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Foxtel/Austar merger may unlock extra IPTV features

Pay TV giant Foxtel in Australia has proposed terms relating to its proposal of $1.9 billion merger with fellow Austar pay TV, which may result in a number of premium content unlocked for use by competing platforms such as emerging Internet video and businesses FetchTV and Quickflix.

The Australian Competition and Consumer Commission (ACCC) said in a statement issued this week announced it had begun consultation on the compromise proposal offered by Foxtel regarding its proposed acquisition of Austar.

Foxtel - a joint venture between Telstra and Consolidated Media Holdings - made its offer of $1.9 billion to acquire the pay TV operator Austar in May last year to create a much larger consolidated company which might dominate the market for subscription entertainment in Australia.

In a press release, Foxtel, said the ACCC had provided undertakings covering access to exclusive content and access channel signals to address the concerns raised by the ACCC of its proposed acquisition of Austar. ACCC Chairman Rod Sims said: "The compromise proposal has been offered by Foxtel to address the probable harm to competitors as likely to arise as a result of the proposed acquisition.", And added that it was intended to resolve the competition or structural issues that may already exist in the relevant markets and were not related to the proposed acquisition.

For ACCC's main areas of concern with the proposed acquisition was for the retail supply of pay television services, particularly at entry level in the domestic market and for the provision of fixed broadband and fixed voice telephony products in regional markets.

Since the proposed acquisition would unite the two main rivals in the subscription television industry in Australia, each with a substantial customer base and significant access to key content, Sims said that this would give Telstra, Foxtel's largest shareholder, the greater market power in fixed broadband and telephony markets.

Foxtel companies covered four main areas: non-exclusivity over a wide range of channels including Disney Channel, Sky News, ESPN, 13th Street and KidsCo, making content available to current and future competitors; non-exclusivity over transactional videos-on-demand movie rights to new movie releases, creating opportunities for new and existing competitors to develop differentiated television offers and more affordable signal access to assist the delivery of IPTV by others, allowing players to receive IPTV signals of the channels which have agreements, and extension of the special access to the performance of Austar set-top units, allowing content providers to access more than 2.2 million Foxtel and Austar combined customer base.

The terms of the undertaking offered an opportunity for competitors to Foxtel and Telstra, according to the pay-TV company. It also aimed at reducing barriers to entry, promoting effective competition in telecommunications markets and subscription television.

The ACCC had believed competition issues may arise over FOXTEL’s property rights to exclusive sports, but these, he felt, were independent of the proposed acquisition. Although the premium national sport was not offered as part of the venture, the ACCC considers that the content package available is sufficient to address the competitive harm that may arise as a result of the proposed acquisition.

With the proposed undertaking now public, the ACCC has sought the views of market participants to assist its consideration of the proposed undertaking and determine whether the proposed company would be likely to alleviate the potential concerns of the ACCC competition. Following market consultation, the ACCC will decide whether to accept or reject the compromise proposal. Submissions are due by March 20, 2012, and the ACCC has set March 29, 2012 as the date of the final decision on the attempt of the proposed commitments.

Welcoming the decision of the ACCC to go to market feedback on their proposed undertakings, Foxtel CEO Richard Freudenstein said FOXTEL firmly believes the acquisition would not lessen competition, in fact it would "create a large Australian media company, good for consumers and good for business.” He said that FOXTEL will continue to work constructively with the ACCC.

Foxtel said it had provided the ACCC with companies that have a term of eight years, to facilitate faster completion of the transaction that otherwise would have occurred in the absence of business.


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