FOXTEL and AUSTAR will join forces to create a national subscription television service for all consumers after the Australian Competition and Consumer Commission (ACCC) today accepted an undertaking from FOXTEL and green lit the transaction to merge the companies. The transaction is subject to final Federal Court approval on 13 April.

The ACCC said today it had accepted a set of undertakings offered by FOXTEL in order to facilitate the merger process. On 30 March 2012, AUSTAR shareholders voted in favour of the merger, subject to the decision by the ACCC, and pending approval by the Federal Court of the shareholder vote.

FOXTEL currently services the major metropolitan cities and Western Australia, while AUSTAR services rural and regional Australia. FOXTEL and AUSTAR share 50:50 ownership of the major subscription TV channels group XYZ Entertainment. When the merger is completed, FOXTEL will own 100 per cent of XYZ.

“Bringing together AUSTAR, FOXTEL and XYZ will unite a number of the most watched channels in the lifestyle and entertainment genres. Importantly, it will enable us to keep building our offering of high quality, compelling content including sport, movies, news, music, children’s, and documentary channels using world-leading technology. This will benefit the 2.2 million subscriber households and over 6 million viewers of our combined platforms, as well as potential consumers,” said FOXTEL’s Chief Executive Officer Mr Richard Freudenstein.

In an effort to offer some form of protection to other IPTV players in Australia, Foxtel has agreed to some undertakings, mostly geared at renewing deals on a non-exclusive deals, so as not to free up acquired content and ensure there is fair play in the IPTV market.

The undertakings the ACCC has accepted cover five broad areas:

– Non-exclusivity over a broad range of channels

– FOXTEL is undertaking not to acquire or renew exclusive new distribution rights to a broad range of linear and time-shifted channels and associated entitlement and subscription VOD (video-on-demand) content unless another bidder is seeking exclusive rights. These channels include Disney Channel, SKY NEWS, ESPN, 13th Street, and KidsCo.

– Non-exclusivity over TVOD movie rights

– FOXTEL is undertaking not to exclusively acquire TVOD (transactional video–on–demand) rights to movies, unless another bidder is seeking exclusive rights.

– Non-exclusivity over movies supplied by major studios and key independents

– FOXTEL is undertaking not to acquire or renew exclusive new distribution rights to include movies in linear channels or EVOD (entitlement
video-on-demand) services from more than 50% of the major studios or more than 50% of the eight key independent distributors in Australia. FOXTEL is also undertaking not to acquire or renew exclusive new distribution rights to include movies in SVOD (subscription video-on-demand) services, except for new release movies that FOXTEL is permitted to acquire exclusively for inclusion in linear channels for a period of 18 months.

– Signal access to facilitate IPTV delivery by third parties – FOXTEL has undertaken that it will provide the signal of linear channels to IPTV players either via an internet exchange (located in Sydney) or via access to the satellite signal. FOXTEL will recover its reasonable and attributable costs of providing such signals.

– Special Access Undertaking extended to Austar set top units

– FOXTEL has also agreed that it will extend its current Special Access Undertaking (which the ACCC accepted in 2007) to AUSTAR set top units. This extended undertaking will enable independent channel providers to access FOXTEL and AUSTAR’s over 2.2 million subscribing households in order to sell their channel directly to the combined FOXTEL and AUSTAR customer base.

Some industry watchers see the new undertakings as a win-win, as this means that Foxtel content, which has previously been locked up in exclusive deals with major distributors like Disney, BBC, Turner, Nickelodeon and several other major Hollywood Studios, can now be openly bid for by other IPTV and pay providers. Fox sports channels, however, remains exclusive to Foxtel.

FOXTEL expects to complete the merger in late May 2012.