Spark, 2degrees formally declare opposition to Sky TV, Vodafone merger

Spark New Zealand and 2degrees have announced they formally opposed the proposed merger between Sky TV and Vodafone New Zealand in their submissions to the Commerce Commission.

Both rival telcos express their concern that the deal would adversely impact consumers as a result of creating a company willing and able to use premium live sports content to stifle competition.

Spark’s position
Although Spark New Zealand’s GM regulation John Wesley-Smith iterates the company is both “ready to compete” with the entity that would emerge from the merger and “generally supportive of market consolidation where it leads to better outcomes for consumers,” it is opposing the corporates’ coalescing because it doesn’t meet that hurdle.

“Based on Sky’s current wholesale market arrangements for premium sports content, we don’t believe the proposed merger is in the best interests of New Zealand consumers and so should not go ahead in its current form,” Mr Wesley-Smith says.

“Sky has a monopoly on rights for premium ‘national sports’ in New Zealand.  Given Kiwis’ love of these sports, they are must have rights for media content providers.

“As it stands right now, there isn’t a proper wholesale market for access to premium sports, and as a result New Zealanders have  few options for how they access that content.”

Mr Wesley-Smith notes that Sky's business model appears to be increasingly built around sports and that the proposed merger is likely to entrench its monopoly.

Spark’s concerns were focused on “the limited, unattractive wholesale options”  offered by Sky, which are “essentially about reselling Sky boxes,” an “outdated distribution model” Mr Wesley-Smith says Spark doesn’t want to be tied to.

“Our customers want better choices that let them watch their sports whenever and wherever they want to.”

According to Mr Wesley-Smith, Spark walked away from an earlier reselling deal with Sky three years ago because it wasn’t commercially viable – “and nothing has really changed since then.”

He says Spark believes that if the commission turns down the merger, Sky would be forced to make its sports content available online and on-demand via wholesale arrangements with a number of parties.

This would better serve consumers, Mr Wesley-Smith says, as well as increase the market for Sky’s content rights.

2degrees’ position
The submission from 2degrees, which is supported with reports analysis from London’s Plum Consulting and New Zealand’s Covec, largely echoes that of Spark in raising concerns about the proposed merger’s impact on broadband and mobile markets.

It cites overseas experience when an operator has a monopoly on live sports content and highlights the lack of safeguards against anti-competitive behaviour in New Zealand.

According to 2degrees director of corporate affairs and wholesale Mat Bolland, some of the most compelling arguments against such a merger were made by Vodafone when it highlighted the perils of monopolising premium content to UK regulator Ofcom in 2015.

In its submission, Vodafone stated that, “Ignoring the effects of ‘key content’ across wider and traditionally unrelated markets such as mobile or broadband-only customers, will have an enduring and irreversible effect, as the focus moves to TV bundled competition,” and that “if access to this content cannot be secured on fair, reasonable and non-discriminatory terms, competition and consumer choice across a variety of telecommunications markets will be severely harmed.”

Mr Bollard notes there is no legal requirement in New Zealand for Sky and Vodafone to provide competitors with content on fair, reasonable or non-discriminatory terms.

2degrees supports the Commerce Commission holding a conference “to explore the wide range to issues raised.”

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