Digital deal declares TV war

By RICHARD BRADDELL

All-out war between the two pay television providers, Sky and TelstraSaturn, looks set to break out with the conclusion of a long-awaited digital television partnership between TVNZ and TelstraSaturn.

Initially expected to be operational before the middle of the year, the partnership - foreshadowed in November - will now be transmitting by October at the latest.

The precise terms of the agreement reached yesterday have not been detailed, but in general terms it is about sharing costs and exploiting the capabilities of the two companies.

TelstraSaturn will lease satellite capacity on the Optus B1 satellite from TVNZ and the partners will work together on the acquisition of programming - an alliance that has already won them the broadcast rights to the All Black tour at the end of the year.

For TVNZ, the partnership involves huge savings, compared with the $200 million mentioned for its abandoned joint venture with British cable giant NTL.

In November, TVNZ chief executive Rick Ellis suggested the digital partnership with TelstraSaturn might cost somewhere between $3 million and $10 million.

The benefits for TelstraSaturn are that it gets national reach at a moderate cost and is freed from the geographic confines of its cable networks, which so far work only in Wellington and Christchurch.

TelstraSaturn will now compete head to head with Sky in digital satellite broadcasting, although its sport offering will not initially be as comprehensive.

It will use the joint venture to project a broader range of services, including mobile telephones and internet access, as well as long-distance calling, to a national audience previously difficult to reach.

As customers grow, it says, the economic justification for extending its fixed wire network will improve.

What is less clear is the extent to which TVNZ and TelstraSaturn will cooperate over the set-top boxes that enable users to receive the signal and order interactive services.

While the partners are dedicated to a common system, thus saving subscribers having to purchase multiple boxes for each service, customers wanting TVNZ's free-to-air service will simply buy a box and no further payments will be made.

Despite fierce lobbying by Sky, previous negotiations between it and TVNZ fell apart over the latter's refusal to allow TVNZ interactive services, although it was prepared to carry its two channels free of charge.

TelstraSaturn's corporate development manager, Deanne Weir, said the company saw little need to go straight to interactivity for its pay television service, and would be satisfied with one-way transmissions for the time being.

It plans to launch its pay television service using a refurbished set-top box provided by one of its parents, Austar United, which has replaced its subscribers' equipment in Australia with interactive-capable boxes. Broadcasting Minister Marian Hobbs said the deal was "welcome progress" towards TVNZ's being able to offer a digital television service to the public.