Internet service provider (ISP) iiNet has rejected Foxtel's pledge to open access to some of its content to its IPTV competitors as part of Foxtel's $2.5 billion bid to buy Austar, stating that the undertaking won't actually offer the content that people want.
In order to address concerns surrounding the deal announced in May last year, Foxtel submitted an undertaking to the Australian Competition and Consumer Commission (ACCC) earlier this month. The submission stated that it would not lock up exclusivity rights to content on IPTV, and that it would allow access to some but not all sports and entertainment content currently locked up by Foxtel.
As one of the big users of IPTV through its FetchTV product, iiNet would, on the face of it, stand to gain from the undertaking; however, chief regulatory officer Steve Dalby said in iiNet's submission to the ACCC that the undertaking would do little to reduce the market dominance that the merged Foxtel-Austar subscription TV company would have.
Dalby said that the undertaking would have no impact on current exclusivity contracts, and that a number of the popular channels have been left out of the offer.
"Much of Foxtel's popular content, such as the widely known Showtime, Nickelodeon and National Geographic channels, will still remain exclusive to the merged entity," he said.
It also wouldn't make it easier for smaller subscription TV players to negotiate with the film and TV companies to get that content in the first place.
"The undertaking does nothing to address the commercial challenges faced by iiNet in negotiating with large rights holders, such as the major movie studios. These very real commercial barriers include terms such as 'minimum subscriber numbers' imposed by content providers," he said.
Telstra, which has a 50 per cent stake in Foxtel and will be flush with cash from its $11 billion deal with NBN Co, would be at an advantage to bundle Foxtel packages and become a dominant player in the IPTV market, according to Dalby. He said that the undertaking did not seek to limit any push from Telstra at all.
Dalby said that the only way IPTV can even hope to compete with a merged Foxtel-Austar company would be if it were made easier for IPTV providers to get hold of the compelling content that customers want.
"It is impossible for this objective to be achieved unless IPTV providers have access to premium content that is capable of attracting large numbers of subscribers. If IPTV providers are not able to attract large numbers of subscribers, then they will never be in a position to negotiate access to compelling content, particularly in a competing bid against a merged Foxtel and Austar."
For this reason, Dalby said that the undertaking should be rejected.
While iiNet is talking down the merger, Foxtel CEO Richard Freudenstein said that the merged Foxtel-Austar company will give customers more products and channels, and that this in turn would improve productivity in the economy.
"This is a big change for our industry, but I think it is a really big opportunity for our industry as well," Freudenstein told the Australian Subscription Television and Radio Association (ASTRA) annual conference in Sydney.
"Over time, we will be able to have a more united view on technology and a bigger investment in technology going forward.
"I think that is one of the great advantages of having a big company; you have that ability to invest and innovate."
AAP contributed to this article.