ACCC NOT TO OPPOSE AUSTAR ACQUISITION AFTER UNDERTAKING RESOLVES CONCERNS The Australian Competition and Consumer Commission will not oppose the proposed acquisition of AUSTAR United Communications Limited by FOXTEL Management Pty Limited after accepting court-enforceable undertakings from FOXTEL. The undertakings will prevent FOXTEL from acquiring exclusive internet protocol television (IPTV) rights for a range of attractive television program and movie content, including: • Linear channels supplied by independent content suppliers, including more than 60 linear channels that are currently broadcast by FOXTEL and many more that are broadcast internationally • Subscription Video on Demand (SVOD) rights to current or past seasons of television programs that form part of a linear channel supplied by an independent content supplier • Movie linear channels (or movies for inclusion in a linear channel) from more than 50% of the eight major movie studios or more than 50% of the eight specified independent movie studios • SVOD rights to movies, except for an 18 month window in relation to the movie studios from which FOXTEL is not prohibited from acquiring exclusive linear rights. The undertaking further prohibits FOXTEL from exclusively acquiring any movie delivered on a Transactional Video on Demand (TVOD) basis. Importantly, the undertaking also prevents FOXTEL from acquiring exclusive mobile rights to the content referred to above where those rights are sought by competitors to combine with IPTV rights. This means that those competitors will have the opportunity to deliver a seamless and integrated package of programming across a number of devices. A full list of channels that are currently broadcast on the FOXTEL satellite or cable subscription television platform that are covered by the undertaking is at Attachment A. However in addition to this list there are many more channels available internationally that are presently not carried by FOXTEL that FOXTEL would be prevented from acquiring on an exclusive basis for the 8 year duration of the undertaking. The ACCC's main areas of concern with the proposed acquisition were in the national market for the retail supply of subscription television services, particularly in relation to the developing IPTV field, and a number of regional markets for the supply of fixed broadband and fixed voice telephony products. The concerns in regional markets for fixed broadband and telephony markets arise because of Telstra’s 50% ownership of FOXTEL and Telstra’s ability post merger to acquire preferential access to Austar’s existing subscriber base in combination with its existing content delivery infrastructure in regional areas. This will allow Telstra to offer a For personal use only superior “triple play” of fixed voice, broadband and IPTV services. “The proposed acquisition would bring together the two main subscription TV industry players in Australia each with a substantial customer base and significant access to key content. This would in turn give Telstra, FOXTEL's largest shareholder, greater market power in regional fixed broadband and telephony markets,” ACCC chairman Rod Sims said. “By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets.” “Taking into account the undertaking which has been offered by FOXTEL, the ACCC is satisfied that the proposed acquisition is unlikely to substantially lessen competition.” Mr Sims said. The ACCC expects that as telecommunications networks develop, the undertaking will create opportunities for new and existing competitors to develop differentiated and more affordable subscription television offerings that are attractive to consumers. These offerings, which could be bundled with other telecommunications services, would be likely to improve competition in both subscription television and telecommunications markets as retailers increasingly seek to bundle IPTV services with other telecommunications products. The undertaking also aims to further lower barriers by requiring FOXTEL to provide necessary signal access to linear channels distributed by independent content suppliers (and which FOXTEL itself distributes to its subscribers) to third parties. The undertaking will also extend FOXTEL's Special Access Undertaking (given by FOXTEL to the ACCC in 2006) so that content suppliers can gain access to Austar subscribers as well as FOXTEL subscribers, as is presently the case. The ACCC conducted extensive market inquiries in relation to a draft version of the undertaking. Following market feedback on this draft undertaking and further discussions with FOXTEL, the nature and scope of content addressed by the non-exclusivity provisions in the undertaking was significantly broadened. In particular, the undertaking now prohibits FOXTEL from acquiring exclusive SVOD rights to a broad range of television program and movie content. Of particular note the undertaking prevents FOXTEL from acquiring on an exclusive basis the rights to the Nickelodeon and National Geographic channels as well as the companion mobile rights to the relevant IPTV content covered by the undertaking. The undertaking does not prevent FOXTEL from acquiring exclusive rights in relation to individual sports. The ACCC considers that to the extent that FOXTEL's (and its shareholders') ownership of exclusive sports rights may raise competition concerns, these concerns exist independently of the proposed acquisition. “The proposed undertaking has been offered by FOXTEL to address the harm to competition which is likely to arise as a result of the proposed acquisition,” Mr Sims said. “However it is not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition.” “The ACCC remains alive to competition concerns in existing and emerging media markets. It will continue to consider these issues as part of its usual functions under the Competition and Consumer Act, including consideration of whether exclusive content arrangements have the purpose or effect of substantially lessening competition or involve a misuse of market power.” Mr Sims said. “The ACCC will also continue to consider whether there is a need to advocate for regulatory intervention in these markets.” The undertakings will be available on the ACCC's website. A Public Competition Assessment will be issued by the ACCC in due course. For personal use only Media inquiries Mr Rod Sims, ACCC Chair, (02) 6243 1108 or 0408 995 408 General inquiries, Infocentre: 1300 302 502 NR 070/12 10 April 2012 Attachment A – Linear channels covered by the undertaking The following table lists channels that are currently available as part of the FOXTEL service. FOXTEL has a mix of exclusive and non-exclusive rights in relation to these channels. Following the commencement of the undertaking, FOXTEL will be prohibited from acquiring exclusive IPTV rights to these channels and from renewing exclusive IPTV arrangements in respect of these channels. Current FOXTEL Channel 1 13 th street 2 Animal Planet 3 Antenna Pacific 4 A-PAC 5 Aurora 6 Australian Christian Channel 7 BBC Knowledge 8 BBC World News 9 Bloomberg TV 10 Boomerang 11 Cartoon Network 12 Cbeebbies 13 CNBC 14 CNN 15 Discovery Channel 16 Discovery Home & Health 17 Discovery Science 18 Discovery Turbo MAX 19 Disney Channel 20 Disney Jr 21 E! Entertainment 22 ESPN 23 ESPN 2 24 Eurosport News 25 Eurosport 26 Expo Channel 27 Family Movie Channel 29 KidsCo 30 Movie Action 1 31 Movie Comedy 1 32 Movie Drama 1 34 Movie Extra 1 35 Movie One 1 36 MTV 37 MTV Classic 38 MTV Hits For personal use only 39 MTVN Live 40 Nat Geo Adventure 41 Nat Geo Wild 42 National Geographic Channel 43 Nick Jr 44 Nickelodeon 46 RAI ITALIA 47 Sci-Fi 48 Sky News 49 Sky News Business 50 Sky Racing 51 Sky Racing World 52 Starpics 53 STUDIO 54 Style Network 55 TCM 56 TLC 57 TV1 58 TVN 59 TVSN 60 UKTV 61 Universal 62 World Movies Note: This list excludes time-shift and HD channels. 1These channels are currently supplied by Movie Network Channels Pty Ltd, which is owned by Time Warner/HBO, Disney-ABC, MGM Holdings & Village Roadshow. For personal use only.