Paying for Australia 

14 June 2001 tbs.pm/1841

For nearly 10 years under the Bob Hawke and Paul Keating Labor federal governments, pay-TV was a distant dream in Australia.

The Labor Party determined to keep out new operators, perhaps to appease the then current commercial TV operators, channels 7, 9 and 10, the state-owned ABC and the multicultural SBS (Special Broadcasting Service) who were perceived as soft on a Labor government.

The federal government decided pay-TV had nothing new to offer, despite much of the western world having multichannel pay-TV services.

When the government was facing defeat in the polls almost 12 years ago, they passed legislation allowing the Commonwealth of Australia to adopt a pay-TV service via cable, microwave and digital satellite service – a sop to the public or a dead weight to saddle the Liberal/National coalition that would follow.

But to the surprise of many, the Keating government was re-elected on the fear of the (conservative) Liberals adopting a consumption tax – GST (Goods and Services Tax).

The fledging service was thus launched under a Labor administration by Galaxy TV via microwave, an 8 channel service of 2 movie channels, an entertainment channel, a news service, a kids channel, a music channel, a science channel – in short, all the usual stuff you expect from pay-TV packages worldwide.

Rupert Murdoch, owner of News Corporation and UK’s BSkyB launched FOXTEL, a cable service, jointly with Telstra, sharing Galaxy’s multichannels plus a few of their own to throw in. The standard service on both services was A$39.95 per month.

A third pay-TV service – Optus – was also launched, provided by the largest telephone operator rival to Telstra and half-owned by the UK’s Cable and Wireless.

They launched an equivalent service of movie channels, Ovation (equivalent to Discovery) and MTV.

Galaxy TV were soon in financial trouble with the Australian Stock Exchange forecasting Australia could not sustain three pay TV operators and thereafter folded, leaving metropolitan viewers without pay-TV.

The gap was filled by a regional franchisee to Galaxy, AUSTAR, carrying both Foxtel and Galaxy services to regional Australia and the bush via microwave and satellite. It joined forces with Foxtel, in effect creating two united services (Austar for regional Australia via satellite and Foxtel via cable for metropolitan Australia) and leaving Optus as the direct competition.

Ten years on, Foxtel via cable has broken even, while the regional service Austar is still losing money. The economics are simple: more people live in the city (and receive Foxtel) than the bush (and receive Austar). Optus is losing money as well.

Last year the Australian Competition and Consumer Commission (ACCC) received a request from the Foxtel/Austar pay-TV service to share programmes with the competitor Optus TV. The ACCC refused point blank.

An appeal to the ACCC and the federal government (now run by the Liberal/Nationals) was granted last week. Foxtel/Austar may now share its programme stations with the opposition Optus and vice versa, on the grounds that Australian viewers would suffer if one of the loss making services were to fold, leaving viewers without a service in certain areas. Each service is expected to earn an extra $30 million dollars in added income as a result of the programming merger. It is expected that up to 144 multichannels will be on offer to each of the two services in the future.

So where is Australian pay-TV heading? You don’t have to be a Rhodes Scholar to figure that out. ITV Digital in the UK is a prime example, with the overall UK winner being Rupert Murdoch’s BSkyB. It would be fair to assume that Mr Murdoch’s FOXTEL down under will follow suit.

Foxtel has the better programming with Sky News, live from Sky News UK on the half hour, and a UKTV channel, owned 50% by Foxtel, 25% BBC and 25% the former Thames TV. Channels such as The Comedy Channel, partly owned by Granada and Fox 8, a channel similar to Sky One, complete the basic package.

The globalisation of Murdoch’s empire continues. And their share price jumped up a whole A$3 overnight.