Peter A Thompson is a Senior Lecturer in the Department of Communication Studies at Unitec in Auckland. He has written extensively on the New Zealand broadcasting policies since 1999, and chaired the working party which reviewed public submissions on the redrafted version of the TVNZ Charter. He has also undertaken policy research projects for the Ministry for Culture and Heritage (on broadcasting funding-setting mechanisms in Organisation for Economic Cooperation and Development [OECD] countries) and NZ On Air (on approaches to measuring broadcasting quality).

Reviews Scrapped

In March 2009, the National-led government announced its decision to discontinue the Reviews of Regulation for Digital Broadcasting and Future of Content that had been planned since 2006 (initiated in 2008) by the Ministries for Culture and Heritage (MCH) and Economic Development (MED). The reviews had been intended to inform the development of broadcasting policy in a digital multimedia environment and entailed a substantial re-examination of regulatory principles and institutional arrangements across the media sector. The policy issues under review included regulator structures across different media types, convergence and technical standards, spectrum allocation, analogue switch-off*, distribution/access systems and network development, diversity and plurality, standards of content, public service and local content provisions, funding/investment, public media literacy and a range of other related matters.

* Convergence - the creation of new media platforms and blurring of previously discrete media technologies. Note that the convergence of technical forms might also blur regulatory arrangements e.g. should Internet delivery of television content fall under broadcasting or telecommunications regulation? Spectrum allocation: provisions for allocating radio frequencies for broadcasters (digital media forms typically use up less bandwidth but operate at higher frequencies compared with analogue forms). Analogue switch-off: the policy arrangements for ending the transmission of analogue media signals and having an all-digital broadcasting environment. For obvious reasons, there is a need for ensure a very high proportion of the population has digital reception equipment (such as a Freeview box) before it becomes politically acceptable to initiate analogue switch-off.

Most pertinent to the concerns of CAFCA, the reviews also focused on issues of market competition and raised important questions about the need for changes in regulatory conditions to ensure competition provided quality broadcasting services to New Zealand consumers and citizens. This included consideration of diversity and concentration in media ownership and service provision at different points in the “value chain” as well as the extent and form of market regulation needed to secure cultural, democratic and economic policy outcomes in the digital media age. One policy question of particular interest here concerned the availability of “premium” programming (notably key sports like rugby) and consideration of whether regulations (such as anti-siphoning) were needed prevent monopolistic control by a single broadcaster.

Sky Dominates The Pay TV Market

Sky has grown substantially since its initial operations commenced in 1990, although its national satellite service has operated only since 1997. Sky’s business model reflected News Corp’s subscription television operations in other countries such as the UK: Provide subsidised reception hardware to facilitate rapid market penetration, provide a wide range of channels to appeal to a broad range of potential subscribers, and, crucially, monopolise access to “must-have” content, especially live coverage of the most popular sports. In 2006, Sky bought out Prime Television (6), and thus acquired a presence in the free to air market in addition to its virtual monopoly in the pay television market. Although Sky had to absorb a lot of infrastructure costs (notably the set top box) in its earlier years of operation, according to its 2008 annual report (7), 46% of New Zealand households are now subscribers, and its audience share across all its channels is now 27%. It is important to note that Sky has now passed a point where its subscription income alone easily covers all its operating costs, including the programming rights for all its channels. In 2008, Sky reported earnings of $658 million of which $144 million was pre-tax profit (roughly 22%). Excluding further substantial outlays on infrastructure or investment in developing additional premium channel packages, the income from any expansion of the subscriber base will add directly to that profit margin. Some estimates suggest that had TVNZ not divested itself of its holdings in Sky in 1999, as part of National’s plans to ready it for privatisation, the assets could now be worth $850 million (8) (TVNZ bought the stake for $50m and sold it for $150m to INL) and TVNZ would have had a stake in a digital platform before the development of Freeview.

The significance of Sky’s growth for the free to air television operators is that their revenue streams are primarily dependent on commercial advertising, the level and stability of which is threatened by both the economic downturn and also the fragmentation of audiences across an ever-increasing range of channels and platforms. The growth of Sky’s profitability coincides with increased competition for premium content, especially the most popular “appointment viewing” programmes/series that can guarantee delivery of a substantial market share in prime time. Sky argues that it does not compete for the same premium content as its free to air rivals and denies that its ownership of Prime allows it to cross-subsidise its own free to air operation. It also cites the higher overall market share of the free to air channels as evidence that its market position is not a threat to competition. Sky’s business model does include a moderate level of advertising revenue, but from their perspective, the market share for any of their channels is very much a secondary concern to ensuring that, across their overall range of offerings, there is sufficient audience appeal to motivate continued subscription and encourage upgrades to premium packages such as the movie and sports channels. Once a customer subscribes, it makes relatively little difference to Sky which channel they watch (or even whether they watch any Sky content at all). It is here that the free to air operators have a concern that Sky’s purchasing power in the premium content rights market may reach a tipping point whereupon Sky will have sufficient economies of scale to a) routinely outbid them for an increasing proportion of that premium content, b) offset the costs of that content through marginal increases in subscription levels/rates and advertising revenue, and c) capture an increasing proportion of overall audience share from the free to air operators.

Vested Interests Against Regulation

It is difficult to ascertain whether the projections of either Sky or TVNZ and MediaWorks TV are the more compelling because both have vested economic interests in the policy outcomes. The free to air broadcasters want regulatory intervention to ensure that they can continue to compete for premium content in an increasingly uncertain commercial environment where the margins of profitability are becoming tighter, but to achieve this they want restrictions on what Sky regards as its core business model. Sky naturally argues that its commercial success is a result of a sound business investment strategy and that it should not have the continuing expansion of its services restricted. It was in this context that both the free to air operators and Sky engaged in several further, increasingly vehement, exchanges of views on regulation (9) following their initial submissions on the Review of Regulation. However, the increasing competitiveness of the free to air market and the growth of Sky’s market position is not merely a concern of TVNZ and MediaWorks TV. The Crown Company Monitoring Advisory Unit (CCMAU) noted the need to monitor the risk these trends posed to TVNZ’s market position in its 2008 briefing to incoming Ministers with shareholder responsibilities for State-owned companies (10).

Later in 2008, the Review of Regulation (hereafter ROR) process generated a subsequent report on possible policy options from the Offices of Ministers of Broadcasting and Communications (11), based on the MED and MCH’s analysis of the findings and stakeholder feedback. The report-back on options identified different policy options and noted a diversity of views on certain issues. In particular, it identified as yet unresolved tensions/conflicts of interest in regard to the appropriate institutional structure of any new regulatory body, funding agencies and public broadcaster arrangements (especially in regard to Maori), and the need for measures to ensure free to air access to events of national cultural significance. On that last issue, the report notes a divergence between the points of view of Sky (which supported the status quo) and the free to air broadcasters (which supported some sort of anti-siphoning regulation).

The Ministerial report-back on options document made a range of recommendations, most of which concerned the need for Cabinet to note the policy issues highlighted and direct the relevant ministries to conduct further research in order to develop a clearer basis for policy decisions. The report noted a need for further investigation on no less than 14 areas of policy, with particular attention to two policy areas: a) an investigation of “options for dealing with threats to diversity of local content and the future of public service broadcasting”, and b) a competition study “to look closely at any actual or potential constraints on access to premium content and access to platforms”. This latter study would “focus on market structure, market conduct, and market performance” and “identify where competition was workable and where it was not”. Moreover, this study would have a particular concern to “identify any markets characterised by participants with substantial market power and any evidence of harm caused by that market power to consumers” (Appendix 2, p50).

Failures Recognised In Market Competition

One might argue that the response was somewhat indecisive, given the range of issues identified as needing further study. It is not implausible that the Labour-led government did not want to have to make significant new policy decisions in the run-up to what would prove, in November 2008, to be their unsuccessful bid for a fourth consecutive term in office. However, some of the issues under consideration were doubtless complex and contentious, especially the question of introducing regulations to promote market competition. It is obvious that the reference to “market participants with substantial power” tacitly pointed to Sky, but the respective ministries would have recognised the need for convincing evidence of a threat to market competition in order to justify recommending interventions that would constrain Sky’s business model. Nevertheless, it is important to note that the potential threats to the diversity of local content and public broadcasting services and to access to premium content/platforms related to failures in market competition in the broadcasting sector were recognised unambiguously by both the MCH and MED. There was also agreement that more information was needed to identify appropriate policy responses.

The election of November 2008 saw a new National-led government take office, ending nine years of Labour-driven reforms of broadcasting policy. It must be said that despite Labour’s intention to redirect the trajectory of broadcasting policy away from the neoliberal commercialism of the 1990s, and to reintroduce cultural and democratic policy considerations into the reformed broadcasting portfolio, its endeavours were always half-hearted. Tensions between different ministerial agendas (notably the MCH, MED and Treasury) had repeatedly produced soggy compromises under Labour’s “third way” framework that attempted to pursue social democratic policies within the fiscal constraints of a neoliberal framework. The most obvious example was TVNZ which was restructured and given a public service Charter with a token level of funding from MCH. Unfortunately, this left TVNZ 90% dependent on commercial revenue with a continuing demand for dividends from the Treasury (12) (which saw TVNZ returning more to the Treasury than it received in MCH charter funding). The fragility of the still gestating institutional, funding and regulatory arrangements under Labour’s Programme of Action for public broadcasting, even after nine years of policy reform, made it easy for National to point to the failures of Labour’s policies to deliver the expected outcomes. This helped clear the way for a return to a more commercially driven policy model under the pretext of making changes necessary for the digital future. TVNZ’s charter funding was redirected to NZ On Air and made fully contestable, and the Charter itself is scheduled for ignominious abolition, despite the newly revised version having being endorsed by a Parliamentary Select Committee led by National MPs.

National Dismissed Regulation Review As “Labour Policy”

The Minister of Broadcasting, Jonathan Coleman, and the Minister of Communications and Information Technology, Steven Joyce, were nevertheless faced with portfolios whose immediate policy briefings were framed in terms of the ROR and the report calling for further policy research. Their response was to reject the need for any further policy studies and dismiss the ROR as a product of the Labour government’s policy. This claim was only partially true, because many of the regulatory issues reflected technical policy complexities arising from media convergence and digitalisation, rather than being driven by any ideological agenda. In that sense, the ROR entailed consideration of generic policy issues that would require strategic, well informed decisions from any subsequent government. Nevertheless, National evidently did not wish such considerations to constrain its policy agenda. It cancelled the planned study on market competition even though the $300,000 funding for the study had already been allocated, and attempted to claim the moral high ground by claiming that they were saving taxpayers’ money (13). Instead, Coleman and Joyce directed the MCH and MED to conduct a review of market competition based on the evidence from the public submissions. The resultant report, “Departmental Analysis of Competition in Broadcasting” (14), was released in April 2009. The report discusses a number of important regulatory matters stemming from the Review of Regulation for Digital Broadcasting and the Future of Content Regulation.

The content of the competition report will be outlined in due course. However, an issue that became immediately apparent was the number of discrepancies between the Government’s public statements and the actual contents of the report. In March 2009, the Minister of Broadcasting, Jonathan Coleman, indicated in a Media 7 interview (15) that a competition report undertaken by the Ministries for Culture and Heritage and Economic Development had concurred with the Government’s view that there was no need for regulation of competition in the broadcasting market. This was later confirmed and reinforced by a stakeholder statement circulated by the Minister of Broadcasting and a subsequent joint media release (16) from Jonathan Coleman and Steven Joyce. This seemed to suggest an anomalous reversal of policy thinking in the MED and MCH, given that the Ministerial report-back on options following the ROR submissions noted the need for further information in 14 policy areas and explicitly identified the need for a review of market competition in the broadcasting sector.

The stakeholder statement notes that the MCH and MED were asked to analyse the various submissions made as part of the Review of regulation initiative and assess the state of competition in the broadcasting market. It goes on to say that, “This officials’ analysis concluded that there is no strong case at present for the introduction of specific new regulation for the broadcasting sector. Further, that the report concluded that the current market appears workably competitive and that there are no compelling indications of future issues. We accept the officials’ analysis (sic).” It goes on to note that other areas of the review “may have had merit” but are not priorities for the Government. Those “other areas” include consideration of social and cultural broadcasting outcomes as well as the framework for regulating content in a multimedia environment - issues central to the Review of Regulation, which require policy decisions by Government regardless of political ideology. Again, the anomaly here is that the MCH and MED had already analysed the ROR stakeholder submissions and had concluded that there was a need for further studies.

The Ministers’ joint statement was entitled “Government Concludes Broadcasting Policy Review”. This notes that, “A departmental analysis of submissions made during the review process concluded that the current market appears workably competitive and that there are no compelling indications of future issues. It is also noted that there is currently no strong case for the introduction of specific new regulation for the broadcasting sector.” The statement subsequently noted that, with a few exceptions (including post-digital spectrum allocations for regional broadcasting and options for audiences with sensory disabilities), the remainder of the Review of Regulation would be discontinued.

Issues Of Concern Ignored

Anyone reading those statements at face value would be entitled to conclude that, after due consideration of all the evidence, the Government and all its policy advisors were satisfied that competition in the broadcasting market is fine and that apart from a few peripheral technical considerations, there are no issues of concern that require regulatory intervention. Most people have little interest in the details of broadcasting policy, and would not bother to consult the report. That evidently included the authors of the initial press reports on the issue, who presented the claims made in the Ministers’ news release without further interrogation (17).

It seems likely that the Ministerial press release was intended to discourage further interest or debate because the content of the actual report is markedly different from the way it was characterised by Jonathan Coleman and Steven Joyce. Most significantly, even a cursory examination of the Departmental “Analysis of Competition In Broadcasting” report (18) reveals that there were substantial areas of disagreement between the analyses of the Ministry for Culture and Heritage and the Ministry of Economic Development. In effect, there are two discrete (and in places, contradictory) sets of policy thinking presented alongside each other and throughout the report, there are separate, parallel perspectives attributed to the respective Ministries. Indeed, contrary to the Ministers’ suggestion that the officials had concurred in their conclusion that there was no need for regulatory intervention, it transpires that the competition report identifies two potential Government policy responses to the competition review’s conclusions about risks in the broadcasting market. Moreover, those two options are fundamentally different. The first option, supported by MCH, entails widening the definition of the 2001 Telecommunications Act to include broadcasting, and permit the Commissioner to proceed with an extended review of market competition (which MCH has been in favour of all along), and where required, permit government to “specify” broadcasting services/platforms to ensure access/fair competition (“designated” services are similar but also incur price controls, such as Telecom’s “Kiwishare” obligation). The second option, preferred by the MED, is essentially a “do nothing” approach, involving no more than issuing a statement of Government commitment to ensuring market competition and monitoring market developments. The text from Paragraph 6 is:

“Officials consider that there are two main options available to Ministers to address risks in the broadcasting market. These are:

Option One: Amend the Telecommunication Act to include broadcasting so that:

• A widened telecommunications Commissioner (a ‘Communications Commissioner’) may undertake market studies of broadcasting and make recommendations to ministers as to whether particular services (e.g. access to broadcasting platforms or premium content) should be regulated
• The Minister of Broadcasting (in consultation with the Minister of Communications and Information Technology) on the recommendation of the Commission, may add specific services to Schedule 1 by Order in Council (the effect of this is that the Communications Commissioner may regulate the specific service or facility but only if Ministers have first agreed that the service or facility should be regulated).

Option Two: Take no further action at this time, but

• Make a general statement about the Government’s determination to maintain a competitive and diversified broadcasting market, and
• Continue to keep a watching brief on market developments“.

Diametrically Opposed Policy Options

Thus the two policy options recommended to the Government are in fact diametrically opposed. However, the Government’s policy statements only acknowledge the MED’s laissez-faire alternative, while the MCH arguments are conspicuous by their absence. This seems disingenuous at best, but the extent to which National was being ideologically selective in its presentation of the facts becomes even more apparent when one examines the reasoning behind the respective Ministries’ positions. Paragraph 7 notes several reasons why the MCH prefers the pro-regulatory approach including;

• “Pro-actively manages risks relating to anti-competitive behaviour by Sky in relation to premium content and terms and conditions for access to its platform (satellite capacity, set-top box and EPG*) including the cumulative effects of incremental increases in Sky’s position in the market. The Sky platform is arguably an essential facility as any national broadcaster seeking to enter the market must have a presence on the Sky platform to be viable, due to the large share of households that access television via that platform.
• Enables the Commerce Commission to consider future potential market issues relating to a converged telecommunications and broadcasting market including the provision of broadcasting-type services over next-generation networks (NGN).
• Incentivises market participants to avoid anti-competitive behaviour.
• Enables faster responses to the development of competition issues: delaying responses until problems have occurred may be too late ”. * EPG = electronic programme guide, the system that allows you to use the remote easily when you have dozens of digital channels to choose from.

Paragraph 8, meanwhile, notes several reasons why the MED prefers the laissez-faire approach, including:

• “There is no strong case for regulating the broadcasting market at this time. The current market appears adequately competitive and there are no compelling indications of future issues [NB: This carefully worded extract was directly quoted in the Ministers’ media statement as if it were an agreed conclusion].
• If the Government has concerns about the commercial viability of free to air broadcasters there is a range of options available to it.
• General competition law is adequate to deal with many potential competition issues relating to anti-competitive activity (such as exclusionary contracts). While general competition law is not up to the job of dealing with issues relating to terms and conditions for access to essential facilities, no such facilities have been identified at this time. MED does not agree that the Sky platform is an essential facility for new broadcasters, as alternative transmission options are available.
• There are costs and risks with regulation and extending regulatory powers (including direct costs, the tendency for regulation to increase in scope and complexity over time, and the potential chilling effect on investment and innovation), so the case for new regulation needs to be strong.
• If it proves necessary in practice, it would be possible to extend the scope of the Telecommunication Act to include Broadcasting in relatively short order (if necessary as a matter of urgency) ”.

It is not difficult to discern the different philosophical and normative assumptions underpinning the MED and MCH positions here. However, whether one is predisposed towards neoliberal or social democratic political values, one indisputable point emerges: The analyses of the various stakeholder submissions on the Review of Regulation have not provided sufficient empirical evidence to permit unambiguous conclusions to be drawn about the state of competition in the broadcasting market. The report cannot provide a definitive answer to the questions it was intended to address based only on the evidence of stakeholder submissions.

As mentioned earlier, the submissions from Sky and TVNZ were the most extensive on the market competition issue and they put forward very different arguments reflecting their respective vested interests in the policy outcomes. Consequently, it is not possible to draw any objective conclusion about the risks to market competition from the stakeholder submissions alone. Providing an operational definition of market distortion is intrinsically problematic: It requires specification and measurement of variables and analysis of data using economic models whose validity is rendered open to challenge by the changes in the broadcasting market brought about by digitalisation and convergence (e.g. does one include online distribution of broadcasting-like content, and how does one calculate audience share for media that permit asynchronous content access*?). In this context of uncertainty, the question for policy makers is whether the appropriate response is to collect more independent data to make an informed decision (which is what the MCH has been calling for) or to use that uncertainty as a pretext to do nothing (which is what the MED recommended, and what the National government prefers). * Asynchronous content access - the ability to watch programmes “on demand” at a time the viewer chooses, rather than having to tune in at the time it is broadcast (note that this complicates the models used to measure audience ratings). Paragraph 13 (also para 64) accordingly acknowledges that the report “Is not a full competition study which would involve detailed review and analysis of the different markets in broadcasting, covering market structure, conduct and performance. Rather, it is a review of the case put forward in submissions for and against new regulation for the overall television broadcasting sector”.

Narrow Focus On Market Competition; Nothing On Public Service

The report’s scope is further circumscribed by the focus on market competition which precludes any detailed consideration of broadcasting policy concerns such as social-cultural/public service outcomes. The assumed terms of reference therefore preclude consideration of the need for broadcasting regulation on non-economic grounds. Paragraphs 25-34 are devoted to providing technical/legal definitions of market competition under the current legislation (the 1986 Commerce Act). It becomes apparent that this imposes the assumption that quite specific conditions need to be fulfilled in order to justify regulatory intervention. In effect, this allows the MED to “beg the question” on the need for more regulation: According to the current technical definitions of competition and the pretexts for regulatory intervention, one can find evidence to suggest that the conditions for intervention have not (yet) been met. The problem is that this precludes more substantive consideration of the more fundamental question of whether those conditions are appropriate, not only at the present time, but for the future (which reveals the significance of the careful emphasis on present tenses and adverbs in the Ministers’ statements).

On that point, Paragraph 27 of the competition report notes that although the MED considers that the Commerce Act’s prohibition of anti-competitive arrangements (section 27) and business acquisitions (section 47) “work reasonably well and effectively”, there is nevertheless “some uncertainty about the effectiveness of s27 and s47 in circumstances before a competitive market has developed and about the effectiveness of s47 in dealing with ‘creeping acquisitions’” (original emphasis). It would not be unreasonable to observe that on there is currently no substantial competition in the subscription television market and that Sky’s acquisition of Prime TV and potential future expansion of services through new digital platforms could arguably constitute “creeping acquisitions”. Indeed, the report explicitly acknowledges in paragraph 160 that there are doubts about whether the current legal framework is appropriate to the task in hand: “The Commerce Act (s.36 in particular) is acknowledged to be inadequate to deal with the competition problems that MCH considers are likely to arise. The timeframe for any remedy under the Act is likely to be ineffective”.

Sky’s Dominance In Sport Ace Card Vs Free To Air Broadcasters

This problem becomes even more evident in paragraphs 89-95, which discuss Sky’s growing market position. The Competition in Broadcasting report notes that: “On the access issue from a competition perspective, it does seem clear that Sky has secured a substantial share of key sports rights, particularly rugby, and that this is an important driver of the uptake of pay TV. This in turn puts considerable competitive pressure on free to air broadcasters.” (para 90). But these concerns are then moderated by reference to the Commerce Commission’s 2005 review of Sky’s acquisition of Prime (19), which concluded that Sky was not able to prevent access to premium content by its free to air competitors. Apart from the fact that Sky’s market share has grown considerably in the four years since then, this assumes the validity of Commerce Commission’s framework/criteria for assessing competition, when that is precisely one of the central issues that needs to be examined by any meaningful review of market competition.

Moreover, the claims in the Ministers’ statements that the report found “no compelling indications of future issues” need to be treated very carefully. The emphasis on the need for “strong” evidence to justify regulatory intervention is again premised on the presumed adequacy of existing competition law. Paragraph 128 notes that, “This review has not identified a strong case for introducing new regulation covering the broadcasting sector to address clear and current competition concerns (the review has not addressed the achievement of public service broadcasting objectives and makes no comment on whether new measures are merited here)” (emphasis added). Somewhat expediently, National’s decision to discontinue the components of the Review of Regulation dealing with social-cultural broadcasting outcomes removes the possibility of any forthcoming evidence coming to light that might justify new regulation on those grounds.

In other sections, the report actually acknowledges a strong degree of uncertainty about future scenarios. For example, paragraph 130 notes that “While there does not appear to be a good case for putting in place powers to regulate broadcasting to address current market circumstances, the question remains as to whether there are likely future developments that would warrant regulatory intervention for preventative or pre-emptive reasons” (original emphasis). This is clearly at odds with the Ministers’ decontextualised assertion that there are no compelling indications of any future issues requiring regulatory intervention, partly because such claims overlook the fact that there is equally no compelling evidence indicating that there are not any future issues requiring regulation. Indeed, the avoidance of future issues may well require anticipatory regulation to be developed in the present.

The report proceeds to examine a number of possible future scenarios throughout paragraphs 132-161, but there is substantial attention paid here to outlining the significant differences in perspective between MCH and MED. Again, it becomes apparent that there are two very different policy perspectives compressed into the same document here. As the broadcasting market evolves into more complex digital multimedia forms, radical uncertainties emerge in regard to revenue streams, audience demographics, technical standards, and the overall shape of market competition. Predicting the future is immensely difficult, not least because extending and rescinding regulatory arrangements can simultaneously create more certainty in one policy area while generating more uncertainty in another. The report’s conclusions (paragraphs 168-173) likewise point out that the MCH and MED have very different views on the appropriate Government response to the evidence. Paragraph 168 notes that:

“Officials agree that there are no clear and present competition concerns that justify setting up new regulation for broadcasting at this time. However, departments disagree on:

• The extent of future risks to the achievement of the Government’s objectives for the broadcasting market.
• Whether it is necessary or desirable to strengthen the regulatory regime for broadcasting and in particular extend the Telecommunications Act to cover broadcasting “ (emphasis added).

The literal meaning of the first sentence is highlighted in the Ministers’ statement, but it is evidently taken out of context, because there is no mention of the disagreement between MCH and MED. The supposed absence of “clear and present” competition concerns does not mean that there are no such concerns, and a cursory perusal of the Review submissions reveals very strong views to the contrary among several stakeholders. Meanwhile, the double emphasis on present tenses/adverbs points to the depth of uncertainty about the future and potential for future risks to market competition. Neither the Government nor the MCH nor the MED really know for sure.

In such a situation of policy uncertainty, the rational response would be to seek further evidence, preferably from an independent source. It is important to note that embarking on a further study of competition does not necessarily entail any specific regulatory response, but it would provide a stronger empirical basis to make informed decisions on the matter. This option would be intrinsically favourable neither to Sky nor the free to air broadcasters. However, deciding to do nothing certainly favours Sky because it leaves it free to expand its services and strengthen its market position at a time when its free to air rivals are coping with downturns in advertising revenue and increasing competition for audience attention across a range of media platforms. The possibility that the concerns of the free to air broadcasters about the state of competition might be valid is not being explored.

More Like “Yes Minister” Episode Than An Actual Broadcasting Policy

One therefore has to ask why the Government is being so selective in its willingness to listen to its own policy advisors. The Government has ruled out further consideration of the need for regulatory measures on social-cultural grounds. This ideological circumscription effectively quarantines and delegitimates any rationale for broadcasting regulation on the pretext of public service principles. This is ironic because the report does not provide sufficient evidence to draw clear policy conclusions about market competition and regulation on economic grounds alone. Nevertheless, by refusing to sanction a further economic study, it appears that National does not want to seek further information on the issue, just in case this provides answers to its policy questions that contradict its ulterior political agenda. This seems more like a comedy plot from Yes Minister than a serious approach to complex broadcasting policy issues in the 21 st Century.

Although the “Competition In Broadcasting” report is not regarded as a policy issue of central importance, it could nevertheless have significant political-economic, social and cultural consequences for New Zealand. The Government’s selectivity in its interpretation of the evidence suggests an almost Orwellian interest in expedient fictions over inconvenient truths. This is underlined by the curious disappearance of the links to the ROR documentation prior to the competition report on the MCH website. There are three possible explanations for National’s approach although these are not mutually incompatible:

The first possibility is that Government policy is being driven by an unrepentant neoliberal agenda to remove any vestiges of the State in the broadcasting market and restore the free rein of market forces - a “back to the 90’s” approach. Despite the poorly rationalised move to scrap the TVNZ Charter, Jonathan Coleman (20) has denied that he is motivated by neoliberal principles (although he alludes to other National colleagues holding such views.) The notion of an ideological approach to policy would certainly explain the Government’s willingness to overlook the empirical evidence where it does not align to the preferred policy. But neoliberalism by stealth can only be a short-term approach to policy, because it would eventually demand more radical policy revisions (such as the sale of public broadcasting assets) which the Government has promised not to do (in its first term, at least).

The second possibility is that the Ministers of Broadcasting and Communications & IT might have realised the scale and complexity of the policy issues facing them and are basically unwilling to commit the time, energy and resources required to deal with them. This “do nothing” approach (endorsed by the MED) would help explain the apparent preference for a laissez-faire approach, delegating complex policy decisions to the private sector on the assumption they understand the issues. However, industry cannot be left to resolve issues involving conflicts of interest among the broadcasters themselves; only the Government or an independent central regulator is in a realistic position to do this. Abandoning policy to industry on the assumption that it will deliver positive economic and social outcomes would constitute a serious abrogation of political responsibility.

The third possibility is that National is pursuing a broadcasting policy agenda which has somehow become strategically aligned to the business interests of Sky. The Government’s disinclination not only to regulate, but refusal to seek further evidence that might provide a pretext for regulation, seems bizarre when CCMAU and the MCH have both alerted the Ministers to the risks posed by Sky’s increasing dominance (and even the MED concedes that potential problems may arise in the future). Sky is the principal beneficiary of the “do nothing” approach because it will be able to pursue an expansion of its market share and strategic advantages on new platforms and in the content rights market with minimal hindrance while its rivals are struggling. This means that if any subsequent legislation were needed, the Government would have to retroactively reclaim market ground from Sky that had ostensibly been gained legally under the existing regulatory arrangements.

The Minister of Broadcasting’s admiring acknowledgement of Sky’s successful business model and reluctance to be seen to penalise the commercial interests of a major foreign corporation (21) suggests retroactive regulation would be politically untenable for National. There is little doubt that Sky would lobby hard and legally challenge any change in regulation that sought to claw back its market share or revenue and/or benefited its free to air rivals. National’s aversion to regulation may indicate that it wishes to maintain corporate confidence and an investor-friendly profile and is concerned that New Zealand’s reputation would be tarnished by prioritising civic interests over corporate profits. Such political expediency is hardly satisfactory, but it would go some way to explaining the alignment of policy to Sky’s interests without requiring speculation about more dubious forms of potential influence (22). Nevertheless, the exact reasons for this apparent coincidence of Government policy and private corporate interest remain unclear, and the matter surely warrants ongoing scrutiny.

Neoliberal Ideological Assumptions

Two important ideological assumptions emerge from an examination of National’s approach to broadcasting regulation. The first is a neoliberal conception of markets that implicitly regards an absence of regulation as a natural state of affairs and any form of external regulatory intervention as a source of market distortion or inefficiency. Apart from being substantively unsustainable, this formulation overlooks the fact that all capitalist markets presuppose a range of regulatory arrangements in order to function. This includes guarantees of property rights, enforcement of contract law, officially designated monetary and credit systems and a range of other implicit legal conditions. Thus markets are always embedded in broader social, cultural and political relations (23). This means that regulation is better understood as an enabler of particular forms of market activity, actively constituting “the economy”, rather than an extraneous constraining/damaging force. Under this formulation, even neoliberal “deregulation” is a form of active policy intervention, not just the removal of a barrier to trade, and even as it enables an intensification of some forms of market activity, it renders others less sustainable. In regard to broadcasting, this has very clear consequences: market liberalisation of commercial media may serve paying consumers efficiently but always comes at the expense of market failure in the delivery of public service outcomes.

Secondly, the assumption of the inviolable sanctity of corporate profits is essentially identical to the principle underpinning the notorious Multilateral Agreement on Investment* (MAI) unsuccessfully touted by the OECD during the 1990s, i.e. that governments cannot retroactively introduce legislation which harms the profits of corporate investors, even when those profits arise from legal loopholes or oversights whose removal is in the broader public interest. Recognition of these ideological assumptions helps to highlight the core problem with National’s approach to broadcasting regulation and its preference for the MED’s “do nothing” option : By the time the policy problems become apparent, and a politically acceptable pretext for regulation emerges, the genie is out of the bottle, so to speak, and it will be too late to introduce remedial legislation retroactively. In such a context, pre-emptive legislation in anticipation of future problems may well be necessary (or, failing that, at least a signal to the market that such legislation remains the Government’s prerogative). Although there needs to be strong grounds to justify regulatory intervention, it is equally imperative to demonstrate compelling grounds to justify not regulating . * See elsewhere in this issue for Murray Horton’s article ”‘Obsolete’! Christchurch City Council Quietly Scraps Its Progressive Foreign Investment Policy”, about how that Council, in 2009, has dropped its 1998 policy on the MAI and foreign investment in general. Ed.

Commercial Imperatives Dominate All Broadcasters

In regard to the specific policy concerns of CAFCA, it is nevertheless important to recognise that even if the Government were willing to proceed with a full review of broadcasting competition and consider introducing further regulation, this may do little to address concerns about either the extent of foreign ownership within the broadcasting sector, or the levels and quality of local content production and public service provision. The policy tensions between the free to air broadcasters and Sky reflect neither a public service versus commercial axis nor an indigenous versus foreign ownership axis. It is mainly a tension between two different commercial models of operation. With the exception of key sports events such as live rugby and the Olympics, where an argument for anti-siphoning legislation* might be made on grounds of public rights to events of national cultural interest, the primary concern about premium content rights relates to bidding power for the rights to the most popular foreign programming. Were all the broadcasters locally owned, it is unlikely that this would do very much to compensate for the market failures which ensue principally from the predominant commercial mode of operation in line with private shareholder interests. However, the Government’s willingness to prioritise the commercial interests of a private, foreign-owned company over the public’s legitimate cultural and democratic interests in broadcasting services does little to suggest that its disposition towards other market sectors would be any more progressive. * Anti-siphoning legislation: regulations prohibiting the restriction of particular forms of content (e.g. national sports) to subscription channels to ensure they are available to everyone on a free to air basis.