Spark Sport has secured broadcast rights to cricket matches played in New Zealand. Photo / File
Spark Sport has secured broadcast rights to cricket matches played in New Zealand. Photo / File
COMMENT:
It's a pity that NZ Cricket didn't make the live games available to all retail platforms, on level playing field pricing between them, to encourage competition and innovation, rather than just one JV platform.
Cricket loses out in the long run, and so do Kiwi viewers and the economy.It could even be better to keep the Sky monopoly control over live cricket and test rugby than making this change.
The impact spreads well beyond just watching live games, for reasons that go to the heart of most telecommunications market failures and regulation. Spark's strong objections to Vodafone and Sky merging back in 2016 apply to Spark as well.
Let's pick up what Spark had to say to the Commerce Commission opposing that merger, and apply that to Spark's strategy today.
Mobile, landline and internet services are largely competitive markets. A key reason is that the separation of Chorus into the copper and fibre wholesale-only provider, and Spark as the retail provider, removed Spark's (then Telecom) monopoly control over the network.
As all telcos had to use Spark's network, Spark could compete against the others by allowing access to the monopoly service (the network) on terms that made it too hard to compete.
This could be done by bundling the monopoly service with services in competitive markets, largely neutering competition from other retail providers.
The price and quality wholesale terms were too poor to allow effective competition. That's the biggest problem in telecommunications and the main reason driving the Chorus/Spark split.
So, that monopoly control has gone, but it can now be replaced by a Spark getting, as Spark itself describes them, the monopoly live sports rights, especially rugby tests.
Monopoly live sport can be bundled with services in competitive markets, such as mobile and landline, to create bundles that cannot be supplied by others, as Spark noted when opposing the Vodafone/Sky merger. As Spark said, this "can easily translate into a re-monopolisation of network services".
Basically, get back the monopoly control.
When this happens, again as Spark said, there is less competition, prices increase, innovation reduces, and the one with the monopoly content rights can increase its market share meaning that competitors later don't have enough scale to acquire the rights next time round. Which also gets Spark in the same position as Sky has been to date: in control over the sports body.
Sky was the only viable provider, meaning it had monopoly control not the sports body when it should be the other way around I could quote plenty from Spark's submissions on the Vodafone/Sky merger on this, applying just as much to Spark.
Spark Sport also has the rights to this year's Rugby World Cup. Photo / File
Critically, that also means they know the obvious. Win the live sports rights – especially live rugby tests – and Spark can re-monopolise telecommunications, leading to the poor outcomes for Kiwis and the economy that led to Spark and Chorus being split in the first place.
And at this critical time for fibre uptake, that causes major problems. It also means that rural users will be slower to get fast broadband, or won't get it at all. Telcos competing with live sport packages are more likely to drive fast broadband into rural.
I can be sure that Spark will wholesale packages to its competitors, but I can also be sure, based on Spark's strategies in the past that, like any major telco internationally, this will be gamed and lead to the same sort of poor outcomes.
That is so unless the sports bodies do an exceptionally good job of ensuring there cannot be gaming, but that is hugely difficult and is mostly poorly done, as international experience shows. Telcos are very, very experienced in the tricks for gaming this and sports bodies aren't.
Taking a longer term perspective, the sports bodies are better to ensure, one way or another, competition in not for the market, by giving level playing field access to all competitors. Use the monopoly they have! If they don't, I'm sure there will be regulation to force this, one way or another, within 3 years. The problem is simply too big, as Spark knows from what it said in its opposition to the Vodafone/Sky merger.
Sports codes can drive this on their terms, or be forced to do it.
Mind you, the problems outlined above raise a real question as to whether acquisition of rights by a single Telco is permitted under the Commerce Act. Does that cause, in the words of the Act, substantially lessening of competition relative to other alternatives? Maybe even Sky retaining the rights, with the problems that entails, would be better for competition for example?
Sports bodies and content providers will need to tread carefully in this complex area. For example, wholesale commitments are so easily gamed that they will only be effective under the Act if they are, most unusually, watertight and strong. Textbooks have been written on this stuff.
• Lawyer Michael Wigley specialises in competition, technology and IP issues. He has acted for Spark rival 2degrees
