Our thoughts on the Vodafone/Sky Merger Application

We’ve recently submitted on the Vodafone & Sky merger application. This blog takes you through our submission, why we’ve done it, and what’s at stake for the Internet in New Zealand.

Our vision at InternetNZ is of a better world through a better Internet. Our mission is to promote the Internet’s benefits and uses, and protect its potential. We advocate the on-going development of an open and uncaptureable Internet, available to all New Zealanders.  

As content and telecommunications industries come closer together, we will face new challenges in how we keep the Internet an open network for collaboration, competition and creativity. At InternetNZ, we work on overcoming these challenges, and maintaining an open Internet, on behalf of New Zealand’s Internet community.

Our concern is that this merger will reduce competition and choice for New Zealanders in two markets that are already competitively constrained. The ISP market in New Zealand might feature over 90 different ISPs, but it is also dominated by the largest ISPs who, between the few of them, have the bulk of New Zealand’s Internet customers. In the PayTV market we have Sky, which is our only large provider, and it has a lock on premium sports content that New Zealanders love, like Rugby. Should we really let one of the big kids in the ISP territory to get into bed with the only big kid in the PayTV space, and will this merger help market concentration issues or make them worse?

We think that there’s a great big chance that it will make things worse, and that it will be New Zealand Internet users that will deal with the ramifications – reduced competition, choice and options.

This matter could be our first, big, network neutrality challenge in New Zealand, and that raises heaps of questions too. We believe that our current laws and regulations are poorly equipped for the scenarios that this merger may raise. Put more simply: Vodafone is one of the largest ISPs in New Zealand. If they merge with Sky they will have the ability to be non-neutral and they will also have an incentive. Ability in terms of that they will have so much content and traffic flowing through their platform; incentive in that they may want to make sure that consumers purchase the content that once belonged to Sky. What can we do about that if the worst happens?

Our submission focuses on these issues. We are concerned that the assurances made by Sky and Vodafone aren’t enough to minimise the risks that we face  - risks of reduced competition for both content and telecommunications, and risks of unfair treatment of content for anti-competitive ends. This is not because of any bad motives or deception on the part of the applicants - our concerns are built on an awareness of the changed circumstances and incentives the merger will create if approved.

The good faith assurances given by Sky and Vodafone don’t seem to be enough to manage these risks. In it’s current state, the proposed merger sees us, the Internet & paid TV consumers, having to buy Internet access and content in a market that has less competition, choice, and options, which isn’t right.

We urge the Commerce Commission to consider the Vodafone/Sky application with a  great deal of caution and care. If they approve this merger we believe the impacts would be significant and negative. If the issues that we have raised will not be appropriately managed, then the Commission should decline the application. If the applicants are willing to give clear assurances that address our concerns, we will no longer have any concerns about the merger.

There’s certainly a lot more detail to play out in this process. We will continue to share these thoughts about what is best for the Internet in New Zealand as that happens. Our end goal is to ensure that whatever comes from this merger helps to keep our Internet a platform that’s friendly to competition, collaboration and creation - an Internet that’s open.