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Satellite Operators Lead Way For Australian Pay-TV

By | October 16, 2006

      Australia is one of the most dynamic pay-TV markets in Asia, and the country’s geography and large numbers of households situated in remote areas of the country making it an ideal market in which satellite can make a significant impact.

      Two of the operators leading the way in this area are Foxtel and Austar who are using satellite to bring the latest technologies and consumer entertainment to customers throughout Australia. Both operators have a number of product and service launches scheduled for 2007 that are intended to keep Australia at the cutting edge of the digital revolution. Foxtel’s executive director of content, product development and delivery, Patrick Delany and Austar’s Deanne Weir, group director corporate development outlined to Satellite News how the operators plan bring the latest technologies to customers.

      Launching And Enhancing Services

      Both operators are in the middle of transformations, and Foxtel, in particular, has been very successful with its digital strategy. The company has more than 1.1 million subscribers, of which more than 90 percent are now digital. By March, Foxtel will have moved all of its analog customers to digital, completing a three-year transition.

      Foxtel already has its personal video recorder (PVR) services on the market, but Delany revealed that the next stage for the operator’s PVR strategy is to launch a subscription video-on-demand service before the end of 2006. "During the design phase of the Foxtel IQ (the company’s PVR) we made the decision to partition the hard drive, allocating 100 gigabytes for the subscriber and 60 gigabytes to Foxtel. In December, we will launch subscription video on demand using the hidden Foxtel part of the partition. This will involve pushing programmes over a hidden broadcast channel into the hidden part of the drive. Content will appear in a new on-demand menu and will be freely available to subscribers who subscribe to the channel from which the content was sourced on our main service.

      "We are also looking at downloads to PC. We may introduce a scaled-down service with a view to developing our technical understanding in this space as well as an understanding of the types of products consumers want on a download to STB type service," Delany said.

      The service could progress still further. "If we were to launch a full download to a [set-top box] type service it would be in around 18 months time after we introduce our next generation of PVR, a 250 to 300 gigabyte box," Delany said. "This box will have a number of tuners making it possible to allocate say two tuners to the consumer; a tuner for products using broadcast technology and possibly an IPTV tuner for downloads. MPEG-4 compression technology will also be utilized which we believe will be stable by then."

      Austar plans to have its PVR on the market early next year, said Weir. "We are doing a bit of a world first with the PVR because we are adding a FTA (free-to-air) digital tuner," she said. "It will have two satellite tuners and two FTA tuners. We think that is going to be a really exciting opportunity for extending the reach of digital FTA through regional Australia and for our customers to have that convenience. That is our next evolution in" set-top boxes.

      Both operators also are beginning to formulate their strategies for the high-definition (HD)TV market, although it maybe a little while before Australian viewers sees HD broadcasts. "I think we will launch HD towards the end of 2007, possibly early 2008," Delany said. "The timing is dependent on the Optus D2 satellite being launched. We are currently at maximum capacity on the satellite we are on, which is the C1 from Optus. We will have more cable capacity once analog is turned off, but we still need more satellite capacity if we are to continue offering one uniform product to both satellite and cable customers. We plan to take capacity on the D2 satellite once it launches."

      For Austar, ""We have announced as an industry here we would like to have two HD channels up and running by the end of 2008." Weir said. "That is dependent on the new satellite going up. We will be looking at how we do that. We will need a new generation of boxes for that. So that is where we will be going. Thomson will be supplying the first generation PVR, but beyond that no decision has been made. … We have our hands full with our broadband network and PVR, as well as improving channels."

      One area where both operators will look to gain an edge against other pay-TV platforms is interactive services. "This month, we will launch a third Fox Sports channel to follow our recently launched Fox Sports News channel which incorporates an interactive news overlay," Delany said. "To help our subscribers get the most out of their sports subscription we introduced a mosaic-type application called ‘Sports Selector’ which sits at the beginning of our sports genre in the [electronic program guide]. By loading the application the viewer sees a grid of our nine sports channels, enabling viewers to watch nine feeds at once. When you change from grid-to-grid, you get a different audio. If you press select on any of those grids, it takes you to the channel on full screen."

      Austar was a step ahead of Foxtel having launching interactive services in 2000, However, Weir believes the regulatory environment makes it difficult to build a really strong business here. "In 2004, Foxtel spoke with us so we could align interactive products, so we have news active, sports active," she said. "That is sort of where we are sitting at the moment. What we don’t have here in Australia is the ability to do gaming via interactive applications. So there isn’t really a significant revenue opportunity for those interactive applications just yet. From our point of view, there is no business case to support putting a return path on, so when we install our customers, we don’t have a return path. We won’t be going down that path until we see a business case that supports it. I think new opportunities like gaming and gambling would do that, but the current regulatory environment in Australia does not support that happening."

      Alternative Platforms

      While both operators mainly offer pay-TV services via satellite, they are both looking at expanding their delivery options. Austar is look at WiMAX as a way to boost its offerings. "We are rolling out a wireless broadband network in regional Australia, so into the same markets where we offer our television services," Weir said. "We have announced a commercial strategy, which is essentially hitting 25 towns between now and early 2008. That will cost $50 million [Australian]. It will be about broadband Internet. We will be adding voice to it. In stage three, it will also be about our skills as a content aggregator and the channel relationships that we have. How do we leverage those to provide a complimentary content service that compliments the 120 channel satellite service that we have, which will be for a long time the most efficient way to deliver a broadcast television service throughout Australia.

      Weir believes despite satellite’s strengths, WiMAX is a compelling opportunity for Austar. "Satellite is the way to go, however, not every household will want to buy 120 channels," she said. "They may want to go to downloadable content. That is a great opportunity for us. We can look at repurposing and reinventing content, creating new content to have some new revenue streams from the WiMAX network. We have no intention of having a whole stack of linear channels over our WiMAX network. We want to be a broadband Internet service, add voice, look at content and then WiMAX mobility kicks in. You are talking about a truly portable mobile broadband service. One of the obvious applications will be content."

      For Foxtel, the next major innovation is likely to come via mobile delivery, and the operator has signed a deal with Telstra. "Foxtel will deliver a package of channels to Telstra mobile customers via Telstra’s Next-G mobile network and its existing 3G network," Delany said. "Foxtel is about delivering compelling video entertainment through any digital medium including cable, satellite, broadband and mobile networks. Next-G is an exciting extension for Foxtel and over time we intend to grow the offering substantially with the addition of more channels and on-demand elements.

      "We think it (mobile TV) has tremendous potential," Delany said. "The two things we see for growing our business are mobility and . There are clear indications from our consumers that these are the things that light up their imaginations. In addition, we have been participating in the DVB-H trial in Australia together with Bridge Networks. We will continue a second phase of that trial in the next 12 months."

      Attracting New Subscribers

      While the new services are intended to bring in more revenue from existing subscribers, Delany admits that Foxtel also is working harder to attract new subscribers, such as non-sports enthusiast. In May, Foxtel dropped its basic subscription price by $15 Australian ($11.16) to $36.95 Australian ($27.48) and removed sports programming from its basic package.

      "We did that specifically to try and open up Foxtel to more people," Delany said. "It was partly aimed at consumers who could not afford the [previous price], but it was also about providing greater flexibility and choice. By taking all the sports channels out of our basic entry package we were able to offer an entry price of $36.95 [Australian], a sports package for $14.95 [Australian] for those who like sports or the opportunity to choose a movies or general entertainment package for $14.95 [Australian] if you don’t like sports. Our research showed that the value equation for Foxtel subscribers was very much driven by their choice equation."

      Austar also has been fine tuning its strategy in this area. In September, the operator announced that it was introducing a Starter Pack for $36.95 [Australian] ($27.51) a month consisting of 34 channels, including Fox Sport News — a 24-hour news service dedicated to sport.

      The operator previously has been experimenting in this area. "We did a couple of things, 20 channels for $29.95 [Australian], a mini-basic approach," Weir said. "Phones started ringing and we got people who had never picked up the phone to talk to us before. The great news was that once our salespeople could actively talk to those people, we sold them in at the same tier penetration rate as other customers, so [average revenue per user] did not suffer."

      "The other issue is securing commitment," Weir said. "We want to put customers on two-year contracts, but some people perceive this as a barrier. We ran a really fun campaign, a 60-day non-commitment approach. Both campaigns showed us that there is a real opportunity for increasing the range of customers if we can lower that entry price."

      She added "we have now just launched a repackaged basic service with sports taken out and the entry price now reduced from $49.95 to $36.95 [Australian]."

      Both operators expect major changes in the Australian digital TV landscape next year. "I think we will be telling you that we have been getting accelerated growth from being able to repackage and lower prices," Weir said. "I expect our PVR will be selling like hotcakes. We are very excited about that. I think we will have a successful launch of broadband. I hope we will have more widespread commercial plans."

      Delany added, "I hope [we will] have very firm plans on HD and that our [video-on-demand] service to our current PVR has been a success. I hope that we are announcing a more extensive [VOD] service via our next generation IQ, possibly with broadband download. Hopefully, we are a leader in mobile TV in Australia and hopefully we are in advanced stages of launching a DVB-H style service, whether it is mobile driven one or Foxtel-to-go."

      –Mark Holmes

      Contact, Deanne Weir, Austar, Tel, 00 61 2 9251 6999

      Mark Furness, Foxtel, e-mail,

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