Telco content bundling poses threat to competition: Samuel

Telstra's advantage over its competitors now lies in the content that it is able to bundle up with broadband services from its stake in Foxtel, according to Australian Competition and Consumer Commission ex-chair Graeme Samuel.

Speaking at the joint Telecommunications Society and Australian Computer Society Charles Todd Oration event in Sydney on Thursday, the former chair said that contrary to the "pleadings of Optus' Paul O'Sullivan", Telstra's wings have already been significantly clipped in terms of its market dominance through the structural separation of Telstra's wholesale and retail business arms.

"Forgive me if I begin to sound like my former nemesis Phil Burgess, but Telstra has already had its wings heavily clipped with its legislative structural separation. It must soon compete with retailers on an equal basis," he said.

"Its competitive advantage will flow essentially from its ability to structure bundles that provide compelling offers to its customers."

As Australia shifted from Telstra's legacy network onto the National Broadband Network (NBN), Samuel said there was nothing stopping Telstra's competitors such as Optus and iiNet from competing against Telstra on bundles on an equal basis, with one exception: Content.

"Telstra's significant advantage in this area lies in its increasingly developed content offerings, including movie libraries, and, perhaps the most significant, its interest in Foxtel by content offering it controls," he said.

"Competition regulators worldwide are now keeping a close eye on exclusive agreements for the supply of content to ensure the traditional incumbents cannot inhibit the emergence of new players or products by using their market power to tie up access to compelling content."

Samuel said the ACCC needs to keep an eye out to ensure that telcos do not tie up rights to content.

"There is the constant risk that the exclusive tie-up of rights to such content for new and emerging markets will allow the rights holders to shut out competition across a wide range of services on the new networks," he said.

"Ultimately, this could deprive consumers and advertisers of choice and quality, not only for broadcasting, but also voice, internet, IPTV, and innovative communications services, and determine the success or failure of a new competitor."

Samuel said that it is unclear whether the ACCC has the legislative ability to prevent "incremental accumulations" of content that would ultimately lead to an anti-competitive market structure, with one player bundling up all the content, such as football, cricket, or TV shows such as Game of Thrones, but he said that his comments are not an invitation for the ACCC to step in and regulate access to content.

Samuel said that global distribution companies such as Apple, Amazon, and Google dwarf Telstra in size, and local telcos have the ability to negotiate deals with those providers for content. However, he also said that the ACCC needs to ensure that all the content is not snapped up by players in the market too quickly to prevent others from competing for content.

Anti-siphoning rules that keep some sporting events on free-to-air TV are also not applicable to in-demand shows, Samuel indicated, saying that anti-siphoning is anti-competition.

"Anti-siphoning is essentially, philosophically, and in commercial terms anti-competitive. What anti-siphoning does, and we all know why it is there, it's to preserve the position of the free-to-air networks," he said.

"I think if it was let go completely, it would be interesting to see what would happen with the free-to-air networks and the subscription networks competing with each other for rights, and you might find some different products being offered.

"There's a way these markets can sort themselves out, but our free-to-air networks have been accustomed to a high level of protection, and I guess we need to expect that will continue for some time into the future."

Scales' NBN report 'factually wrong'

In his speech, Samuel also took time to defend his legacy at the ACCC, following the claims made in the Bill Scales report into the establishment of the NBN that the ACCC "overstepped its authority" in advocating for fibre to the premises.

"Unfortunately, much of the review analysis has had a political tarnish, which diminishes its value in forward planning for this important infrastructure project," he said.

"The Scales review was probably the least valuable, if only that it is fundamentally flawed in its evidence base. [The] Scale report is factually wrong on the role of the ACCC as attested by myself, the current chair of the ACCC, and others in the organisation."

But despite the position that the ACCC took back then, Scales said that the Coalition's switch to the multi-technology mix would improve the broadband available for some.

"The Coalition's multi-technology mix NBN won't satisfy the broadband zealots, who long for an extensive fibre-to-the-premises rollout, but it will provide for higher-speed broadband than we currently experience, and it should, indeed must, allow for technology upgrades meeting developing consumer needs," he said.

He said that TPG's decision to roll out fibre to the basement to 500,000 premises in capital city locations across Australia was a result of the cross-subsidy that keeps NBN prices higher in urban areas in order to offset the cost for rolling out the network in regional Australia, but said that the rollout would have little impact on NBN Co.

He said it is unlikely that others would follow in TPG's footsteps, but, if they did, they should not be opposed by the ACCC unless the decision is made to preserve the business case for the NBN.

Net discrimination like roads

On the issue of net neutrality, Samuel said that it is a larger issue in the United States than it is in Australia, but said those that use more bandwidth, such as streaming, over-the-top players like Netflix, should pay for using more bandwidth.

"I don't know where [the ACCC] stands today ... but back when I was there with the ACCC, I used to liken net neutrality to the use of our highways. You have a multi-lane highway, and you've got big, massive trucks chewing up the bitumen. Those that chew it up the most, those that are using up the infrastructure and causing a limited ability of others to use the same infrastructure, ought to pay more for it," he said.

"I think that runs contrary to the whole view of net neutrality."