Foxtel heads to digital

SYDNEY– After wallowing in red ink for seven years, the Australian pay TV business is set to be restructured after the regulatory Australian Consumer & Competition Commission agreed to a content-sharing deal between the Foxtel and Optus platforms.

The ACCC’s decision paves the way for Foxtel to proceed with its $A650 million ($357 million) upgrade of its network to digital.

It will also allow Foxtel’s channels to be delivered to Optus subscribers and several Optus services to be added to Foxtel’s line-up, starting Dec. 1.

Telstra, a 50% shareholder of Foxtel, will be permitted to sell Foxtel’s pay TV service together with its telco products.

The outcome is a plus for the U.S. majors as the movie channels owned by Warner Bros., Disney and MGM aired on Optus will be available to Foxtel subscribers. Foxtel is assuming Optus’ responsibility for shouldering the contracts with those majors through 2010, worth about $275 million.

Optus had threatened to pull out of pay-TV if the ACCC blocked the content-sharing deal with Foxtel.

In turn, the Premium Movie Partnership channels owned by Fox, Paramount, Universal and Liberty Media carried on Foxtel will be offered to Optus’ homes.

The ACCC said Wednesday it would not oppose the content-sharing after ruling the court-enforceable undertakings proposed by Foxtel, Optus, Telstra and the third major platform Austar addressed its concern about the potential anti-competitive effects.

These undertakings provide access to programs for other pay-TV operators, access to Telstra’s cable network and Foxtel’s set-top boxes and ensure broader choice for consumers.

The parties have been negotiating since June when the ACCC deemed the original proposals would have substantially lessened competition. Foxtel gave additional undertakings, but these were fiercely opposed by the Seven and Ten Networks and the Fairfax press.

The commitment by Foxtel and Telstra to digitize the network is conditional on legislation being passed by the federal parliament, and the ACCC is yet to approve Foxtel’s undertakings on access to the analog network.

Foxtel CEO Kim Williams told Daily Variety he hopes to switch to digital, initially offering more than 100 channels, in the last quarter of 2003.

Winning approval for the content-sharing also means Foxtel can resume renogiating its contracts with the PMP partners, aiming to strike a new deal in Oz dollars which will cushion the impact of the local dollar’s decline against the greenback. “We expect to engage in discussions with our colleagues at PMP as a matter of priority,” Williams said.

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