Dreams of media, telco marriage

By RICHARD BRADDELL

It doesn't sound like much, but Telecom's grab of 5.7 per cent of Independent Newspapers is the signal that the battle over the convergence of media and telecommunications in this country has truly arrived.

Assuming all goes as Telecom might hope, it will end up with news and information content it can push to business customers and to users of its internet portal Xtra.

Much more important, it might even revive its dream of carrying Sky Television content over its network, this time through a backdoor relationship via Sky's 49.5 per cent owner, INL.

In its dreams, perhaps. The fact is that at the moment Telecom doesn't have the network capability to distribute Sky itself, although that may not matter since it can "virtual bundle" Sky with its own services in a reselling arrangement.

Exploiting Telecom's customer base that way would be good, not just for Telecom's bottom line but also for Sky's flagging overall subscriber growth. If it works, it may also give Telecom the confidence to revive construction of the fibre optic broadband network it abandoned two years ago.

One hitch is possible: an exclusive relationship with Sky could well provoke either Clear Communications or the new Telstra Saturn to go to the courts in an attempt to block it yet again.

But the deal also signals that New Zealand's telecommunications players and media companies may polarise into two groups.

Telecom seemingly has thrown in its chips with INL. Logic suggests the new Telstra-Saturn alliance that combines traditional telephony with state-of-the-art broadband and Herald publisher Wilson & Horton might align in alliances that could also involve Vodafone.

Indeed, a sister company to Saturn, European broadband internet portal Chello, has had talks with Wilson & Horton for content on its New Zealand service when it starts over Saturn's network mid-year.

Such alliances would recognise practical realities which are driving media and telecommunications providers into each others' arms around the world.

While telcos and internet sites want good content to attract visitors, newspaper groups are every bit in need of new distribution channels as their traditional readership comes under attack from radio, television and, nowadays, the internet.

For an incumbent such as Telecom, the INL deal is important because it signals that it is making the transition to the new world.

For all its promise, the INL stake is still only a strategic investment whose potential has yet to be realised.

But it is also a chilling message that those players who are outside the main alliances stand a serious risk of being marginalised.