Dialogue: Sky casts cloud over TVNZ dream

With Television New Zealand's digital strategy in tatters, Sky has been left to exploit an unhealthy monopoly position, writes PAUL NORRIS.

Lurking within Television New Zealand's recent media release on its restructuring lies a phrase potent with hidden meaning, disguising a much bigger story.

The company's digital strategy, it says, "has effectively been completed". Read this as a euphemism for "our strategy has failed, all our grand dreams have crumbled to dust, we have tangled with Sky and lost".

Remember not so long ago, TVNZ announced an alliance with TelstraSaturn in which the partners would launch digital channels by satellite, both free-to-air and pay channels. They would have their own set-top boxes and would be offering a nationwide pay service to compete with Sky.

At a conference 16 months ago TVNZ's chief executive, Rick Ellis, laid out an ambitious plan to offer new digital channels, plus interactive services and access to the internet through the television set.

None of this will happen. TelstraSaturn got cold feet at the last minute and plans for its satellite service were "put on hold". It was contractually committed to spending $10 million a year on the satellite alone - money now simply pouring into thin air.

TVNZ's proposed launch should have happened last week. It, similarly, was postponed, with no new date, and in reality is unlikely to happen.

What has led to this extraordinary state of affairs? TVNZ's main problem is that it has failed to achieve an open-access agreement with Sky. Open access means that programmes and services offered by different providers can all be accessed by various different set-top boxes. Viewers can receive multiple services through one set-top box, the device needed to decode the digital signals.

TVNZ, in launching its digital channels, wanted viewers to buy a new-generation set-top box capable of receiving not only TVNZ's proposed new interactive services and the internet, but also Sky's digital programming, if the viewer wanted both services.

The other side of the open-access deal was that viewers with Sky boxes would have been able to get TV One and TV2 (currently they are not on the Sky platform), and any other new TVNZ digital channels.

But negotiations to these ends have broken down. Instead expect to see shortly a carriage deal, whereby Sky agrees to carry on its satellite TV One and TV2. This deal could also include new TVNZ channels such as an educational or health channel. These channels would not be competing with anything Sky is offering.

Forget any advanced interactive services TVNZ might want to develop and forget any idea of access to the internet through digital television.

Most of all, forget any idea that TVNZ is any longer in control of what services it can develop or offer. It will be in thrall to Sky. If Sky does not want to carry those services, it will simply say no.

That is why a carriage deal is not in TVNZ's best interests and never has been, and up to this point has been firmly resisted. TVNZ has consistently argued for open access and should not give Sky the right to carry its channels unless open access is secured.

What is even more important, a carriage deal without open access is not in the national interest.

This is because Sky will become the only digital delivery platform and the Sky box will effectively control the digital gateway to the home.

In the absence of other platforms and boxes, any programme provider will have to rely on Sky agreeing to carry its programmes. Sky will be able to exploit its monopoly position and impose what charges it sees fit.

Monopoly control over a key element in our digital future should certainly sound alarm bells, especially when the monopoly is in the hands of one of the great global media barons, Rupert Murdoch. He is hardly averse to using his power for political purposes and hardly celebrated for his respect for national cultures.

Furthermore, monopoly control of digital development will mean less choice for viewers and consumers. New Zealand is already well behind other countries in moving to digital.

Sky is about to introduce basic interactive services but these fall far short of the more sophisticated services viewers receive in Britain.

Sky's current box is not capable of browsing the web. The absence of competition will surely cause us to fall even further behind.

It was once hoped that the alliance between TVNZ and TelstraSaturn would provide competition in the digital and pay television market. But that dream should also be forgotten.

Saturn's Australian parent, Austar, has been bleeding money and cannot afford the continuing investment needed for TelstraSaturn's plans here. Expect that Telstra's interests as a provider of communication networks will prevail and that TelstraSaturn's pay television service will be merged with Sky digital. Truly Sky will have taken all.

Given that the national interest has been raised, where is the Government in all this? Concerned but ineffectual may be the answer.

A few weeks ago, there was a glimmer of hope when the Broadcasting Minister, Marian Hobbs, seemed to threaten regulation to encourage TVNZ and Sky into meaningful negotiation. She was even heard clearly endorsing the principle of open access.

But it is not in Sky's interest to move to open access. It is well established with a first-mover advantage, which it will try to hang on to for as long as possible. Just like Telecom.

So if open access is the policy objective, the Government may well have to impose it by legislation, as has been the case in other countries. It is pointless to wave the big stick of regulation if you are not prepared to use it.

The opportunity is available with the Telecommunications Bill entering its final stages. Yet the Government shows little appetite for regulation in this area of communications, in contrast to its determination to refocus TVNZ towards public service broadcasting and to restructure it accordingly.

But where TVNZ fits in the digital future is just as important. Indeed, we must ask whether the Government has a clear strategy for moving New Zealand into the digital age and for taking advantage of new services and opportunities.

These include reducing the digital divide by using the television set to access the internet.

That TVNZ's digital strategy has failed so starkly should also be seen as a failure of Government policy - a failure that will affect not only what we can see on our screens, but also our progress towards a genuine knowledge economy.

* Paul Norris, a former senior executive at TVNZ, is the head of the broadcasting school at the Christchurch Polytechnic.