Why Neither NBN Plan Will Kill Foxtel

I’ve been really irritated in this first week of the election campaign that the debate over the National Broadband Network (NBN) has degenerated into an argument as to which NBN plan hurts Rupert Murdoch and Foxtel the most.

The premise is just ridiculous, as quite frankly, the NBN – (in either ALP or LNP form) – will not kill Foxtel.

I say that in pure mathematical terms.

Since its merger with Austar, Foxtel is permitted to sell subscription television services to 100% of the Australian population.

It does so with a combination of DTH satellite capacity it leases from Optus – (on the C1 and D3 satellites) – and the existing HFC cable network that has been around – (predominantly) – since 1995.

If the Telstra HFC cable runs down your street, your Foxtel is delivered on that cable. If it doesn’t run down your street, they throw a satellite dish on your roof, and it gets beamed at you from on-high.

If Foxtel were to switch to NBN delivery, they would only be able to do so for 93% of the population.

Under the ALP plan, they would get 93% FTTP coverage, and under the LNP plan they would also get 93% coverage – (22% FTTP and 71% FTTN).

Whichever way the network goes, they still have to find a way to service the remaining 7% of the population, and the only way they can do that at the moment is via the existing DTH satellite service.

Foxtel could equally do 100% population coverage with the same satellite deal they have with Optus now.

They could simply stop using the HFC cable, and put everyone on satellite. Their satellite costs would be the same, regardless of the number of homes they are servicing that way.

In fact, doing so would reduce their day-to-day operational costs, as they wouldn’t have to maintain the local cable head-end sites to pump the channels off the satellite into the cable network in the capital cities. There would simply be no need for them to remain in place.

Naturally, there would be an upfront cost to move all their existing cable customers onto satellite, so they’d have to weigh that up if they were to consider such a change.

So in short, exactly how the NBN rolls out does not necessarily have to kill Foxtel. What they do however it rolls out is entirely up to them. Their destiny is in their own hands.

However they choose to deliver their service is – (largely) – irrelevant to the end user.

Sitting in front of your television, you don’t care if The History Channel is coming up out of the ground through a piece of coaxial cable, or being beamed at you from 36,000 kilometres in the sky.

It looks the same.

What Foxtel must do is recognise the market has changed.

Before the NBN, a subscription television service like Foxtel was the only way to get this kind of content in Australia.

Though services like Fetch TV have done a fair job of trying to capture a slice of the IPTV, they just have the economies of scale to provide the financial clout to do the major content deals that a company like Foxtel can do with pocket change.

If you want to watch certain sports in your home, right now, Fox Sports is your only option.

That’s just the way it is, and if you want to watch certain niche content – (like TV shows the FTA networks don’t carry) – you have to go without, pay for a Foxtel subscription, or just illegally download it.

Consumers are no longer willing to accept that these are the only possible avenues.

When decent ubiquitous bandwidth becomes available in this country, the content providers – (who, lets be honest, get shafted on the money they get from the Foxtel’s of the world) – will start selling their individual channels, direct to consumers, bypassing subscription television providers altogether.

That is Foxtel’s biggest fear – and whichever NBN we get does not change this. Ultimately, Foxtel need to change, or they will fail.

If they fail, it will be their own fault.

What they need to do is leverage their content deals, and sell them over the NBN.

Let people pay $15.00 a month for their suite of sports channels, and their sports channels only. Let people pay $10.00 a month for the movie channels, or the news channels, or the general entertainment channels.

Or charge people $1.00 a month for individual channels and make them choose a minimum of 30 channels. Or 20 channels, or whatever number works out at the bottom of the spreadsheet.

To get all the channels I want to watch, I have to pay for a certain package that gives me dozens more channels that I never watch.

So why do I have to pay for them? Let me choose what I want.

HBO would make a killing if they had their own private NBN-streamed channel in Australia, they could sell directly to consumers.

Furthermore, Foxtel delivery methods may have to change – (and to their credit, they are introducing IPTV-based options) – but it’s their customers who’ve changed more.

The NBN opens up opportunities for them, but it opens opportunities for others too.

No, the NBN won’t kill Foxtel – only Foxtel will kill Foxtel, and what happens is entirely up to them.

Just like any other business, they have to adapt to changes in their market.

So if Rupert Murdoch or anyone else thinks the NBN will kill Foxtel, they can cry me a fucking river – because the NBN will have nothing to do with it.

(NOTE: This post was adapted from my response to an article on technology site Delimiter).