KEY POINTS:
A Ministry for Culture and Heritage report on regulating digital media and telecommunications has deepened the stoush between free-to-air channels and Sky Television.
For free-to-air broadcasters like TVNZ and MediaWorks, the report's findings could represent the last chance to bring Sky under the regulatory umbrella before the expansion of the new media, such as internet-based TV.
The report leans heavily towards a super agency like Britain's powerful regulator Ofcom to oversee both sectors.
Sky has been largely left out of the regulatory loop since it started but any new body is expected to close those doors.
The report - Digital Broadcasting: Review of Regulations - looks at options for changing regulations in the digital sector to cope with convergence media like IPTV and video content on mobile phones.
It offers four options for dealing with problems facing the New Zealand media sector with options to do nothing or have limited changes to regulations.
The other two options are to set up a combined regulator for broadcasting and telecommunications.
The report author, former New Zealand On Air chief executive Jo Tyndall, questioned how New Zealand could maintain local content with our small population, fragmenting markets through new media and domination by overseas media organisations.
Cabinet papers attached to the report suggest that retaining the status quo is not an option.
And industry leaders are widely predicting the emergence of a super agency in the next three to four years.
The review is only a discussion paper and is awaiting industry response by April.
It is unlikely to be developed as legislation before this year's election.
But its publication has brought rivalry to a head between TVNZ (TV One, TV2) and MediaWorks (TV3 and C4) - and Sky which owns Prime TV.
As lobbyists approach politicians in the run-up to the election, parties will be asked to protect free-to-airs though the new Freeview digital platform or to keep Sky out of the regulatory loop.
Sky has expanded rapidly largely unregulated to the point the pay monopoly has been allowed to achieve what is unheard of overseas - the pay TV monopoly with huge buying power for TV shows has been able to buy a free-to-air channel and compete for shows.
The review published this week raises questions about the role of anti-siphoning rules - which require that some key cultural events such as sports must be shown on free-to-air TV.
Free-to-air broadcasters suggest provisions could be implemented forcing Sky to give up bidding for certain sports events.
But industry sources thought that highly unlikely given that Sky's deep pockets buying TV rights for sports have a big role in keeping professional sport afloat in this country. Sky TV chief executive John Fellet played down the impact of the report saying it catalogued every regulation from around the world.
"It's not saying that we have a problem here and looks at the solutions. Its like a laundry list that gives all of the laws that apply overseas and asks whether we need them here."
Meanwhile the discussion paper has surprised some in the advertising world raising issues as to whether advertising - which is currently self regulated - could be incorporated into the new super agency.
