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ACCC Okays Foxtel-Optus Deal
CANBERRA
The Australian Competition and Consumer Commission has announced
that court-enforceable undertakings proposed by Foxtel, Optus, Telstra
and Austar address the ACCC's concern about the potential anti-competitive
effects of the planned pay-TV arrangements between Foxtel and Optus.
As a result, the ACCC will not oppose the arrangements, which allow
Optus and Foxtel to share pay TV programming.
The undertakings are designed to provide access to programs for
pay TV operators, broader choice for consumers and access to Telstra's
cable network and Foxtel's set-top boxes.
The decision follows extensive consultations between the ACCC and
the industry since June, when the ACCC concluded the proposed arrangements
were likely to have the effect of substantially lessening competition
in a number of pay TV markets.
"The majority of submissions considered rationalisation was necessary
in the industry, which was suffering from high content costs and
difficulty accessing quality content," said ACCC Chairman, Professor
Allan Fels. "Pay TV operators will now have access to a more comprehensive
range of programming, enabling them to offer pay TV consumers a
broader range of programs, including popular movies and sports.
"Most of the concerns raised about the arrangements related to the
ability of Foxtel to prevent meaningful competition in the pay TV
industry by blocking competitors from using either its programming
or its cable network."
In order to address the concerns about access to programming, Foxtel
and Austar have agreed to allow rival operators, such as TransACT
and Neighbourhood Cable, to purchase their pay TV content at fair
and commercial terms.
"This also will facilitate new investment in broadband networks,"
said Professor Fels.
The concerns about access to infrastructure, such as Telstra's cable
network and Foxtel's set-top boxes, have been addressed by Foxtel
and Telstra's undertakings to allow rival pay TV operators to use
their analogue and proposed digital networks to provide competing
pay TV services to consumers.
However, the ACCC says the terms and conditions Telstra and Foxtel
impose for access to these networks are still to be subject to further
consideration by the ACCC to determine whether they comply with
the telecommunications access requirements of the Trade Practices
Act 1974".
Professor Fels emphasised the undertakings are not intended to alter
the pre-existing competitive landscape in the pay TV industry.
"The ACCC's role is to decide whether the undertakings address the
potential anti-competitive conduct or effects arising directly from
the content-sharing arrangements," he said. "In this case there
was evidence that the competitive position of Optus in the market
was being adversely affected by its inability to access and supply
key content to its customers.
"The content-sharing arrangements should enable Optus to improve
its programming and ensure consumers are offered a better quality
pay TV service".
Professor Fels said the undertakings also protect the availability
of independent programming to consumers. The ACCC continues to be
concerned about the level of vertical integration in the pay TV
industry, particularly given the position of Telstra as a major
shareholder in Foxtel. This leaves the ACCC with concerns about
the appropriate regulatory regime in both pay TV and telephony markets.
These will be considered in a report to Senator Richard Alston,
Minister for Communications, Information Technology and the Arts,
who has requested advice on how emerging market structures are likely
to affect competition across pay TV and telecommunications.
"This report will also include some of the concerns raised during
the consultation process which the ACCC did not consider relevant
to the transaction being considered," said Professor Fels.
The ACCC says it will continue to monitor the pay TV and related
industries closely and will take immediate action if any of the
parties fail to comply with the spirit of the undertakings.
AUSTAR BENEFITS
Welcoming the ACCC decision, John Porter, CEO of Austar, “The new
subscription television industry arrangements will provide long
term benefits to Austar and will secure the future of digital television
for consumers in regional and rural Australia.”
Key benefits cited by Porter for Austar included access to future
Foxtel services, increased business for Austar’s joint venture programming
business, XYZ Entertainment, through on-selling of programming to
Optus and other third parties, and the migration of Austar from
the Optus B3 satellite to the new C1 satellite being launched next
year, sharing Foxtel’s transponders.
This will see Austar’s coverage extended to more than 200,000 new
homes, many in the most remote areas where decent ordinary television
reception is unavailable.
In addition to expected increased subscription revenue, the new
satellite arrangements will reduce Austar’s infrastructure costs.
As part of the migration, Austar plans to upgrade set-top-boxes
for all those customers of the satellite service who are not currently
iTV-enabled. New regional infrastructure providers will also be
able to access Austar’s channel programming for provision on their
cable networks.
Austar will also have the right to bundle with other organisations
as appropriate, increasing choice and flexibility for rural consumers.
This means, for example, consumers may be able to purchase a bundle
of television, telephony and internet services from one provider.
BUNDLING
The decision on the Foxtel-Optus programming deal coincided with
an ACCC announcement that it will not intervene to block a proposal
by Telstra to 'bundle' pay TV and telecommunications services under
certain conditions. The decision means Telstra Pay TV (a wholly
owned subsidiary of Telstra Corporation) can offer Foxtel pay TV
services at a discount to retail residential customers who also
buy telecommunications services from Telstra Corporation.
Telstra already offers discounts to customers who bundle fixed line
telephony services with additional services, including mobile and
Internet, under its Rewards Options program. The Foxtel pay TV services
will be added to this program. Discounts will remain at their present
levels.
Professor Allan Fels said the ACCC had concluded the overall public
benefits of allowing Telstra to proceed with the proposed bundling
arrangements were likely to outweigh any public detriment.
"In reaching its decision, the ACCC analysed the likely effect of
the proposed conduct on the markets for pay TV services and the
markets for various telecommunications services," said Professor
Fels. "Consumers should benefit from increased choice in bundled
offerings of pay TV and telephony services, with further benefits
arising through Telstra's discounting strategy and the convenience
of getting multiple services on a single bill.
"The public interest is also served as the increase in competition
arising from Telstra bundling its services is likely to increase
the penetration rates of pay TV. However, the ACCC recognises that
any competitive benefits of Telstra entering the market are partly
mitigated by Telstra's 50 per cent equity interest in Foxtel, its
major competitor in pay TV".
Telstra CEO Dr Ziggy Switkowski said the ACCC decision cleared the
way for Telstra to reward loyal customers by offering them single
bill convenience for bundles of telephony, Internet, broadband and
Foxtel subscription television services. FOXTEL has also gained
approval for its proposed Content Sharing Agreement with Optus,
which was submitted to the ACCC in March this year. Under the proposals
FOXTEL and Telstra have provided a comprehensive set of undertakings
which will ensure competitors can gain access to the Telstra and
FOXTEL subscription-TV infrastructure.
According to Dr Switkowski, the bundling and programming decisions
also cleared the way for Telstra and its partners News Corporation
and PBL to turn Foxtel into a digital TV service with more than
200 Foxtel channels and the opportunity for other pay-TV providers
to operate on the same platform.
"The ACCC's decision is good for Australia - a victory for commonsense
and consumers," said Dr Switkowski. "Consumers are the winners with
convenience, flexibility and greater choice. These proposals also
boost competition in both telephony and pay-TV.
"These proposals allow for a long overdue restructuring of the pay-TV
industry. It also clears the way for the development of digital
subscription television with hundreds of additional channels and
the growth of the Foxtel customer base.
"Together these agreements will increase consumer choice, promote
competition in telephony and subscription television and provide
the basis for the growth and digitisation of Australia's subscription
television industry. "Digital subscription television requires substantial
new investment which is only feasible if the industry is placed
on a stronger economic footing.
"The ACCC's approval today follows months of work by the Foxtel
business partners and the regulators to ensure the best results
for consumers and competition generally," Dr Switkowski said.
He also said details of Telstra's new telephony, Internet and Foxtel
bundling offers for customers would be announced shortly and become
available before Christmas.
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