The Australian Competition and Consumer Commission today issued for public comment draft undertakings offered by Foxtel, Optus, Telstra and Austar provided under section 87B of the Trade Practices Act.
The undertakings detail a series of measures offered by the companies to overcome the competition concerns raised by the ACCC about the proposed pay television arrangements between Foxtel and Optus.
"The release of the draft undertakings for public comment should not be seen as an indication that the ACCC has formed the view that the undertakings alleviate all competition concerns raised by the Foxtel/Optus content supply agreement and associated arrangements", ACCC Chairman, Professor Allan Fels, said today. "This process will be used by the ACCC to inform itself of market views on whether the undertakings will likely address the key competition concerns. A final decision will be made after taking these views into account".
In June 2002 the ACCC concluded that proposed arrangements between Foxtel and Optus in relation to pay television were likely to breach the Act. It was found that the form of the proposed arrangements would likely substantially lessen competition and that there were four principal areas of concern. These were:
- the acquisition of content
- the likely dominance of the Foxtel distribution network
- the supply of pay TV services to households
- the provision of channels to third parties who wish to supply pay TV to customers.
The Act enables the ACCC to accept written undertakings in the exercise of its powers. Such undertakings must be of substance and address the conduct that has given rise to the perceived breach of the Act.
"Since reaching its conclusion that the proposed arrangements between Foxtel and Optus would likely breach the Act, Foxtel, Optus, Telstra and Austar have offered the ACCC draft undertakings", Professor Fels said.
Broadly speaking the draft undertakings provide for the following:
- access for third parties to Telstra's cable pay television networks (both analogue and digital) as well as Foxtel's analogue and digital set top units
- a commitment by Telstra to commence supplying a digital subscription television carriage service and by Foxtel to commence supplying digital set top unit services
- access for third parties who own, operate or control cable, satellite or MDS networks to Foxtel programming (the basic package and tiers)
- acquisition by Foxtel and Optus of particular pay television channels only on a non-exclusive basis
- commitments that relate to the make up of Foxtel and Optus' programming (including the level of expenditure on independent Australian content) and the retail price of Foxtel programming
- removal of a first and last bid right clause that was proposed to be granted to Foxtel in the event Optus decided to sell certain assets.
"Given the number of parties providing draft undertakings and the complexity of this matter, the ACCC has prepared an issues paper which provides an overview of the various draft undertakings.
"At the same time the ACCC is also conducting market inquiries in relation to a third line force notification lodged by Telstra in July 2002. The notified conduct involves Telstra Pay TV providing pay television services at a discount to retail customers who also acquire telecommunications services from Telstra Corporation.
"The ACCC is conducting market inquiries for these matters simultaneously as the outcome of its considerations regarding the proposed arrangements between Foxtel and Optus and draft undertakings has the potential to impact on the competitive environment in a number of telecommunications, and telecommunications-related, markets. This may have implications for the ACCC's assessment of the notification. A further issues paper which has been prepared in relation to the notification process is also being released seeking comment".
Comments are sought from interested parties on both the draft undertakings and Telstra third line force notification by 27 September 2002.