Angry iiNet roars dissent at FOXTEL/Austar merger


news National broadband provider iiNet has fired off a sternly worded missive to the national competition regulator arguing that a proposed undertaking by FOXTEL to mitigate anti-competitive outcomes in the subscription television space was wholly unsatisfactory and may allow FOXTEL part-owner Telstra to extend its broadband dominance in regional areas.

Pay TV giant FOXTEL had announced its 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 (used by iiNet and a number of other telcos) and Quickflix.

iiNet, in its submission to the ACCC, has said the results of the acquisition of compelling content on the market would be minimal, if any, should the merger happen, since the undertaking had not addressed the market dominance issue either in the Australian subscription TV market, or other related telecommunications markets. In fact, iiNet argued, it had exacerbated the issue, which would substantially reduce competition.

It was apparent from the preamble to the proposed undertaking that the main source of competition to the pay TV market was IPTV. The only way this could be realistically achieved was if IPTV providers had access to premium content in order to increase their subscriber base. Only then would IPTV providers be in a position to negotiate access to compelling content, particularly when competing with a merged FOXTEL and Austar. Summarising the limitations of the undertaking, iiNet said that the proposed undertaking would not address the ACCC’s competition concerns regarding the national subscription television market and the telecommunications market. The reasons being:

  • The undertaking did not provide access to any content, since FOXTEL was not bound to allow access to any of its content, even while allowing the merged entity to acquire cable, satellite and mobile rights.
  • The undertaking only offered an opportunity for negotiation for access to content distributed by some IPTV platforms.
  • The undertaking failed to address the reality of consumers wanting access to a range of content anytime, anywhere and on any device. iiNet claimed their customers expected to be able to move content received on a linear channel over IPTV onto their mobile phone or tablet.
  • The undertaking did not improve access to the core subscription driving content of premium live domestic sport.
  • The undertaking only provided the opportunity to negotiate for limited access to compelling content such as new movies and popular general entertainment channels. It had no impact on existing exclusive contracts; much of FOXTEL’s popular content would remain exclusive to the merged entity; and content was limited to individual films and not movie channels.

In addition, iiNet argued, the proposed undertaking showed only limited restrictions on FOXTEL for entering into new exclusivity arrangements with independent content suppliers. And the undertaking did not address the commercial challenges faced by iiNet in negotiating with large rights holders such as the major movie studios, especially since there was a proviso of ‘minimum subscriber numbers’ imposed by content providers.

Furthermore, iiNet argued, the undertaking did not address the competitive advantage enjoyed by Telstra, more so now since it had 50% ownership of FOXTEL. Hence it was uneconomical for iiNet to offer IPTV in areas where it required access to Telstra’s wholesale DSL service, since it would be impossible to compete with Telstra for the supply of bundles of broadband, voice, Pay TV and mobile products iiNet believed these were reasons enough for the ACCC to reject the proposed undertaking.

Frankly, I agree with iiNet here. Although FOXTEL did throw the ACCC and the rest of the industry a bone in its undertaking, iiNet is correct in that a vast amount of content remains locked up in FOXTEL’s exclusive agreements with multinational content providers. A great example would be the popular TV series Game of Thrones, which aired in Australia on FOXTEL for its first season, but wasn’t available through any other medium (apart from Apple’s iTunes), despite its great popularity with the community.

I think FOXTEL should do more to demonstrate that it is open to competition in the subscription television market, if it wants its merger with Austar (which would make it an unrivalled force in the market) approved. And the possibility for Telstra to use the Austar connection to boost its rural broadband market share should also not be overlooked.

Opinion/analysis by Renai LeMay


  1. Does this really matter? There are no other competitors in regional markets as we know the iiBorgs of the world only cherry pick on DSLAM rollouts and fetch is stuck in a multicast world, so we’ll never, ever see it on TW. Even if you are in a town of 15000 people, you still don’t have a choice when it comes to paid TV.

    If there was a chance that the NBN would be rolled out, then this would have some merit, but based on the results in QLD, NBN will be dead in 18 months.

    It would be nice to live in a fairy land of competition, but the most of Australia will never see it so why bother opposing such a merger? It might actually bring regional dwellers a better deal on subscription TV and more content.

    • Even if the LNP get in I really can’t see the NBN getting canned, by that stage there would be too much invested in infrastructure and too many people on the payroll to make turning it around a serious option, not to mention the discrepency that would occur between people who have an NBN service and those that don’t.

      We “may” see the NBN rollout slowed down, but it won’t be stopped.

  2. Game of Thrones could have been screen by FTA. Except that it’s an HBO production, and as such unless FTA have access to that, they’re sh*t out of luck.

    People are going off the deep end at FOXTEL, whom are only part of the puzzle; they’re not directly a culprit, just a willing accomplice (they have to be, to get content).

    If you really want to ask questions, enquire as to why supply has been constrained in the first place. Hint: it’s distribution and rights models.

    And then you begin to see why infringement might happen.

  3. Sooner or later all shows, movies, documentaries etc will be available online at reasonable prices. The current $60-100 a month charges by Austar are insane. I watch almost anything I want online now for nothing, albeit at low resolution. I would be happy to pay for faster, better services similar to those available overseas at very affordable prices. As usual the powers that be will delay legislation to favour big business with exorbitant charges as long as possible. Australia, still a global village idiot!

  4. If channels 7, 9 or 10 buy a TV show, then they have exclusive rights to air that program, yet based on iiNETS logic, if Foxtel buys then because they are a subscription srrvice then anyone else should also get access to it. Seems to me that companies like iiNET want access to everything for free (Telstra’s copper, TV programs, sports etc) so that they can make bigger profits for themselves. How about they start investing rather than just taking.

  5. It’s always interesting to see how those like, iinet & internode, are always critical of those who have paid out huge sums of money to grow their own businesses. They believe that they have some “right” to have equal access, as long as they have contributed nothing. The hypocricy is just astounding. because they are unable, as small businesses, to raise the capital to play with the big boys they are continualyl driven to denigrate. Quite frankly organisations like them hold no serious position in the industry and to ascribe them as having an influence is laughable

  6. Hurry up and approve it ACCC. Anyone who has ever had to put with Austar’s appalling, dated set-top boxes and program guides, as well as lagtimes on button pushes, will be barracking for Foxtel to get up in this one so that finally rural residents will recieve a decent subscription TV service.

    Surely the benefit to the consumer in the primary business area should be of more concern than potential limit to future endeavours of companies delivering associated, but not core, services.

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