Pay TV market gears up for 'Triple Play' war

Telcos, internet service providers and Foxtel are locked in a race and all eyes will be on what the pay TV incumbent will offer in its triple play model.

Telcos and internet service providers (ISP), as well as pay TV operators, are now following triple play models (bundling telephone, broadband, IPTV into one price package). Foxtel will launch its offering – no doubt with an attractive Foxtel-lite content package – later this year. Meanwhile, M2 Group has entered the fray and TPG Telecom looks set to join in as well.

In general however, these models have already been deployed for several years in most other developed telecoms markets around the world. So, none of this is entirely unprecedented.

There are basically two triple play strategies used:

  1. Aimed at extending the customer base
  2. Offering it to existing customers to keep them loyal (stop churn).

Over the years, the second model has been more successful. Even a five per cent or 10 per cent discount is a bonus for the customer, especially in situations where they are already using all three services.The bundling strategy creates a recontracting event, increases barriers to churn (inconvenience) and extinguishes billing relationships with competing companies.

Since its introduction a decade or so ago the first strategy has in general not been very successful. In most cases the content was not attractive enough and/or there wasn’t an interesting enough discount attached to it to get customers to move over. Only when players had control over all of the services themselves were they able to offer discounts that were appealing enough to capture new customers – the competition between BSkyB and BT in the UK is a good example, with BSkyB being able to make a very attractive offer, using video content as the ‘hero’ to its customers.

Such a level of competition is unthinkable in Australia. With Telstra a 50 per cent owner, Foxtel will forever be hampered by the ownership arrangements and there is little hope that Telstra will sell out. The telco's shareholding in Foxtel continues to be its strategy to keep News Corp at bay. Furthermore, Foxtel is also restricted from making its content for its other offerings too attractive, as that would undermine its core pay TV business. So all eyes will be on what Foxtel will offer in its triple play model.

With the approach of broadband saturation and telephony revenues on the decline a new strategy is being promoted by the telcos – making the IPTV offering their hero element in their triple play packages. They are using these content services as a competitive differentiator in the market and in that way are trying to poach broadband customers from each other.

This is an edited version of a post originally published on September 29. Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.

They will most certainly get a run for their money from Foxtel. The company can also promote the PVR element of its services, which is popular among viewers.

We are seeing increased advertising activity aimed at using IPTV as a successful way for telcos to gain broadband customers, and so, with increased broadband competition, there will be an increase in IPTV activity.

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