing relationship with the pay TV monopoly.

At the press launch in a Herne Bay villa Vodafone head of consumer fixed services Steve Jackson said pay TV gives New Zealanders the incentive they need to move to fibre. That’s important given the slow uptake of residential fibre and the lack of any other obvious ‘killer application’ making fibre a must have.

Competition in fibre services, not media content

Vodafone deserves credit for identifying what customers want and finding a way to serve it. Thanks to Red Home, we have a vibrant competitive market in consumer-focused fibre internet.

Yet something disturbed me watching the impressive launch. Have New Zealanders been tricked into buying a spanking new delivery network for Sky?

On our behalf, the government has invested $1.5 billion of public money to seed the UFB network now being built by Northpower, Chorus, Enable and Ultrafast Fibre. Those companies are likely to tip in their own billions, by some estimates bringing the total cost to around $5 billion.

Real UFB cost is billions

On top of that, our largest telecommunications company was torn in two. At a further huge cost to investors. And, if the Coalition for Fair Internet Pricing has its numbers right, the thick end of another billion dollars will transfer from citizens to Chorus in a transaction the coalition describes as a copper tax.

Was all this just so that Sky can save on replacing its satellite and sell its content via fibre? Have we strengthened the monopoly?

It’s a question that was discussed before a single turf was cut on the UFB project. In fact it was discussed before the UFB contracts were announced. Nobody seems to have found any answers. Just don’t assume no-one is watching.

Commerce Commission warns Sky

Earlier today the Commerce Commission warned Sky about it contracts with service providers like Vodafone. The company escaped a fine for what the Commission calls historic breaches of competition law saying market changes reduce the opportunity for similar behaviour in the future. It also said it will continue to monitor Sky and will take the company to court if there is evidence of further breaches.

The Commerce Commission is a regulator. It acts like a police officer. What’s needed to deal with the relationship between Sky and companies selling fibre services is a fresh look at New Zealand media law – something our government seems reluctant to do.

In the meantime, the UFB’s real value lies in turbocharging New Zealand business – the residential network may be sold as a consumer product, but it will revolutionise life for hundreds of thousands of small companies working from suburban spare bedrooms, sheds and garages. That’s what our money pays for.

Any benefits to Sky are a byproduct. If that company becomes an abusive monopolist on the back of those benefits, a future government will have to step in and slap it down.