The Commerce Commission have initiated a study of the issues that may affect the demand for high speed broadband in New Zealand. The study is important because the roll-out of the urban ultra fast broadband program is dependent on demand being high enough to ensure the program continues.
In the third of three papers exploring the issues that may affect the uptake of high speed broadband, the Commerce Commission has retained content arrangements in its investigation despite the objections of pay-TV provider Sky Network Television Ltd.
Sky TV's submission on the Terms of Reference for the study, pressed for the removal of content from the study, saying that it wasn’t relevant to the government’s objectives in rolling out its $1.35 billion broadband network. Sky was "concerned about the general approach that the commission will take in the proposed demand side study, and that it will become a quasi-regulatory inquiry,".
So why is it that Sky Network Television are so concerned about an investigation into demand issues? Because such an investigation by a regulator may result in regulation of content ownership rights in the broadcasting industry, should it be shown that demand is constrained by their business practices.
Access to services may be constrained in a number of ways. For example, in a free-to-air TV world, watching some All Black games live is possible only for those with a Sky decoder.
Another example was Telecom’s control of broadband services over its copper network created by a "lack of circuits", which resulted in a bottleneck that only Telecom could overcome. That bottleneck meant that a premium price for the service could be maintained because demand exceed capacity.
The open-access principles of the new ultra fast broadband fibre network were designed to avoid the possibility of bottlenecks being controlled by one company.
In a July 2010 article, Computer World magazine discussed the view of Telecommunications Commissioner Dr Ross Patterson, that the bottleneck would simply shift from the network to closer to the consumer. In the article, Dr Patterson used Singapore as an example of an open access, government-backed fibre network achieving only 30% uptake despite providing a free connection.
Dr Patterson sees an issue for New Zealand from the Singapore example - video over broadband is a driver of demand, but will New Zealanders buy into ultra fast broadband if they cannot watch the All Blacks live?
The ComCom issues paper confirmed that video delivered over broadband will be a major driver of broadband demand and that this has the potential to change the shape of the video content sector.
It also found that internationally, consumers are benefiting from 'triple play' service offerings through reduced prices and greater choice. Triple play is the bundling of telephone and broadband services with access to video as a core component. Currently in New Zealand, most bundled services are re-selling Sky content for the video part of the bundle.
Sky TV responded to the possible threat of regulation by making arrangements with most Internet Service Providers to resell their content.
What high speed broadband does is enable new content providers to enter the consumer market without the need to have transmission capabilities. Competition will follow but that is dependent on access to content which probably means even fiercer bidding by pay-TV channels for access to those All Black games.
But this is not an issue for rural people as most will not have fast broadband to be able to watch the All Blacks.