Did we just spend $1.5 billion on a network for Sky TV?
A $45 per month Sky TV subscription is the centrepiece of Vodafone's Red Home fibre internet package launched on Friday.
It's a smart move combining broadband, phone and television that plays to Vodafone's existing relationship with the pay TV monopoly.
At the press launch in a Herne Bay villa
Vodafone head of consumer fixed services Steve Jackson said
packing pay TV will give New Zealanders the incentive they
need to move to fibre. That's an important point given the
relatively slow uptake of residential fibre and the lack of
any other obvious 'killer application' making fibre a must
Competition in fibre services, not media content
Vodafone deservers credit for identifying what customers want and finding a reasonably-priced way to serve it. Thanks to Red Home, we now have a vibrant competitive market in consumer-focused fibre internet.
Yet something disturbed me watching the impressive launch. Have New Zealanders been tricked into buying a spanking new delivery network for Sky?
On our behalf, the government
has invested $1.5 billion of public money to seed the UFB
network now being built by Northpower, Chorus, Enable and
Ultrafast Fibre. Those companies are likely to tip in their
own billions, by some estimates bringing the total cost to
around $5 billion.
Real UFB cost is billions
On top of that, our largest telecommunications company was torn in two. At a further huge cost to investors. And, if the Coalition for Fair Internet Pricing has its numbers right, the thick end of another million dollars will transfer from citizens to Chorus in a transaction the coalition describes as a copper tax.
Was all this just so that Sky can save on replacing its satellite and sell its content via fibre? Have we strengthened the monopoly?
It's a question that was
discussed before a single turf was cut on the UFB project.
In fact it was discussed before the UFB contracts were
announced. Nobody seems to have found any answers. Just
don't assume no-one is watching.
Commerce Commission warns Sky
Earlier today the Commerce Commission warned Sky about it contracts with service providers like Vodafone. The company escaped a fine for what the Commission calls historic breaches of competition law saying market changes reduce the opportunity for similar behaviour in the future. It also said it will continue to monitor Sky and will take the company to court if there is evidence of further breaches.
The Commerce Commission is a regulator. It acts like a police officer. What's really needed to deal with the relationship between Sky and companies selling fibre services is a fresh look at New Zealand media law - something our government seems reluctant to do.
In the meantime, the UFB's real value lies in turbocharging New Zealand business - the residential network may be sold as a consumer product, but it will revolutionise life for hundreds of thousands of small companies working from suburban spare bedrooms, sheds and garages. That's what our money is really paying for.
Any benefits to Sky are a byproduct. If that company becomes an abusive monopolist on the back of those benefits, a future government will have to step in and slap it down.