Foxtel has licensed some of its television channels to cut-price internet service provider TPG Telecom, which is set to launch its own premium television service from early 2015.
The unprecedented move by Foxtel to sell a "white label" version of its content to an independent competitor is a further sign of the radical efforts by the former pay television monopoly to bolster growth in the face of cheaper competition.
Foxtel already has some of its content shown by Telstra’s internet television service. Telstra owns 50 per cent of Foxtel, while Rupert Murdoch’s News Corporation Australia owns the other 50 per cent.
It is understood Foxtel’s entrylevel television content would be shown through TPG’s own set-top box as part of a low-cost service. This would be similar to Telstra’s basic T-Box service.
Foxtel is facing new competition from Nine Entertainment Co and Fairfax Media – owner of BusinessDay – which have formed a $100 million joint venture to offer a subscription video-on-demand service called StreamCo that will undercut Foxtel’s cable and satellite service. That move is itself a preemptive strike against the expected arrival of US giant Netflix in Australia next year.
In response to these threats, Foxtel chief executive Richard Freudenstein has slashed the price of the basic Foxtel cable and satellite service from $49 to $25 and is preparing to offer a broadband and phone service from early next year.
That will pit Foxtel head to head against both Telstra and now TPG, which will launch a "triple play" service of broadband, fixed line telephony and pay television – via the internet – in the new year.
It is unknown what the TPG contract is worth to Foxtel. Both parties declined to comment.
Internet-protocol television (IPTV) is an increasingly important service used by telcos to keep customers loyal to their brand. Most other major internet service providers , including SingTel-Optus and iiNet, have partnered with Malaysian-backed service Fetch TV for their subscription TV content.
TPG consumer business head Craig Levy told Fairfax Media on Tuesday he had secured a content partner. "TPG has been doing IPTV for more than five years on our network , using multicast technology and we have the underlying infrastructure to do it,’’ he said. "What we’ve always lacked is the content.’’