Foxtel fears threatens digital plans

Co.'s investments would 'fall away' if multi-channeling allowed

SYDNEY — Australia’s dominant paybox Foxtel has threatened to pull the plug on its $390 million upgrade to digital if the government agrees to let terrestrial networks launch more channels before 2005.

The Australian Competition and Consumer Commission has recommended scrapping the moratorium on multi-channeling by the terrestrial broadcasters. Foxtel fears the broadcasters would convert new channels, especially those offering sports, to payboxes in a territory where it is struggling to raise pay TV penetration above a lowly 22% of TV homes.

It hopes to drive up that rate by launching 120 digital channels and interactive services in the first half of the year.

In an 88-page submission to the government released last week, Foxtel warned its commitment to invest more than $390 million to introduce digital services would “fall away” if multi-channeling were allowed.

The domination of the free-to-air webs would be further entrenched and Australia’s reputation in the global investment community would be “seriously damaged,” it said.

Foxtel reveals it lost $650 million and does not expect to return a profit to its shareholders News Corp., Telstra and Publishing & Broadcasting Ltd. until 2006.

The Nine and Ten networks have said they do not want to use their digital spectrum to add channels because that would fragment audiences without increasing ad revenues, but Seven is keen to introduce multi-channeling.

A spokesman for Communications Minister Sen. Richard Alston told Variety the government is considering submissions to the ACCC report.

The government did reject an ACCC recommendation to scrap its policy against issuing any new licenses for free-to-air channels before 2007.

Oz intends to switch off terrestrial analog broadcasting at the end of 2008, although this date will be reviewed.

However, Foxtel welcomed an ACCC recommendation urging a change in the law deeming that the rights to 40 key sporting events must be available to terrestrial webs.

Foxtel has long advocated a dual-rights system where pay and terrestrial deals for those events are negotiated separately.