Sky hits pause on online service

John Fellet says anger over the Sky Online service is countering efforts to attract customers. Photo / Kenny Rodger

Pay television giant Sky is planning to hit the pause button on its Sky Online site, saying the service does not make sense in the current New Zealand broadband market.

Chief executive John Fellet said data caps applied by internet service providers had been annoying too many customers who subscribed to Sky Online.

Sky Online is available on the internet for a $5 monthly fee and is distinct from the pay-per-view service on Sky On Demand.

Subscribers can sign up with Sky Online, open an account, and download unlimited content in accordance with their Sky plan.

Fellet said: "We did this to make subscribers feel better about our service but it has not been a great viewer experience."

Viewers were using up their broadband capacity and then becoming unhappy with Sky when they passed data limits and their internet service provider (ISP) dropped them back to dial-up speeds.

It was not Sky's fault, Fellet said, that it had become "the meat in the sandwich" with the online operation, countering efforts to attract customers.

Fellet said he personally had been dealing with two or three complaints each day and believed the extent of the problem was worse than that. Sky Online was likely to be put on hold, he said.

"But clearly it will come into its ownand we're not going to say it's over."

Sky has been trying to secure a deal for no data caps for Sky Online downloads.

Broadband with no data caps or "all you can eat" deals are more common overseas.

Many believe such deals are essential if new media like internet TV are to take off.

There has been an explosion in internet users accessing video content.

But with the wholesale price charged for bandwidth capacity there are no signs yet that any ISP could cover the costs of customers' rapidly expanding downloads of video.

Sky - which has invested heavily in online rights to its programmes - has not been alone in looking to open up the market.

Hybrid Television Services holds Australasian rights to TiVo, which has download capabilities and wants to offer an internet download service. Hybrid, one-third owned by TVNZ, has been talking to Kiwi telcos.

Sky launched its On Demand service this time last year, about 15 months after TVNZ had launched TVNZ ondemand.

Sky has been unable to make it work under a pay TV model. But TVNZ head of emerging markets Jason Paris says that TVNZ ondemand - funded through advertising attachments to programme downloads - has been profitable since March.

Unlike Sky, Paris insisted yesterday that TVNZ had received no complaints from viewers about breaching data caps.

TVNZ was the first broadcaster in Australasia to launch a full online catch-up service and nearly all of of its prime-time shows are available through this service. Each week nearly 250,000 New Zealanders stream 1.5 million shows to their homes, Paris says.

Some TVNZ traffic has been through a relationship with the state-owned ISP Orcon, which has allowed its subscribers to access the TVNZ ondemand website without affecting data caps.

Orcon executive Scott Bartlett said data caps remained an impediment partly because there was only one "pipeline" from New Zealand allowing internet traffic from the United States - the source of a lot of internet traffic.

He said there were also issues over Telecom charges for data transfers.

TV ON THE WEB

* New Zealand's internet users are demanding more video content.
* That is using up more bandwidth on broadband plans.
* Broadcasters are offering TV shows that can be downloaded on demand.
* TVNZ says it has found a way to make money from downloads.
* But Sky says that it does not make sense in the current broadband market.
* Data cap limits are slowing growth of new media like internet Protocol TV.