Chris Barton: Government intervention needed to prevent Sky's delaying tactics

Only in New Zealand would you have to buy two set-top boxes to watch free-to-air digital TV. That's thanks to Sky's delaying tactics about when it will make Prime available on the Freeview platform.

For consumers, government intervention is the obvious way out of such a ridiculous situation. Unfortunately, our government seems intent on keeping the mess intact.

It's odd, because there are compelling reasons for the Government itself to intervene too. They can make a cool $230 million by doing so - realising the so called "digital dividend" that comes from freeing up much-needed spectrum if analogue TV is switched off by 2015.

But rather than doing something that benefits both consumers and itself, our government has chosen to do something that benefits just one company - the pay TV monopolist Sky. For those who have watched the disastrous handling of telecommunications regulation here, none of this comes as any surprise.

Yet again, our government is favouring corporate profit ahead of public utility. Yet again, we have a government convinced a monopoly needs its help.

One of Dr Jonathan Coleman's first acts of sucking up to Sky as the new Broadcasting Minister was to dump the Reviews of Regulation for Digital Broadcasting and any thought of regulating competition in the broadcasting market.

His second was to convince TVNZ to drop its opposition to putting its Freeview digital channels 6 and 7 on Sky, without securing the reciprocal deal of getting Prime on to Freeview. Well done Jonathan.

But it's not entirely his fault. He's been outplayed - albeit too easily - by two of the best operators in the business. Chief executive John Fellet is the wiliest of old foxes, ably supported by Tony O'Brien, Sky's bold-as-brass lobbyist around Parliament, who knows the Beehive's backdoors better than any.

Together they must be congratulated for playing the long game with successive governments to ensure Sky's market dominance.

Fellet, who describes himself as "a libertarian by politics but a fundamentalist Christian by faith", treads the difficult ground of having a personal relationship with Jesus and running the Playboy Channel.

But somehow he manages. As he told Canvas in 2006, "I can't allow my religious beliefs to take money out of the pockets of owners by not providing what the consumers want."

By owners he means shareholders including Rupert Murdoch and by consumers he means the paying ones - not Prime consumers whom he treats as pawns in his game. It's a familiar anticompetitive tactic - delay, delay, delay - and give in only when the Government is about to regulate.

What's particularly annoying is that Sky knows sooner or later it has to move to the Freeview platform, but it's prepared to let consumers suffer while it stalls for competitive advantage.

At the moment, it has 47 per cent of New Zealand homes and Freeview has just over 14 per cent. That's 61 per cent of homes that now have digital TV - enough for any sensible government to have set a provisional switch-off date for analogue TV, a decision our government seems to have fallen asleep on.

What's even more annoying about Sky's cynical control of the market is that the transition to digital would be markedly sped up if Prime was on Freeview.

If Prime were to move to Freeview and if Sky kept feeding the channel with delayed rugby, league and other sports coverage, plus outstanding shows like True Blood, it's a pretty safe bet that Freeview uptake would rocket and by this time next year, 75 per cent of homes would have digital TV.

That would allow the Government to easily set a compulsory analogue TV switch-off date sometime in 2015 - and pick up $230 million in economic benefits in the process.

But while the Government leaves Sky in control, one imagines Sky can delay the digital dividend for as long as it pleases. An unchecked Sky poses other competition problems too - such as its buying up of almost all premium sports content. Other countries make sure one company doesn't have so much monopoly power that it can tax viewers at will for what they watch.

They have "must carry" rules that ensure free-to-air channels get to broadcast iconic sporting events. Or "antisiphoning" legislation which mandates against the purchasing of monopoly rights over events of national importance.

In cancelling the Reviews of Regulation for Digital Broadcasting, our government claims there is no need for the regulation of competition in the broadcasting market.

In doing so, it ignores the advice of the Ministry of Culture and Heritage which has very real concerns about Sky's dominance. It also ignores consumer and public interest in favour of letting the market decide. Here's another example of how that doesn't work.