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Writing at Newsroom.co.nz, Mark Jennings covers a weak financial result from Sky TV. He quotes boss John Fellet:

“Piracy has become our biggest competitor.

“The big problem is the increasing ease by which pirated content is accessible.

“Devices preloaded with piracy software enable users to access pirated content stored on servers overseas, from the comfort of their living room.”

There’s little question piracy happens. Every so often an email arrives from a company that offers exactly the kind of device Fellet blames for a poor financial result. You can buy a VPN and watch shows or sports that cost money on Sky on other nations’ free to air TV channels. It’s not hard.

But it’s not the whole story.

Keen consumers of paid services

Analyst firm IDC says New Zealanders are now among the world’s keenest buyers of paid online services. Some 22 percent of consumers here say services like Netflix and Lightbox are their main way of viewing entertainment.

That’s on a par with the US and a long way ahead of the worldwide figure of 14 percent.

We’re still behind North America when it comes to buying a streaming service. On the other side of the Pacific 41 percent pay for streaming TV, here just over a quarter do.

New Zealand wasted little time moving from near the bottom of the online service league to the top of the table. It is three years since Spark launched Lightbox, the first widely available local service. There were also services like the Premier League Pass which allowed fans to watch English football on digital devices.

Netflix

While many New Zealanders paid for an international version of Netflix, that service didn’t arrive in a local form until early 2015. Network companies like Chorus and ISPs like Orcon show graphs of how data consumption rates leaped after Netflix opened in New Zealand. It helps that these services arrived as the nationwide UFB fibre build hit its stride.

These numbers give the lie to the idea that New Zealanders are software pirates or spend a lot of time downloading illegal content.

Some of the discussion of this survey on social media centred on the poor entertainment choices had before streaming video was a practical option.

Fellet’s Sky TV enjoyed an effective monopoly on paid video entertainment for a generation. By overseas standards it is, or was, expensive. Sky was never fast bringing shows to New Zealand, that wasn’t an issue back when it started, but online spoilers and the buzz around big, popular shows meant that annoyed consumers.

Sky missed a trick with the internet. It still doesn’t make all content easy to buy online. Instead it uses out-of-date set top boxes. Its technology is more than a decade behind the times.

Download pirates

Customers found they could download shows ahead of Sky’s schedule. They can watch them when they like. They also realised they could get their material without paying. Many still do. But as the IDC evidence shows, New Zealanders are more willing to pay for TV than most people in the world.

While Sky could legitimately claim it was losing to pirates, there’s another side to the debate. Studios sold exclusive rights to Sky for vast fortunes, but did little to police how their products were distributed.

For a while New Zealand consumers could buy shows from international online services for a fraction the price charged by Sky. The pay TV company would have a legitimate claim against the studios, but chasing wealthy lawyered-up corporations is harder than busting kids who know how Bittorrent works.

Not just movies and sport

IDC says it isn’t just movies, sport and TV shows. New Zealanders are among the keenest users of all premium digital services. This includes online music streaming, cloud services, and console gaming. We are also among the highest users of Facebook with 81 percent of people who answered the survey using the service in the month before they were asked. The worldwide figure is 74 percent.

People here own an average of 6.5 digital devices and spend 56 hours, roughly half, of waking hours connected to online.
In general, we’re a practical breed. We tend to use digital services if there’s an obvious benefit. If the benefit is less clear, we’re more tentative. So just 18 percent of New Zealanders have used virtual reality in the past year. This compares with 38 percent worldwide.

To get these numbers IDC questions 30,000 adult consumers in 19 countries. 1400 of them were in New Zealand.

Sky TV to become Vodafone-SkyHere in New Zealand, television stories dominate the week’s telecommunications news.

Sky and Vodafone bow to the inevitable and call off their merger. Meanwhile TVNZ goes all in on streaming video.

For more than 40 years journalists have written about convergence. The telecommunication triple play idea: combining voice, data and television, is well over 20 years-old. I first heard about it in around 1990. That’s right, it pre-dates the commercial internet1.

Almost overnight, we’re on the other side of the revolution. Some bewildered people are looking back and wondering what happening. The rest of us wonder why it took so long to get here.

You say you want a revolution

The revolution is not that hard to understand, television uses electrical signals. They used to be analogue. Digital is better. Once TV was digital, it was only a matter of time before it became another stream of bits travelling through networks.

It took longer for the industry to grasp what that means in practice. Today we have Netflix and a cluster of junior would-be netflixen. We have binge viewing. We have on-demand viewing. Yacht races from across the world beam on to our mobile phones as we commute to work.

What we still don’t have is the choice and flexibility we get from other online media. That’s coming.

History lessons

If you look at the sweep of online history, a merger between Vodafone and Sky TV makes perfect sense. It made sense to the management and board of both companies. If you look at the deal with the eyes of a competition regulator, nixing the deal makes sense. It could have established a monster.

There is something odd about the Commerce Commission’s decision on the Vodafone-Sky merger. Yes, a merger would give one telco access to the crown jewels of sports programming. Yes, it could be exclusive access.

But Sky still has a monopoly on that material. A stand-alone Sky can cut an exclusive deal with a broadband company. Indeed, it’s quite possible that it will strike an exclusive deal with Vodafone. Today’s agreements and contracts between the two companies point in that direction.

Exclusive anyway?

So the Commerce Commission vetoed a merger because of something that will happen anyway. Am I alone thinking that is odd?

Whatever the logic, Sky and Vodafone have come to terms with the decision. The two issued a terse statement to the New Zealand Stock Exchange on Monday. It gave no reasons. But said they withdrew their High Court appeal protesting the Commerce Commission’s decision.

The marriage may be off, but the two companies remain good friends. The relationship is still on.

Free Sky Sport for Vodafone customers

In June Vodafone said it would give 12 months’ free Sky Sport to customers buying broadband and a basic Sky TV service. This is, more or less, the kind of arrangement the Commerce Commission worried about.

Elsewhere, Vodafone mobile customers can get a deal which includes free Sky Neon. And Sky is providing Vodafone with exclusive live coverage of All Blacks matches.

There’s a secondary commercial logic here, the phone company is now the team’s sponsor. Yet both deals have a whiff of the exclusivity that the Commerce Commission feared. Remember, in February the Commerce Commission said a proposed $3.5 billion merger would reduce competition.

Separate, but vertically-integrated

It said Sky and Vodafone had an opportunity to create a vertically-integrated business. That would give a single telco access to all popular sports broadcasting rights. There was a fear the market power wielded by the new business would lock out other potential bidders.

Now rivals fear the two non-merged companies are doing the same thing anyway. They are building a form of vertical integration without all the parts being in a single company.

The tragedy here is that, unlike Australia’s ACCC, our regulator can’t impose rules. That way it could OK the merger and insist the new company licence Sky content to all-comers.

There’s a ridiculous lack of broadcasting oversight in New Zealand. The Commerce Commission’s job is to ensure competition. We have intense telecommunication competition, but one company holds a TV sport monopoly.

TVNZ goes all-in on digital

From Monday, Television New Zealand will livestream channels One and Two. Viewers will be able to see all broadcast material over the internet on PCs, tablets and phones. Everything will be available online in HD 720p format. There will also be a new catch-up on-demand service.

Some material will be in box-set format for binge viewers. Programmes will be on Chromecast from next month and Apple TV later this year.

TVNZ plans to optimise its streaming service for mobile devices. It will also keep programmes available online for longer.

For now, there are no plans to do anything about television transmission. Although TVNZ says that could change depending on demand.

The ghost of Netflix

All these moves acknowledge the changing way people use television. The spectre of Netflix is somewhere there in the background.

The key problem for TVNZ is that it earns its revenue from advertising. This is more annoying and intrusive online than on broadcast TV.

If TVNZ wants to address Netflix head on, it might think about offering an ad-free paid option. Of course, it would need to have enough high quality material to make that viable. It could start by investing more in its news and current affairs programming.


  1. People started talking about the idea in the 1990s. I first heard the term around the time Kiwi Cable was building an HFC network on the Kapti Coast. The first serious attempts at triple play didn’t come until later. ↩︎

touched-by-the-hand-of-godNet neutrality is controversial in the US. It is not an issue in New Zealand. As telecommunications and media companies get closer, it is time to take another look.

What is net neutrality, why does it matter elsewhere and how might it move onto the agenda in New Zealand?

Net neutrality says internet companies can’t play favourites with network data. Nor can they pick and choose what services or organisations can use their networks.

Put in those terms, net neutrality is simple. It echoes the internet’s design where the network is blind to the packets it carries. Everything is a dumb pipe. The neutral internet treats all data as equal. Nothing has priority. It doesn’t block any data. It doesn’t slow any data.

For years that was how everything worked and everyone was happy.

Net neutrality versus profit

Then some US internet service providers decided this got in the way of profit. They decided they would like to pick and choose the traffic going through their pipes. They want to charge big online media companies extra to prioritise their traffic.

Something else changed. In the internet’s early days, no-one knew what traffic was going through the dumb pipes. Then the industry developed a technology called deep packet inspection.

This means service providers are no longer blind. They can look inside the data packets on their networks and see what traffic is passing through.

What they found made them less sympathetic to the idea of net neutrality.

The case for dropping net neutrality

This isn’t as one-sided as it might appear. Telecommunications companies are under pressure to invest more in providing bandwidth.

Yet intense competition drives margins down. Few make fortunes from providing basic internet services. Dumb pipes don’t make for high profits.

Contrast this with the billions media companies earn distributing content on telecommunications networks.

Service providers had a good idea that others make more from the internet than they do. Deep packet inspection confirmed their suspicions. Yet they only needed to turn to the finance pages of newspapers to see what was happening.

Enter Netflix

In 2015, Netflix, the video-streaming service, accounted for one-third of US internet traffic. Service providers had to build fatter dumb pipes. They needed to buy more bandwidth to keep episodes of Game of Thrones streaming into homes. Their costs went up yet they sat outside watching Netflix rake in the profits.

It’s not only Netflix and video streaming. Most big internet service providers are also telecommunications companies. Over-the-top services like Skype, which uses voice over IP to bypass phone tolls, hurts their business. Net neutrality helps telecommunication companies’ fiercest rivals and gives little back.

The argument that Netflix, Skype and others should pay to use fatter pipes makes sense from the telco point of view. You could see Netflix and similar large-scale content operations as free riders.

Yet if network owners override net neutrality, critics say it will break the internet.

Breaking the internet

By break the internet, they mean it will choke innovation. They argue the last 25 years of progress made since the internet opened for business would grind to a halt.

Online innovation only happened because entrepreneurs were free to try new ideas. Email, web, e-commerce, video and social media would not have emerged without a neutral net.

As you’d expect most positions on the net neutrality debate come down to self-interest. Yet ideology also plays a role.

Net politics

In America, it became political. Lawmakers took sides and government agencies weighed into the debate. In 2015 America’s Federal Communications Commission adopted the Open Internet Order. This enshrined the idea of net neutrality in US law.

Last year presidential candidates Ted Cruz and Marco Rubio tried to overturn the law. Their campaign may have succeeded.

“Ajit Pai, President Donald Trump’s choice to lead the Federal Communications Commission, is taking a page from his boss’ book and moving quickly to roll back regulations. In the process, he’s raising questions about the future of equal access to the internet.”

New York Public Radio 10/02/2017.

Europe has its own net neutrality debate. Some countries, the Netherlands and Slovenia, passed laws protecting it.

Net neutrality has never been a big issue in New Zealand. In part, the industry structure makes it hard for service providers to discriminate.

All land-based internet traffic passes through a wholesale layer. That means Chorus, Northpower, UFF and Enable Networks guarantee net neutrality. New Zealand land-based ISPs don’t have end-to-end control. It’s hard for them to be anything other than neutral.

Net neutrality not in New Zealand

Until now that’s been enough to keep net neutrality off the agenda. Only land-based networks had enough capacity. Only they could deliver the high-bandwidth traffic that might attract a higher price.

Technology, as always, moves on. Today 4G mobile networks carry streaming video content. Both Spark and Vodafone promote fixed wireless broadband as a landline replacement.

Added to this, carriers, Vodafone and Spark sell streaming video services. Discrimination might benefit them.

Vodafone’s potential merger with Sky is not dead. Spark has its own Lightbox service and a deal with Netflix. There could be a temptation or incentive to prioritise any of these.

Fixed wireless broadband

For now, mobile networks only carry a fraction of data traffic —well under ten percent. This may yet change if fixed wireless broadband grows.

Even so, mobile will remain small compared to fixed-line broadband services.

It doesn’t serve Vodafone or Spark’s interest to discriminate in fixed-line broadband. If either tried to do so with fixed-line broadband, rivals would step in. They’d make a lot of it in their marketing.

Tough competition is enough to counter the threat to fixed-line internet.

Mobile networks face less competitive pressure. Despite 2degrees the mobile market is not far from a duopoly1.

End-to-end control

Vodafone, Spark and 2degrees have end-to-end control over the traffic. There’s at least a potential to discriminate.

Today Spark and Vodafone have an ability to discriminate and a possible incentive to do so. That’s not to say they will, but they can.

This is what has changed. It could bring the net neutrality debate to New Zealand. The recent change in the US climate might embolden companies here to follow suit.

Or not.

Regulatory action

The Commerce Commission has never been backward when dealing with telecommunications companies. If there’s a whiff of reduced market competition, expect action.

Likewise, the Telecommunications Act gets revisited every five years or so. Many in Parliament would love to squash net neutrality.

Think back to earlier debates about internet issues. Our politicians are not up to speed.

The Commerce Commission is slow at times. Its processes are often ponderous. After bruising battles on other fronts, the last thing telcos want is another fight. It would be long, expensive and distracting.

Red-tape alone could be enough to keep net neutrality off the agenda. If not, there is the near certainty of market intervention. That and potential penalties will concentrate minds.

Update: Sarah Putt has another take on Net Neutrality at SP Media and talks about it on Radio NZ Nine to Noon.


  1. Yes, the point is debatable. One could argue a weak third player is only tolerated by the giants as it gives the appearance of full competition. ↩︎

Netflix tablet

There’s no comparison between Spark’s Netflix promotion the and the halted Vodafone-Sky deal.

One would have changed New Zealand’s telecommunications and media scene. The other is a marketing promotion.

Clever, perhaps. Timely, yes. But still marketing.

Netflix credit

Spark customers signing a two-year broadband contract will get a one-off credit on their Netflix subscription.

The deal only applies to unlimited data plans and is equal in value to a year’s standard Netflix subscription.

Netflix’s standard package costs $15 a month in New Zealand. The deal means Spark customers get a $180 credit against their Netflix bill to use as they choose.

Spark unlimited plans start at $105, so customers spend $2500 to get $180 worth of Netflix.

In money terms that’s less generous than the discounts some other ISPs offer. But Netflix is a magic name in the online media business.

While it is an aggressive move with the right video service, it’s not strategic.

The right video brand

Netflix is the big name in streaming TV and movies. It’s the brand everyone wants.

Spark needs a high profile deal to tie restless consumers to its brand.

Spark will continue to offer its own Lightbox online service as well.

The deal timing is interesting. It comes after the Commerce Commission turned down the proposed Vodafone-Sky merger. If that deal had gone through, it would be a handy face-saver for Spark which was wrongfooted by Vodafone.

Either way it underlines how telcos look to value-added services to sell their, otherwise, dumb pipes.

The telecommunications market rebooted after Telecom shed Chorus to win UFB contracts. At the time, most industry insiders expected the big players to compete on quality of service.

That never happened. No-one argues the big broadband companies offer anything other than indifferent customer service.

Adding value

Instead Vodafone and Spark sought other ways to compete. The game moved to adding value.

In Spark’s case the value-add includes home security and earlier attempts at bundling video entertainment. Spark dipped its toe in the media water with Lightbox and an investment in Coliseum Sports Media.

Vodafone has a partnership with Sky to do the same thing. The two companies may still reach a merger agreement.

At this stage the deal between Spark and Netflix is looser than any of the above. It’s just about marketing. Yet it gives Spark an opportunity to link its name with the biggest online media brand. Think of the move as a show of intent.

“Content provider”

Jason Paris, Spark Home Mobile and Business CEO talks of an ambition to become New Zealand’s preferred content provider. He says: “This partnership is a step on the road toward Spark becoming a go-to destination for media and entertainment.”

Maybe. But offering low-cost Netflix to customers already spending a lot of money doesn’t not make one a “go-to destination”. At best it makes Spark a deal broker.

For a media and entertainment to work in New Zealand Spark has to sharpen its act when it comes to bidding for sports rights. That means Rugby, lthough a tempting bundle of other popular sports including Cricket, Netball and Football might swing it.

Offering Netflix is a step in the right direction and a useful hey-look-over-here while a rival is in the spotlight. It’s not a strategy.

Writing at the NZ Herald Holly Ryan reports Sky is not happy about the Spark-Netflix deal

Premier League Pass

Chris Keall, writing at the NBR, reports Lightbox Sport, a joint venture between Coliseum Sports Media and Lightbox, has lost the New Zealand TV rights to English Premier League football.

Coliseum’s Premier League Pass is innovative. It is special:

  • Premier League Pass packages top-flight English football in a handy, innovative online format. Fans can watch it on a laptop, tablet, phone or stream to a TV. A single subscription allows viewers to choose any format.
  • Every game is available. Fans need never miss their favourite team’s match.
  • Viewers only pay for the one sport, not a rag-bag bundle of codes.
  • Fans can watch when it suits. All games stream live, most games remain online for a day allowing easy catch-up. A handful of games stay online all week.

$200 for a season seems reasonable and inexpensive compared with Sky Sport. To get a more limited football coverage from Sky would cost at least five or six times as much.

I watch live games on my iPad Pro. The picture quality is often, although not always, first rate. An uncontested VDSL connection helps there.

New Zealand’s awkward time zone is brutal on English football fans. Depending on the daylight saving, games are usually played sometime between one AM and mid-morning. I often wake at 4:00 to catch my team’s game live — sometimes with headphones under a warm duvet.

Other times I catch up at the breakfast table with a cup of tea.

Flexible

This flexibility is so much better than the alternatives. I found this out the hard way.

When Premier League Pass first appeared I signed up for the season. For a while I enjoyed it. Towards the end of the season I had to miss many games because my workload was so high I found myself too busy to watch, even early on weekend mornings.

So for the second season I decided to, ahem, use a VPN and watch the games broadcast on UK television. This approach was unsatisfactory. While Premier League Pass had the rights to every game, the BBC and ITV did not. I often missed important matches.

Worse, I could only watch these games at set times. It may have been possible to find a way of recording matches over the VPN, I never got there.

I left the worst part of this story to the end. Last season, the club I’ve supported since I was six years old, Chelsea, won the championship. I saw about eight or nine games that year. This explains why I was first in the queue when subscriptions for the current season went on sale.

And, yes, I know Chelsea has had an awful season. It’s been painful, but if Premier League Pass was in business next year, I’d sign on again. It’s just too good and so much better than the alternatives.

Next season

What will I do next season? It depends, if the new rights holder offers a similar service to Premier League Pass, I’ll be there.

Otherwise, I’ll sign up for Chelsea’s own TV service. It’s cheaper than Premier League Pass and includes European games, assuming there will be any next season. On the other hand, I won’t get to see many non-Chelsea games. That’s a pity.

Premier League Pass isn’t perfect. It doesn’t show cup games, European matches or internationals. I’d pay more if they could be added. Yet it was the best thing to happen to New Zealand TV sport in a long time.

For a short time Premier League Pass showed the potential of unbundled sports television. Friends from overseas, including those from England, often told me they were envious of the service. Let’s hope something similar returns in the future.

This story originally said the rights were lost by Coliseum Sports Media.