1. Ross Kelso kelso@internode.on.net http://www.rosskelso.com 21 November 2005 Accessing the Foxtel/Telstra Network: an Open and Shut Case Communications Research & Strategy Forum 2005, Sydney

2. 2 CR&SF 2005 Ross Kelso Chronology (1): Pay Television Delivery 1992Broadcasting Services Act legalises Pay TV; moratorium ends 1995Australis/Galaxy Pay TV service commences via microwave, satellite ″ ″Optus Vision and Foxtel Pay TV services commence via HFC cable 1997Telstra and Optus cable rollouts end 1998Australis/Galaxy collapses; services effectively taken over by Austar 2000TransACT Pay TV, telephony & data services commence via cable in Canberra 2004Foxtel commences conversion to digital Pay TV

3. 3 CR&SF 2005 Ross Kelso Chronology (2): Access-related Events 1995Ministerial Direction exempted Optus Vision and Telstra Multimedia from 3 rd party access provision 1997ACCC deemed analogue broadcasting access service delivered by cable as a declared service; revised 1999 Trade Practices Act revised: protected contractual right 1999Seven Cable and TARBS sought access to Foxtel/Telstra network; access refused > disputes 2000ACCC-sponsored arbitration, extending to 2004 Multiple legal challenges involving access providers, access seekers and regulator, extending to 2001

4. 4 CR&SF 2005 Ross Kelso Chronology (3): Access-related Events 2002/04Foxtel and Optus agreement to rationalise pay tv content ACCC gained undertakings from Foxtel/Telstra for analogue access 2002Telecommunications Competition Bill – access exemption ‘in anticipation’ introduced 2003ACCC gained undertakings from Foxtel/Telstra for digital access as part of anticipatory exemption order 2004Seven Cable challenged ACCC anticipatory exemption order & won! Foxtel/Telstra network digitised, but still not declared

5. 5 CR&SF 2005 Ross Kelso How did the Foxtel/Telstra pay tv network achieve closed access? Unrestricted business entry —Telstra faced none of the restrictions then prevalent in the US and UK

6. 6 CR&SF 2005 Ross Kelso How did the Foxtel/Telstra pay tv network achieve closed access? Unrestricted business entry Minimal competitive threat —Telstra’s ‘telephony defence’ neutralised Optus network —Foxtel/Optus programming agreement neutralised Optus content —Only broadcasters sought pay tv access, not Telcos, and both defeated —No Telco or ISP ever sought cable modem access

7. 7 CR&SF 2005 Ross Kelso How did the Foxtel/Telstra pay tv network achieve closed access? Unrestricted business entry Minimal competitive threat Delayed access —Insufficient analogue channel capacity —Persistent legal and regulatory delays whilst market position consolidated, competitors wasted away and analogue technology replaced by digital

8. 8 CR&SF 2005 Ross Kelso How did the Foxtel/Telstra pay tv network achieve closed access? Unrestricted business entry Minimal competitive threat Delayed access Dictated terms of access —Arbitration prolonged until ready for access undertakings –Analogue agreement useless –Digital agreement competitively neutered —ACCC worn down by labyrinthine process

9. 9 CR&SF 2005 Ross Kelso What political and legal opportunities were exploited? Carrier Associates Direction (1995 - 1997) —Optus subterfuge in avoiding common carrier obligations —Government caught over a barrel by Optus threat not to invest in alternative telephony infrastructure —Digital technology would alleviate capacity constraint by around 1997 anyway?

10. 10 CR&SF 2005 Ross Kelso What political and legal opportunities were exploited? Carrier Associates Direction (1995 - 1997) Protected Contractual Right (1996/97 – 2001/2) —Telstra and Foxtel signed Broadband Cooperation Agreement July 1996; lobbied new Howard government for protection from third party access > TPA amendment —Applicable if a contract in force as at 13 September 1996 —All court cases based on PCR were defeated, but delay the prime goal

11. 11 CR&SF 2005 Ross Kelso What political and legal opportunities were exploited? Carrier Associates Direction (1995 - 1997) Protected Contractual Right (1996/97 – 2001/2) Anticipatory Exemption (2002 – 2004?) —PC & government: reduced regulatory uncertainty would foster new telecommunications investment —Telecommunications Competition Bill: Access providers can seek exemption from standard access obligations even prior to investment being made > ACCC granted orders —Seven Network appealed to Competition Tribunal and set aside orders

12. 12 CR&SF 2005 Ross Kelso Conclusions 1. Cable television has been the most significant new wireline access network investment since the PSTN. 2. Governments have never really committed to third party access. 3. Regulatory process for access is now labyrinthine and wide open to gaming. 4. Fibre to the Home, the next (& last) wireline access network, is highly likely to remain closed to third party access > a monopolist’s dream!