Sky TV to become Vodafone-Sky

The Commerce Commission declined the proposed Vodafone-Sky merger saying it would decrease competition in telecommunications.

That seems right1. The important thing is that Sky has all the important rights tied up. It owns or sub-licenses all the popular sporting codes. Most of all it has the rights to Rugby.

At the moment Sky has a deal with Vodafone to sell its services over broadband as a bundle. But in practice anyone with a broadband account can buy services from Sky.

Vodafone says it doesn’t plan to stop Sky selling to all comers, but that’s not a legal obligation. It could have made a formal undertaking to continue the practice, but did not.

Vodafone-Sky exclusive

Therefore, Vodafone could at any point decide that its customers get access to some or all channels. The moment, say, an important sporting fixture, becomes a Vodafone-Sky exclusive, then all other broadband companies would be in trouble as their customers switch telecommunications service provider.

This will be twice as effective if exclusive Sky material is distributed to Vodafone mobile phones.

The temptation to do this will be great. It is also why Sky was worth the price Vodafone was prepared to pay.

After all, what is the point of having a monopoly if you can’t milk it?

Clearly the move has other telcos rattled. A little over half of all homes have Sky. There’s the potential for them to be locked out of those customers. This applies to both broadband and mobile.

Integration

There’s also vertical integration. Telcos love vertical integration. It is anti-competitive.

The point of the government building the UFB fibre network and splitting Chorus from Telecom was to break vertical integration.

Having said all that, TV over broadband, especially over fibre, is, in general, a good thing.

That would have been a positive. It would be good if Sky could find another way to move all its business online.

A last point worth mentioning. The Commerce Commission can only say yes or no to a proposal. Overseas regulators, like, say, the ACCC in Australia, can impose conditions. The Commerce Commission can not. So it was not an option for the regulator to say to Vodafone “you can buy Sky, but must continue selling video services to all comers”.

Had that been the case, the ruling may have gone differently.


  1. Right in the sense that a merger would decrease telecommunications industry competition. Let’s not pass rash judgement on the Commerce Commission decision.  ↩︎

5 thoughts on “First thoughts on Commerce Commission Vodafone-Sky ruling

  1. Apart from the sport offerings (which obviously are a major selling point for some), Sky TV is becoming less and less relevant to a growing number of people.

    Constant advertisements (on a paid service!), repeats, and ever increasing prices to try to make up for customers leaving in droves (anecdotally), makes Sky a less-than-compelling proposition for more and more private individuals.

    Especially with the likes of Netflix and to a lesser extent, Lightbox, and the far more accessible internet content on modern TVs.

  2. The moment, say, an important sporting fixture, becomes a Vodafone exclusive, then all other broadband companies would be in trouble as their customers switch telecommunications service provider.

    Does anyone anywhere have actual figures on the degree to which this intuitively credible fantasy occurs in a sustainable real world fashion?

    Anyone can buy customers, I think Spark currently offer two free (can’t sell) video streaming services, the BT EPL free bundle is beginning to be charged for. So short term, sure, you can buy customers, your existing customers will be a little put out and people who don’t stream video or prefer a third supplier. But the idea that the grief of two different businesses, two very different businesses, content and carriage, under the same roof is worth the illusion you have a killer USP (unique selling proposition)… nah.

    The difference by the way, between content and carriage is the former is “exclusive” and the latter “inclusive,” or it fails its common carriage public benefit purpose. That is, one succeeds in content by excluding those who aren’t interested enough to pay, while carriage is inclusive because everyone has something to move, say, power or other activity facilitated by impartial carriage, either directly or indirectly, so they find you and give you money. Could it be easier?

    Exclusivity might work for winner takes all markets, but in that market model, there are many losers.

    Inclusivity means common carriers have the largest potential market, and they don’t have to pay for content or creation, they only have to be paid to carry others’ goods.

    The value of trusted impartiality in the absence of monopoly cannot be overestimated. A common, non-discriminatory, impartial carriage reputation could be a selling point.

    If AT&T wants to offer most favoured nation status for TimeWarner, I hope it’s prepared to face a lot of suspicion from others who want to be carried for fee.

    Carriers may later discover that in chasing the glittering, ephemeral and illusory glamour of content, they are excluding and risking the whole world of common carriage for a fatuous flirtation with fashion.

    • That’s not quite the picture. Spark is offering the Netflix deal to existing customers as well as newcomers. I suspect that it won’t win much new business because Spark plans including Netflix can still cost more than rival ISP plans plus a Netflix subscription. On the other hand, it will stop a certain type of existing customer from drifting away.

      Curious also that the English Premier League was on sale here at $200 a year. (I was a customer). The service was great, but Spark’s partner was outbid by a wealthy media company that proceeded to throw the rights away. It offers an inferior alternative.

      There’s a case for regulating media. This is common overseas where one media company is not allowed to dominate the market or where a ring fence is put around the rights to certain products such as sport in Australia.

  3. Spark is offering the Netflix deal to existing customers

    Really the offer is to anyone who is prepared for 2 years of no choice. Sparky will credit anyone $179 towards Netflix services who agrees to that.

    a ring fence is put around the rights to certain products such as sport in Australia.

    Anti-siphoning. Why a carrier would risk further regulation, as a broadcaster is beyond me. I think the sport exclusive is an over-worked and over-credited illusion. It probably worked when the switching cost was a button on a remote to change the channel.

    Here we’re talking about changing the “ether” between you and the “broadcaster.” I’ve listened to tragic anecdotes of HelpDesk hell for technical naifs determined to conquer the new world and watch Lydia Ko. Switching remains non-trivial (some people have their email addresses @theirRSP.nz!)

    If any carrier tried to deny access by exclusive subscription to their carriage service would suffer outrageous and effective condemnation on the Twitters. There’s a lot of baggage from the past that needs to be dropped by refugees from the telecommunications past, and its regulators.

    If good sense don’t keep content and carriage independent I think the economics and politics of the Internet in 2017 will deter bad behaviour.

    And for the avoidance of doubt, I think it was a questionable “merger” that wouldn’t have benefit anyone and regulators saying no to it might be a stroke of luck for Vodafone. TBH, I’d like to have seen it play out in the real world of 2017, not in the fantasies of carriers who think they can make up their declining carriage margins by entering a market in which they have no experience, aptitude or pricing power.

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