Telstra free to bundle Austar in regional areas

Telstra will be able to bundle Austar’s pay TV service with Telstra's telecommunications services, the Australian Competition and Consumer Commission announced today.

"The decision means the Telstra Corporation-owned Telstra Pay TV can provide Austar pay TV services at a discount to retail residential customers who also get telecommunications services from Telstra Corporation", ACCC Chairman, Mr Graeme Samuel, said today.

"The conduct is limited to the areas that Austar currently supplies - rural and regional Australia, Hobart and Darwin.

"The ACCC found the public benefits of allowing Telstra to bundle the services were likely to outweigh the public detriment.

"The decision is consistent with the ACCC's November 2002 decision to allow Telstra to bundle Foxtel's pay TV services in the areas that Foxtel supplies.

"The ACCC expects the proposed bundling will enhance competition by providing consumers with an alternative supplier of Austar’s pay TV service and by facilitating price competition.

"The public is also served as the increased competition from Telstra bundling should increase the penetration rates of pay TV and thus improve the long-term viability of the industry".

Mr Samuel said the majority of market participants consulted about the proposal did not believe the public benefits outweighed the detriment. In particular, it was argued that the conduct would stifle the development of alternative telecommunications infrastructure in rural and regional areas.

"The ACCC gave these comments serious consideration. It undertook further analysis by talking to infrastructure providers and merchant banks to determine the extent investment in new networks may be directly harmed by the bundling.  However, the ACCC did not believe it was sufficiently clear that the conduct would have such an impact such that it should be stopped".

Background

The notified conduct

On 20 May 2003, Telstra Corporation Limited and Telstra Pay TV Pty Ltd notified the ACCC of conduct that constitutes a third line force. The conduct involves Telstra Pay TV proposing to offer and supply Austar’s subscription television services at a discount to retail customers who also acquire fixed line telephony services from Telstra Corporation Limited.

The Austar pay TV service will be offered to Telstra's retail customers through Telstra's Rewards packages.

As a result of the proposed conduct, a five per cent discount will be available to Telstra's Rewards customers who acquire a fixed-line telephony service that is pre-selected to Telstra on a single bill with one of the following services:

• mobile telephony service;
• Internet services; or
• Austar’s subscription television service.

If a customer acquires a fixed-line telephony services which is pre-selected to Telstra and any two (or more) of the additional services on a single bill, the customer will receive a 10 per cent discount. 

The discount is off Telstra’s standard retail price for the service. Telstra Pay TV's basic retail prices for Austar's subscription television services will be slightly different to Austar's current, published, standard retail prices for subscription television services.

Third line forcing

Third line forcing is a specific form of exclusive dealing and prohibited no matter what its effect on competition.

In this particular case the third line force arises under sections 47(6) and (7) of the Trade Practices Act 1974. This is because Telstra Pay TV intends supplying the Austar pay TV services on condition that the purchaser acquire other goods or services (fixed line telecommunications services) from Telstra Corporation, which is a separate entity, or because a discount is being provided on the condition that the services are acquired together.

Although third line forcing is prohibited, suppliers engaging in it may seek immunity from court action under the notification and authorisation process in the Act. 

Under the notification process, immunity from court action for third line forcing conduct is obtained automatically 14 days after lodgement, and continues unless and until the ACCC issues a notice removing the immunity.

The ACCC may issue a notice removing the immunity provided by notification of proposed conduct if it is satisfied that the likely benefit to the public from the proposed conduct would not outweigh the likely detriment to the public resulting from the conduct. 

Under this test the ACCC considers whether public benefit is likely to result from the conduct and whether such benefit would outweigh the public detriment, particularly the anti-competitive detriment generated by any lessening of competition in relevant markets.