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Spark triggers Sky-fall?

Some exciting news was released on Friday -- Telecom has changed its name and is going to get into the pay TV marketplace.

Okay, the name-change is a bit lame -- as rebranding always is. Tens of millions of dollars get thrown at pony-tailed, latte-supping "brand consultants" and advertising agencies with absolutely no benefit to customers. In effect -- it puts the prices up without improving the quality of service.

However, Telecom ^H^H^H^H^H Spark's ShowMeTV service is not a stupid move by the telco. As its share of the NZ market continues to dwindle it has realised that it's time to strike out on a bold new path if it is to retain profitability in the years ahead.

As a monopoly, Telecom never really had to worry too much about delivering what the market was seeking. Safe in the knowledge that it was the only game in town, Telecom could simply serve up whatever it wanted to and customers had no options but to buy that offering.

But my, how things have changed!

Now, thanks to deregulation and active competition -- especially in the areas of mobile and internet connectivity, Telecom is seeing its profits dwindle faster than its own cost-cutting measures can compensate for.

Time for some testicular fortitude!

So, will ShowMeTV be the rescue raft that Spark so dearly needs as we approach the middle of the second decade of the 21st century?

Like all good commentators -- I say "maybe it is, maybe it's not" :-)

Until we have more information on exactly what ShowMeTV is, what content it will contain, how much it will cost and just what the delivery mechanisms will be -- there's no educated answer to that question.

On its own, it's unlikely that Spark can round up enough good quality content to compete with the likes of SkyTV or the free-to-air (FTA) broadcasters. However, if it partners with someone like Netflix or even Amazon's new "Prime Instant Video" service, then they might be on the right track.

However, regardless of what they eventually roll out, Spark will have a very uphill battle to capture Kiwis wallets and eyeballs. There are very many factors working against them.

Firstly, about half the country already has SkyTV and is paying a hefty monthly stipend for the privilege. Although you might think that huge swathes would defect to a cheaper service, never underestimate the power of inertia. Most people resist change and if you're paying $200 a month to SkyTV, you'll probably expect that something that costs 1/4 that price won't live up to its promise -- so why take the risk?

And then there is the matter of price...

Right now, tech-savvy Kiwis (and their friends) can use Netflix for about NZ$20 a month. This figure includes the Netflix subscription and the cost of a proxy that neatly sidesteps the geo-locks that Netflix attempts to impose to stop us from subscribing from this country. If Spark's pricing is more than NZ$40-$50, I expect that their presence will simply create even more interest in Netflix and the sidestepping tactics needed to subscribe.

Let's also not forget that SkyTV has wrapped up an enormous amount of the world's TV content -- even if they choose not to screen it here. By preemptively purchasing the rights to much of this stuff, they effectively lock competitors (such as ShowMeTV) out of the market. I see no way around that problem.

Finally, there's the issue of Telecom's network performance.

Even though I'm one of the very few who enjoys HD video streamed to their living room TV from distant shores via the Net, I still find it irritating that at certain times of the day -- things slow to a crawl and even SD videos start buffering. How on earth can Spark hope to roll out an on-demand video service over the same network?

If even 5% of the country signed up, the pressure on the backhaul would cripple the NZ internet infrastructure -- making it not only impossible to watch ShowMeTV but also impossible to engage in online gaming, watch YouTube vids or just about anything else that required a reasonable bandwidth or low latency connections.

Despite the talk of our wonderful UFB,there are only a handful of places where you can actually get it installed around the country.

So as you can see... there are many hurdles and obstacles in the way of ShowMeTV being a practical success.

Judging on public comment to date, it seems that there are a huge number of SkyTV subscribers who'd love to ditch their $100-$200/month stipend in favour of something cheaper and better.

If Spark can deliver a Netflix-likes service for under $50 a month and provide robust, reliable streaming to enough homes, they might just cause the Sky to fall.

But don't bet on it just yet.

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