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More video options would drive UFB uptake: Commerce Commission

21 May 12

The Commerce Commission has released its draft report on the issues affecting the uptake of internet services on the government’s Ultra Fast Broadband (UFB) network, pinpointing video services – particularly entertainment-based ‘video on demand’ services – as a key driver.

The report, which is open for submissions until June 7, also notes that the cost of connecting to the network and paying for services will be the dominant factor hindering widespread uptake.

"Video content is likely to be the primary driver of consumers’ uptake of high speed broadband services over the next few years,” the report reads.

"The rate of uptake is likely to be higher if there is a diverse range of video on demand options available to consumers.”

Alternative online video services have been slow to take off in New Zealand due to Sky TV’s control over local broadcast rights.

Of the two most notable attempts, Australian content provider QuickFlix has been held back by a lack of content, while Maxnet sub-brand Fyx, which offered to help users bypass regional restrictions in order to access content direct from overseas, was forced to remove its so-called ‘global mode’ after only a few days on the market, citing ‘matters that require further consideration’.

The Commerce Commission last week announced it was launching an investigation into Sky’s contracts with New Zealand’s Internet Service Providers (ISPs) and whether they are hindering competition.

This latest report doesn’t mention that investigation, although it does detail a submission from QuickFlix targeting Sky.

"QuickFlix’s submission notes that existing content right arrangements in New Zealand limit QuickFlix’s offering in New Zealand compared to its Australian service,” the report reads.

"For example, Sky has content rights for HBO programming, which means that QuickFlix is unable to offer this premium content in New Zealand despite the fact that HBO is a major shareholder in the company. QuickFlix offers HBO content in Australia.”

For Sky’s part, CEO John Fellet is cited in the report saying that subscription video on demand and pay-per-view video on demand rights ‘for the most part are generally non-exclusive’.

At any rate, the report doesn’t seem to suggest regulation could be on the cards, concluding that QuickFlix’s mere entry into the market is ‘an early indication that a greater range of video services may be emerging in New Zealand’.

"Parties will be watching closely the evolution of the video content sector over the next few years and its impact on consumers’ uptake of high speed broadband.”

Go here to download the full report.