Telstra stifling broadband growth for the last 15 years: Austar CEO

Subscription television industry ideally positioned to be the entertainment portal of the NBN

Telstra’s stake in the Foxtel pay television network has been a major inhibitor to the growth of broadband in Australia according to John Porter, CEO at pay television provider Austar.

Speaking on ABC televisions’ Inside Business at the weekend, Porter said intense competition between telecommunications companies on the one hand, and cable operators on the other, had driven competition in broadband services in other countries.

“The biggest issue in the shareholding of Foxtel is Telstra 50 per cent ownership of the subscription television company [which] has stifled the growth of broadband in this country for the last 15 years,” Porter said.

Following up Porter’s comment, an Austar spokesperson said Foxtel itself had not been able to generate competition due to its being unable to sell broadband services independent of Telstra.

“Optus has been the only competitor in this area but it has had enormous challenges, particularly because of the high costs of programming incurred when Optus and Telstra went to war with the launch of Pay TV,” the spokesperson said. “Telstra itself is able to bundle Foxtel with its telco services but Foxtel has not been able to sell any other services using either the cable network or resold services.”

In a bid to resolve the issue, the company had previously raised the prospect that Telstra should be required to divest itself of its controlling/veto position in Foxtel in various regulatory submissions, the spokesperson said.

This included the question of whether Telstra should be permitted to retain its 50 per cent ownership of Foxtel if it was also an owner of or participant in the National Broadband Network and/or NBNCo.

“Everyone is aware of Telstra’s plans to launch IPTV services and the fact that it has acquired some exclusive online content rights to support that service, such as NRL and AFL,” the spokesperson said. “When we speak to people in the cable or telco business in other parts of the world they are astounded beyond belief that Telstra would be allowed to own 50 per cent of Foxtel, have veto rights over its ability to offer competing broadband and telco services and be allowed to have exclusive content rights for on-line services on top of this.”

Telstra was contacted for comment but did not respond by the of publishing.

While there was a lot yet to be learned about the shape that the NBN would take, Porter said, Austar was also viewing the network as a major opportunity, particularly as a powerful delivery tool for subscription television.

“The subscription television industry is ideally positioned to be the entertainment portal of the broadband world,” he said. “Should the promise of the NBN be reached with a reasonable wholesale offering, you can be assured Austar will be bundling a broadband offering hopefully at very attractive price points with its television service and potentially a voice over IP service as well, so ultimately the triple play to customers in regional Australia.”

Having a high speed broadband network, such as the NBN, would be an efficient way for subscription television, such as Austar, to provide value-add services to its customers, the company spokesperson said.

“While satellite is a very efficient way to deliver linear channels Australia-wide, future generations of set-top boxes will also have broadband connections that will allow us to integrate all types of content experiences for the customer.

“The set-top box will integrate linear channels, free to air channels and other downloadable content, such as on demand movies and user generated content from sites such as YouTube - and all of this content will be accessible via a smart user interface which allows for easy navigation, recommendations and so on. It is not about changing what we do today but it is about adding more value.”

Austar recently reported its financial results for the half year to June 2009. For the six months ended 30 June 2009, compared to the same period in 2008, revenues increased 8 per cent to $331 million and gross margin increased 9 percent to $186 million.

Profit before interest, tax and significant items was $59 million for the six months, a 15 per cent increase on the same period in 2008

Austar provides of subscription television services in a service area of approximately 2.4 million homes, a third of Australia's total homes, primarily using digital satellite technology. It has about 728,700 subscribers.

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