news Pay TV giant FOXTEL has proposed terms relating to its proposed $1.9 billion merger with fellow pay TV company Austar that could see a raft of premium content unlocked for use by competing platforms such as burgeoning Internet video companies FetchTV and Quickflix.
The Australian Competition and Consumer Commission (ACCC), in a statement issued yesterday, announced it had initiated consultation on the proposed undertaking offered by FOXTEL regarding its proposed acquisition of Austar. FOXTEL – a joint venture between Telstra and Consolidated Media Holdings – made its $1.9 billion bid to acquire fellow pay TV operator Austar in May last year, to create a much larger consolidated company which would dominate the subscription entertainment market in Australia.
In a media release, FOXTEL said it had provided ACCC with undertakings covering access to exclusive content and access to channel signals, to address concerns raised by ACCC of its proposed takeover of Austar. ACCC Chairman Rod Sims said: “The proposed undertaking has been offered by FOXTEL to address the harm to competition which is likely to arise as a result of the proposed acquisition.” He added that it was not intended to resolve competition or structural issues that may already exist in the relevant markets and were unrelated to the proposed acquisition.
For ACCC the main areas of concern with the proposed acquisition were for the retail supply of subscription television services, particularly at entry level, in the national market, and for the supply of fixed broadband and fixed voice telephony products in regional markets.
Since the proposed acquisition would bring together the two main subscription TV industry players in Australia, each with a substantial customer base and significant access to key content, Sims said this would give Telstra, FOXTEL’s largest shareholder, greater market power in fixed broadband and telephony markets.
FOXTEL’s undertakings covered four main areas: non-exclusivity over a broad range of channels including Disney Channel, SKY NEWS, ESPN, 13th Street and KidsCo, making content available to existing and future competitors; non-exclusivity over transactional video-on-demand movie rights to new release movies, creating opportunities for new and existing competitors to develop differentiated and more affordable TV offerings; signal access to facilitate IPTV delivery by third parties, enabling IPTV players to receive signals for channels to which they had agreements; and extension of the special access undertaking to Austar set-top units, making it possible for content suppliers to gain access to the more than 2.2 million combined FOXTEL and Austar customer base.
The terms of the undertaking offered a fair chance for competitors of FOXTEL and Telstra, according to the pay TV company. It also aimed at lowering barriers to entry, promoting effective competition in telecommunications and subscription television markets.
The ACCC had believed issues of competition might arise around FOXTEL’s ownership of exclusive sports rights, but these, it felt, were independent of the proposed takeover. Though premium domestic sport was not offered as part of the undertaking, the ACCC considered that the package of content made available would be sufficient to address the competitive harm likely to arise as a result of the proposed acquisition.
With the proposed undertaking now public, ACCC has now sought views from market participants to assist its consideration of the proposed undertaking and determine if the proposed undertaking would be likely to alleviate ACCC’s potential competition concerns. Following market consultation, the ACCC will decide whether to accept or reject the proposed undertaking. Submissions are due by March 20th, 2012, and the ACCC has set March 29th, 2012 as the tentative final decision date on the proposed undertakings.
Welcoming ACCC’s decision to go for market feedback into its proposed undertakings, FOXTEL CEO Richard Freudenstein said FOXTEL strongly believed the acquisition would not lessen competition; in fact it would ‘create a great Australian media company, good for consumers and good for business’. He affirmed that FOXTEL would continue to work constructively with ACCC.
FOXTEL said it had provided ACCC with the undertakings, which have a term of eight years, to facilitate a more expeditious completion of the transaction than would otherwise have occurred in the absence of the undertakings.
Could the merger of FOXTEL with Austar, ironically, finally unlock some of the top-level content which companies like FetchTV and Quickflix (and potentially even Apple) need to vault their IPTV offerings to a competitive level with pay TV? It’s certainly possible. With the pay TV company promising access to channels such as Disney, Sky News and ESPN — as well as a range of new release movies and so on — there’s a lot of goodies which could come out of this deal for the IPTV companies.
The IPTV services are growing fast in Australia and rapidly adding content, but that content often tends to be legacy rather than the new hotness — older movies instead of new releases, second-tier or publicly available channels instead of the latest breaking news through channels such as Sky, and TV shows that are the remnants left over after the pay TV and commercial TV networks grab the latest and greatest releases. If some of this fresh content makes it to the IPTV operators, they could start to look a whole lot more attractive.