Between the lines: Digital tango hard to fault

It was once said that Jack Matthews of Telstra Saturn is prepared to tango with just about anybody. Well, any other telecommunications company that would take an interest.

Self-confessed as keen to team up with other players, he unveiled a partnership with TVNZ yesterday that is probably his best effort so far in propelling the once-fledgling Wellington cable television provider into a national telecommunications company capable of putting the frighteners on Sky Television as well as Telecom.

The deal is one of those rare occasions when it is hard to find any flaws, and that's not just for Telstra Saturn.

At minimal cost, TVNZ enters the digital era, finds the capacity to meet its Government charter obligations and lays open options for interactive services it might want to introduce later.

For the Government, it provides a potential mechanism for national delivery of a Maori channel.

And while the arrangement envisages TVNZ remaining a free-to-air operator, it does not preclude its offering pay television in future.

But what the deal does most of all is signal a complete restructuring of the way television is offered.

At its most basic, anybody with a satellite dish will get perfect reception of TV One and TV2 and, probably, the other free-to-air channels in the likely event that they decide to join in.

Well, almost. In addition to the satellite dish, viewers will also need a decoder, otherwise known as a set-top box. And this is one of the most contentious issues in the new market.

As things stand, Mr Matthews expects to have a cheap set-top box capable of receiving the free-to-air channels available early next year.

But viewers who want access to pay television will need one that can detect that they have paid their subscription, just like those used by Sky now.

And here's the rub. Sky reckons its box should stay a Sky box. TVNZ and Telstra Saturn would like one that is common to all providers to save viewers expense.

The telecommunications inquiry agrees. But unbundling the set-top box like this would result in a profound separation of content from the network.

Sky has good reason to keep things as they are. It has the largest market share, and while it controls rugby rights it is likely to stay that way. But Sky should watch its step when the rugby rights come up for renewal.