Telstra restricting Foxtel revolution

Summary:Telstra's half-ownership of Foxtel has long been a contentious issue — but its destructive effect on Foxtel's more-open pay-TV vision has rarely been clearer than in the telco's attempts to lock Foxtel to its own delivery network. In an era where improving telecommunications mean such close relationships are no longer necessary, such a deal would let Telstra create unnecessary obstacles to the realisation of the industry's triple-play vision.

The extent of the crossed wires in Australia's telecommunications industry can be astounding. It was only last week, after all, that I sat in on a very interesting presentation at Microsoft's ReMix10 developer conference in which Foxtel executive director of content, product and delivery innovation Patrick Delany proclaimed that Australia's broadband services were "not too bad"; that the future of pay TV was to be delivered to basically any device, anywhere, at any time; and that Foxtel was working to make it happen.

Now, we have word that Foxtel — presumably, the part of the company that Delany does not control — is seeking special dispensation from the ACCC to get permission to offer certain services solely to customers of Telstra BigPond broadband. This is an extraordinary move that, not surprisingly, immediately raised hackles at Optus, which has already backed away from pay TV because it has struggled to add value compared to Telstra's services. It also merited attention from the Competitive Carriers' Coalition, which referred to the move as a "brazen exploitation of market power".


Foxtel's Patrick Delany outlined a more open content vision than the company's ACCC undertaking would suggest (Credit: David Braue/ZDNet Australia)

Delany outlined a future where content can be delivered to all sorts of devices, but what he did not mention — or, one concedes it's possible, know — is that all of those devices would need to be owned by BigPond customers. This is a very different vision that would create a quite extraordinary government-granted monopoly over a content delivery service.

Pay TV has long been geographically limited to Telstra's hybrid fibre coaxial (HFC) network and, as Delany and many others have eagerly observed, is on the cusp of a massive uptick in penetration as the shift to IPTV means that content services are available to anybody with an internet connection. Providing Foxtel to the community at large would open Foxtel to millions of households outside the Telstra HFC network's 2.5 million-strong footprint — potentially expanding the provider's market manifold.

Consider Foxtel's mooted partnership with Microsoft, which is all set to deliver Foxtel — wrapped in a range of social-media, online-gaming, and other layers — to any Xbox 360 games console in Australia. This is a powerful, transformational change because it's catapulting what was originally a single-use device into something completely different to its original design. But does Foxtel seriously think the service will succeed if it's only available to people with Xbox and Telstra services?

TV just can't afford to be tied to one telco network anymore — and Foxtel's current conundrum illustrates exactly the problem with Telstra's continued stake in the content provider....this kind of deal smacks of narrow-minded protectionism rather than organic growth — and it would facilitate the kind of anti-competitive situation that the ACCC could never in good conscience allow.

TV just can't afford to be tied to one telco network anymore — and Foxtel's current conundrum illustrates exactly the problem with Telstra's continued stake in the content provider. Why, then, would Foxtel try to tie its services to Telstra's network? Well, because it's half-owned by Telstra, that's why. But this kind of deal smacks of narrow-minded protectionism rather than organic growth — and it would facilitate the kind of anti-competitive situation that the ACCC could never in good conscience allow.

Freed from Telstra's HFC connection, Foxtel could be delivered to anybody, anywhere, as long as they have a decent broadband connection. This is already possible for free-to-air TV using services such as myTVR.com.au or computer-based PVRs like eyeTV, with which I regularly impress friends by streaming live TV straight to my iPhone.

Rapid commoditisation of broadcast programming, perpetuated by BitTorrent but solidified in the networks' online catchup-TV services, has turned TV from something you sit in front of, into something you consume when and where you want it. Despite some early hiccups and resistance, the industry has this year managed to embrace the concept — and I'd suggest TV fans have a much richer experience for it.

Delany's vision, as I heard it, had nothing to do with Telstra specifically, and everything to do with opening Foxtel's content to the world. Previously, the only realistic way to deliver IPTV has been to set up quota-free arrangements between broadcasters and content providers; limited broadband quotas meant customers were quite likely to exceed their quotas if they watched even a moderate amount of TV.

Delany articulated a vision free of all that. Five factors — widespread adoption, expanding variety, direct-to-device delivery, IPTV, and support from studios — are combining to create a "tipping point" in the TV industry, he said, adding that the company had intentionally not partnered with any telcos and was taking a bet that broadband quotas are expanding fast enough to help punters avoid excess-usage charges. And there's something in that; a year ago, quotas of 50GB were extraordinary, but we now have iPrimus offering 300GB plans, TPG providing 180GB for $49.95 per month, and others sure to follow.

Foxtel had intentionally not partnered with any telcos and was taking a bet that broadband quotas are expanding fast enough to help punters avoid excess-usage charges.

Kowtowing to Telstra's desire for lock-in reflects the worst of the industry, which Finance Minister Lindsay Tanner already said had suffered under Telstra's "dreadful" influence, and speaks to the reasons Stephen Conroy included Foxtel in its list of assets from which Telstra must divest itself to meet the requirements of his separation legislation.

Television no longer depends entirely on the good graces of telcos that are willing to enter into free zone-type arrangements. Expanding bandwidth quotas are starting to make good TV-based content packages a reality — and the government needs to encourage this fledgling market by making the country's most popular pay-TV provider compete on its own terms. Allowing Telstra to lock in its already-unparalleled hold on Australia's TV market will simply delay the shift to the triple-play vision the industry has already pursued for years.

Can you see any benefits from Foxtel being granted this exemption? And will you subscribe to Foxtel for viewing on your Xbox or other device?

Topics: Telcos, Government, Government : AU, Telstra

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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