Foxtel-style 'triple plays' offer improved margins

Pay TV provider enters broadband market

Pay TV provider Foxtel has entered the broadband market, this morning announcing details of long-anticipated 'triple play' bundles that combine Internet access, Foxtel TV and a home phone service.

Foxtel is a joint venture owned between Telstra, which offers Foxtel TV bundled with home Internet access, and News Corp.

IBRS advisor Guy Cranswick said that he expected 'triple play' bundles to become more common among ISPs.

"In this market it's an obvious strategy, almost necessary, as the price pressure on all three components is great but once bundled, it tends to cut churn and improve margins," Cranswick said.

"Bundling offers a strong means to grow marginal revenues. As a standalone business ISPs face commodity price pressure but once they offer content and other services it's a proven strategy to grow revenue and reduce churn rates.

"This has been known for a long time. The perceived convenience of the supermarket telecoms offer is good for vendors but not always ideal for consumers."

"Most of the major ISPs have a triple play offer, though only Telstra and Optus have Foxtel content, the majority of the rest are bundling FetchTV," said independent telecommunications analyst Chris Coughlan.

"Foxtel’s existing PayTV customer base is serviced either via HFC or satellite," Coughlan said.

"Satellite connected customers may well be attracted to the new offer, as any broadband will likely be provided via ADSL. Foxtel, like all Telstra Wholesale customers, do not have access to a wholesale cable broadband service.

"The majority of these customers will have a cable broadband connection at bit rates of up to either 30 or 100Mbps, and would be no doubt reticent to connect to a slower ADSL2+ service.

"For this reason I believe that Foxtel will make a concerted marketing effort at existing satellite connected customers within an ADSL2+ area and new regional or metro satellite connected customers."

"Once NBN Co provides access to a HFC based cable wholesale broadband product I believe that Foxtel will be able to make a concerted effort to churn Telstra’s cable broadband customers to their bundled offer," Coughlan added.

Existing Foxtel TV customers can add broadband Internet and a phone service from $65 per month on a one- or two-year contract, with a 50GB per month quota.

New customers can sign-up to a triple play package from $90 per month on a one- or two-year contract.

Use of Foxtel Go and Anytime, Foxtel Play and Presto services don't count towards a user's download quota if they are connected over the company's broadband offering.

"Foxtel is passionate about bringing Australians the best entertainment experience possible and we’ve worked tirelessly to make that experience more accessible through our investments in pricing and packaging for cable and satellite customers and through our new movies and TV streaming service, Presto," Foxtel CEO Richard Freudenstein said in a statement.

"Today, we take that effort to the next level by providing our most compelling offer yet with our new Foxtel Broadband and Home Phone bundles. Foxtel Broadband is specially designed with entertainment and video in mind and maximises the value of a Foxtel subscription through flexibility, customisation of services and a simplified customer experience."

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