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REVEALED: Why ACCC Fears Foxtel

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Yesterday, the ACCC called a halt to the (proposed) $1.9bn merger, which would see the Pay TV giant Foxtel merge with regional player Austar and gain 97% domination of Pay TV market in the process.

The ACCC’s main areas of concern is the market supply of (non-Foxtel) subscription TV and broadband and telephone services in regional areas, it said today.

Read Austar, Foxtel Respond To ACCC ‘Inquiry’

In other words, a much larger Foxtel, which is 50% owned by Australia’s largest telco Telstra, with heightened access to regional markets, could wreak havoc on competition in such areas and prevent other players from entry, particularly in a ‘bundled’ world where Internet, IPTV and phone services are all flogged in one attractive package.¬†

The Competition and Consumer Commission (ACCC) has now kicked off “market consultation” on the proposed undertakings offered by Foxtel’s Management in respect of its Austar buy out and is calling on its rivals, which would include the likes of Optus, iiNet, Internode to give their views on the proposals.

“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,” ACCC chairman Rod Sims said today.

“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.”

“This would in turn give Telstra, Foxtel’s largest shareholder, greater market power in fixed broadband and telephony markets,” Sims warned.

According to the terms of the undertaking given by Foxtel, it will be prevented from entering into exclusive IPTV rights  for channels including Sky News and ESPN, unless another bidder wishes to do so. And ditto for video-on-demand movie rights.

By reducing content exclusivity, the proposed undertakings the watchdog are insisting Foxtel obey, aim to lower barriers to entry and promote new competition in telecommunications and subscription TV markets, the ACCC says.

It expects the undertaking will create opportunities for new and existing competitors to “develop differentiated and more affordable subscription television offerings.”

Internet TV is set to boom and become even cheaper and more plentiful (fetchtv starts at $9.95) in an NBN world, thus to allow the creation a new Pay TV or telco monster would be a nightmare scenario.

The watchdog said it was is conscious that any remedy must balance the need to reduce barriers to entry without dampening incentives for content suppliers or subscription television operators to be innovative and competitive.

Following market consultation, the ACCC will decide whether to accept or reject the proposed undertaking.