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FetchTV puts NZ expansion on hold pending Sky-Vodafone merger

FetchTV has put its move into New Zealand on hold until the Commerce Commission rules on the proposed NZ$3.4 billion merger between Sky TV and Vodafone New Zealand.

FetchTV is one of a number of companies that have made submissions to the regulator arguing that the merger could potentially reduce competition and prevent access to premium content. FetchTV had previously announced that it was planning to bring its video platform to the New Zealand market, although with no set timetable.

However, CEO Scott Lorson told CommsDay that the company was now waiting on the regulatory outcome of the proposed merger, noting that the Commerce Commission could potentially introduce conditions similar to those that were secured during the Foxtel/Austar merger in 2012.

“[New Zealand expansion] is still very much on the agenda for 2017, but the landscape is fluid and we need a landing given our B2B approach and partnership model,” Lorson said, noting that the company was also now actively looking at expanding into Asia as well. In its submission to the Commerce Commission, FetchTV said that the SkyVodafone merger would have the effect of creating barriers to entry, effectively locking out FetchTV and other potential competitors from the New Zealand market and enabling the merged entity to foreclose competition.

In particular, it said the merger will enhance the ability and incentive for Sky to acquire content on an exclusive basis. FetchTV noted that similar concerns relating to access to content were recognised by the Australian Competition and Consumer Commission in its merger review of the acquisition of Austar by Foxtel.

“To ensure that competition was not foreclosed, Foxtel was required to provide undertakings that limited its ability to acquire content on an exclusive basis. These undertakings have been critical to ensuring the ability of competitors such as FetchTV to acquire a core content offering that have enabled it to compete with Foxtel in Australia. FetchTV encourages the NZCC to engage with the ACCC on its approach to help build an understanding of the impact of access to content on the relevant markets,” it stated in its submission.

VODAFONE RETURNS FIRE: FetchTV is not alone in raising concerns – carriers including Spark, 2degrees and Trustpower have also voiced their opposition to the proposed merger. A key objection cited by all three carriers is the potential to block access to premium content, particularly sport.

Concerns were also raised about competitive advantages available to Vodafone through content bundles. However, Vodafone New Zealand yesterday responded to the various issues raised, suggesting that the submissions primarily reflect commercial concerns of the third parties and were not realistic.

Its followup submission to the Commerce Commission argued that the proposed merger does nothing to prevent competitors packaging their products with additional services such as Wi-Fi, electricity, or music streaming as some of the already do today.

“Rivals will be forced to constantly rethink their offering to ensure the product they deliver is what consumers see as the best value,” said Vodafone New Zealand CEO Russell Stanners.

He also claimed that Sky content is – and will remain – available to wholesale to other providers. In its submission, Vodafone said that arguments made against the merger were premised on a “wholly unrealistic counterfactual” where Sky would offer bespoke packages at cut-down prices so as to allow third parties to pick and choose what content they want to add to their own packages.

“Spark and others offer no objective evidence as to why Sky would make this change. In particular, it does not address the commercial implications of this change for Sky and why such a material amendment to Sky's current approach should be seen as likely (or even rational),” it said.

According to the submission, Sky currently makes content available to Vodafone on wholesale terms that are significantly different to those envisaged by the third party submitters.

“Vodafone is an arm’s length willing taker of these wholesale terms and that has provided Sky with the opportunity to distribute its content to more customers. Vodafone has no reason to expect that Sky would depart from this model, not least because it would facilitate a disaggregation of content that Sky has to date not needed to consider,” it said.

Vodafone noted that Sky already offers OTT products, such as Neon and FanPass, that offer value alternatives for customers who do not wish to take its full satellite service. Stanners said that Vodafone has been commercially successful in reselling Sky content over several years on its wholesale terms, and that it would continue to do so in the event the merger should not go ahead.

The Commerce Commission is expected to make its final decision on the merger on November 11. Geoff Long, Commsday