Telstra restricting Foxtel revolution

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.

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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

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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3 comments
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  • It seems the incumbent monopolist wants to further limit consumer choice by cleverly putting more and more obstacles in the way of consumer choice.

    Well, perhaps they think they are clever.
    gnome-8be8a
  • Telstra is no longer owned by the Government, especially since the Future Fund was reported as having sold out of Telstra; and so is required to operate in the best interests of its shareholders, as defined by the board of directors. This is as required by Australia's Corporations Laws.
    They seemingly believe it is in their interests to make Foxtel available to Bigpond customers, which is a good way to increase network usage and corporate synergies. The idea of restricting it only to Bigpond customers may not be due to a monopolistic intent, put a practical reality of how to address the the technical and commercial issues of adding Foxtel traffic to the download quota of non-Bigpond customers. Would Optus, AAPT and the others let this traffic through for free? I doubt it. Would their customers want ot pay an extra fee to watch Foxtel online? I doubt that too. Would Foxtel pay for the traffic? maybe, but they may have to charge extra and if so to which customers?
    It's ironic, we let Channel 9 in particular cross-promote TV in its magazines and other media, and vice versa; yet like Telstra, Channel 9 has a virtual monopoly in many TV and magazine markets.
    I can clearly remember when Telstra's first competitor, Optus; started up in Australia. I attended conferences for their business customers, read their prospectus and bought shares, and read their annual reports. They were all very positive about building their own network, as required by the government fo the day. It didn't take long for them to abandon the enthusiasm and try to use the courts to build their business at hte expense of Telstra. Yes, there always were technical and commercial reasons why Optus could never build a complete network, the last mile is a real killer. But, it was never Telstra that was the problem as they have long been required to comply with the Corporations law: it is successive governments who lack the technical and business competence to set in place the structures for effective competition. I clearly recall an early 1990's Optus boast, they would only need 1 exchange in Canberra, while Telstra had some 300 to maintain. That is because Optus depended on Telstra's network for their own to work. I have always personally considered that the government should have required every competing carrier to install its own links between every existing exchange, a d to offer services to all Australians, ever since it became apparent every carrier besides Telstra had no interest in taking on any business other than high-density, high-profit services (mostly busness and mostly CBD).
    the_reluctant_wiz
  • Hey totoaus,

    I agree with some of waht you say, but in general, well...

    Firstly, the Future Fund have not sold out of Telstra they still hold 10.9% (was 16.4%). So really the sell off was only a relatively small one, 5.5%.

    Virtual monopoly???? Thats an oxymoron...

    As for competing carriers installing their own links, yeah good and well and a definite plus for the consumer. But Telstra didn't have to, as the they received the complete network from the taxpayer, so...

    Plus Telstra received the PSTN with clear laws for access to competitors and a USO (otherwise they wouldn't be anywhere but the CBD).

    Laws, you have unfortunately not mentioned...

    Cheers.
    RS-ef540