This month, Foxtel and Austar will be Pay-TV rivals no more, after Foxtel’s application to acquire Austar was green-lit by the Australian Competition and Consumer Commission (ACCC) on 10 April. The transaction was subsequently approved by the Federal Court on 13 April.

Foxtel currently services major cities and Western Australia while Austar services rural and regional Australia; a concerted move by Austar to avoid a head-on clash. The potential good news, Foxtel asserts, would bring the combined channels of both operators under one roof; meaning more content for Australians?

For one, XYZ entertainment, the group of lifestyle and entertainment channels co-owned by Foxtel and Austar, will now see Foxtel as sole owner.

In a press statement, Foxtel’s Chief Executive Officer Mr. Richard Freudenstein said: “Bringing together Austar, Foxtel and XYZ will unite a number of the most watched channels in the lifestyle and entertainment genres. This will benefit the 2.2 million subscriber households and over 6 million viewers of our combined platforms, as well as potential consumers.” For Discovery Channel, one of the channels under XYZ and distributed by both Foxtel and Austar; the merger has obvious benefits.

“We don’t anticipate any changes to distribution or packaging of our channels or changes to our content sales business. What we do anticipate is the opportunity to work more closely with Foxtel on impactful, national on-air and off-air marketing and promotional campaigns, rather than separate metropolitan campaigns with Foxtel and regional campaigns with Austar as we’ve done to date,” said Mandy Pattinson, Senior Vice President and General Manager – Australasia, Discovery Networks Asia-Pacific.

While Foxtel’s spreading of its Pay- TV “tentacles” to the far reaches trouble industry watchers, the other (perhaps more worrisome) concern is that of IPTV delivery; which analysts fear can move towards monopoly given that Foxtel is 50% owned by telecommunications giant Telstra. The Foxtel-Austar merger now gives Telstra a far larger customer base when pit against competitor Optus. Pattinson, who is based in Sydney, tells TV ASIA Plus that the general mood within the subscription TV sector is positive.

“The television business has more competitors than ever before, so to combine the Foxtel and Austar businesses to form a united national provider focused very acutely on driving subscriber penetration beyond 30% benefits everyone. Increased competition drives innovation and this can only be positive for the consumer and the television market in general,” explains Pattinson.

In an effort to allay fears of monopolising the IPTV market in Australia, Foxtel has agreed to some undertakings, mostly geared towards not locking up in exclusive deals, which it has successfully done so, IPTV rights to TV content. Also, current deals that are exclusive will be renewed on a non-exclusive basis upon renewal.

While the door to including premium channels (and associated content) is now seemingly open for competitors, the reality is that some exclusive deals take years to expire, so competitors’ access to premium content will most definitely be delayed.

Before the announcement, Discovery has already jumped unto the multi-platform bandwagon, so Pattinson is watching the industry with a great deal of interest to see if other industry players might be following suit.

“Locally in Australia, we already distribute our channels with some smaller ITPV distributors, including Fetch TV, as well as via mobile, Xbox and TBox. Apart from the proliferation of mobile devices, from smartphones to tablets, it will be very interesting to see the development of IPTV, in particular, progress with national broadband speeds and accessibility for consumers across Australia, in the coming years.”

Still, the one door that remains shut to IPTV competitors is the coveted FOX Sports channels. The sports genre will remain exclusive to Foxtel, giving it a continuous edge over domestic sports coverage.

So who wins? Foxtel gains a larger customer base while competitors will get a stab at premium content, or not?

Foxtel expects to complete the merger in late May 2012. Meanwhile, social media in Australia is abuzz with rumours of job losses (Austar employees most likely the sacrificial lambs) when the merger completes.

Below is a summary of the five undertakings FOXTEL has agreed to, as approved by the ACCC. (Source: Foxtel, 10 April 2012).

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.
• not to exclusively acquire TVOD (transactional video–on–demand) rights to movies.
• 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.
• 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.
• that it will extend its current Special Access Undertaking (which the ACCC accepted in 2007) to AUSTAR set top units.