Television New Zealand soon to learn its fate in the digital world

By Michele Simpson

Friday 16th June 2000

The government is poised to announce its own plans for digital television after decisively shelving TVNZ's $339 million venture.

An advisory group, known as the Officials Committee Into Broadcasting (OCIB), is overdue to make its findings public two months after being set up by Broadcasting Minister Marian Hobbs to look at the issue.

Known as the "Wednesday group" due to its weekly meetings, the OCIB was supposed to be announcing its findings on digital television and wider broadcasting issues by the end of May.

Committee head Denis Clifford, a policy adviser in Prime Minister Helen Clark's office, said he hoped Ms Hobbs would sign off the papers prepared by the group this week. They would then be put to the cabinet.

Mr Clifford was tight-lipped on what the committee's papers would say but said nothing in them was "earth shattering." A report titled New Directions - TVNZ would set out the state broadcaster's future in digital television. The paper would also look at guidelines for selling off the digital spectrum and delved into regulating set-top boxes used for digital technology.

Government reports and letters from 1999 to February this year about TVNZ's moves into digital have been posted on TVNZ's nzoom.com website. They show the government considered three scenarios for TVNZ, including joining with Sky Television, adopting a "wait and see" approach and starting a digital service known as DTV.

DTV is explained in an October report by broking firm Ord Minnett which showed TVNZ was to have a 67% interest in a proposed joint venture between the state broadcaster and UK pay TV operator NTL.

There were plans to have a monthly subscription to obtain TV One, TV2 and channels covering fashion, shopping and weather as well as a 24-hour New Zealand news service. DTV was also looking to carry ethnic channels, similar to the Asian services recently launched on Sky, as well as a Maori channel.

The targeted launch date was October this year. Work was done to provide email and internet access on DTV, which would have been able to carry 60-100 channels.

Sky chief executive Nate Smith has been knocking at TVNZ's door ever since Sky launched its own digital satellite service last year. But TVNZ decided it was not interested and since then Sky has done a deal with CanWest's TV3.

Mr Smith wrote to Deputy Prime Minister Jim Anderson and Finance Minister Michael Cullen in February proposing that TV One and TV2 join the Sky service on a non-exclusive basis for free, with the public incurring the cost of a Sky decoder.

But TVNZ has vehemently opposed the Sky option because:

control of TVNZ's TV One and TV2 brands, estimated to be worth more than $580 million, would be lost to Sky and would inevitably become Sky brands;
Sky would not provide sufficient channel capacity and certainty or revenue opportunities;
over time TVNZ would become solely a content provider for Sky; and
it would weaken TVNZ's position and independence in the marketplace.

The benefits of joining Sky were the alliance's potential spinoffs, such as future sports rights arrangements.

The more cautious approach, dubbed the "wait and see" option by Mr Cullen's office, argued at some stage TVNZ, and therefore the Crown, would have to foot the bill to convert TV One and TV2 to digital transmission and estimates put that cost at $150-$600 million.

"However, it may be that a deferral of DTV would enable time for new technology to emerge which might reduce the cost of the digital transition," a report from the Minister of Finance's office said.

Estimates for DTV show it was not expected to make money for eight years.

Its total equity funding would have been $505 million, with TVNZ's 67% share accounting for $217 million after tax.

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