The very cable network which underpinned the pay TV battle 20 years ago is about to be abandoned by Foxtel as it confirms the plan to move all broadcast subscribers to Satellite delivery.

The Aussie Pay TV Battle

Back in the heyday of the rise of Subscription TV the battle was fierce, Galaxy owned the skies with Satellite, Foxtel and Optus Vision battled it out along our streets with cable’s strung from telegraph pole to telegraph pole providing direct access to our lounge rooms.

Fast forward to 2018 and it’s an entirely new world. Galaxy became Austar and dominated regional areas but then merged with Foxtel, and Optus Vision couldn’t keep up, so we have one major Subscription TV network delivering broadcast TV channels into homes across Australia using a combination of Satellite and Cable delivery.

That cable, known as HFC – or Hybrid Fibre Coaxial – was installed and owned by Telstra, and the “spectrum” inside it was spliced up allowing Foxtel to send down it’s hundreds of channels while Telstra offered Bigpond Cable Internet.

HFC under the NBN

Today, the Cable is gradually being transferred to the ownership of NBN, as each suburb is converted to NBN the company takes ownership and the space inside the cable is split in three. NBN Internet, Bigpond Internet and Foxtel.

When the NBN is complete, the space used by Bigpond becomes NBN’s which will provide a more consistent and potentially faster broadband speed capability.

Transition to Satellite

One EFTM Reader (thanks Damian) who is a Foxtel Satellite customer had a curious question after the NBN was installed at his home. The NBN you see was installed using HFC – the network expanded to reach his home, where previously Satellite was the only option. So could he now convert to Foxtel via HFC?

No was the answer. While I’ve found other customers who have, that seems a chance act or very last of a breed, because in fact, according to Foxtel customer service “we are actually in the process of moving our existing cable customers onto satellite”.

The customer service representative went on to say this was “in preparation for the handover of the entire fibre optic cable network to the NBN”

What does Foxtel Say?

Foxtel Group Director of Corporate Affairs Bruce Meagher has confirmed the migration plan to telling us “Foxtel is moving to satellite only delivery for its broadcast subscribers while also significantly increasing its presence as a video streaming service.”

“In the future, the NBN will fully manage the HFC network to deliver broadband services. Satellite is the best option for high quality video images watched on the large screens in homes and other venues. IP delivered streaming services are clearly the delivery mode of choice for individuals watching on a range of devices in and out of home. Foxtel is able to offer the best of both.

When asked about the difference in service from HFC to Satellite for customers, Mr Meagher told EFTM “Satellite is less prone to outages than the HFC cable and delivers great quality HD signals. iQ2 and iQ3 boxes can be connected to the internet to deliver a range of services such as streaming video, Start Over and Look Back.”

The scale of this task

No timeline has been given for the migration, though one senses that it’s a multi-year plan that would take likely 3-4 years to implement.  It will commence with the ceasing of new HFC installations, likely imminent, and from there a mixture of churn of customers (cancellation) as well as people who migrate to Foxtel’s online platform Foxtel Now will reduce the overall HFC Foxtel numbers.

That said, it’s estimated Foxtel have around 2.7 million customers, and some reports from within Foxtel indicate that 75% of them are on Satellite.  That puts the number of HFC connected Foxtel customers at almost 700,000, though other estimates within the industry suggest it could be as low as 250,000.

Regardless, the logistics and cost of a migration to satellite must be enormous for even 150,000 customers to be converted to Satellite.

One also imagines a fair amount of reluctance from many home owners to switch to a system that requires a satellite dish on the roof.

What about NBN and Telstra?

This news has come as a surprise to many, even some close to the industry in both the telco and NBN world as EFTM made calls today about this.

It should be noted that despite the appearance from the Foxtel customer service and official statement to EFTM (above), there is no requirement that Foxtel migrate away from the HFC network under the NBN ownership.  The technical framework for the HFC network today and into the future assumes an amount of spectrum for broadcast usage.

Foxtel’s presence on the network has no direct impact on the NBN in a financial way, because under the ownership transfer arrangements Telstra retained the rights to a portion of the HFC spectrum for Pay TV services.  It is therefore Telstra that has the most to lose in this new arrangement as they will no longer receive what we can only imagine is a rather handsome carriage fee for the provision of the service.

A spokesperson for Telstra told EFTM “Moving customers from HFC to satellite is a commercial decision for Foxtel’s management. Telstra received $35 million of revenue from Foxtel for their use of the HFC network in the first half of FY18. Reductions in this revenue will not be material to our overall financial results.”

While that’s a stack of money, there is also upside for Telstra – given they are half owners of Foxtel, one assumes the business positives for Foxtel will pay dividends for Telstra long term.  Additionally, there may be substantial savings for Telstra in not having to maintain the HFC broadcast network.

An NBN representative told EFTM “nbn is taking ownership of the Telstra HFC network in a progressive manner as each part of the HFC network is declared Ready to Connect for nbn services.

“During the co-existence period nbn shares the HFC spectrum with both Telstra for its own broadband services and Foxtel’s pay TV services.

“Following the end of the 18-month co-existence period Telstra will cease operating its broadband services on the HFC network.

“Foxtel has historically negotiated its access to HFC spectrum with Telstra and has continued to have access to the HFC spectrum even when nbn has taken ownership of that portion of the network.

“Any decision from Foxtel to no longer deliver its services over the HFC network is a commercial decision for Foxtel and is not related to nbn.”

What’s this mean for customers?

Well it’s interesting, because in reality, there’s no difference in the number of services you can get – the number of channels – however, vast numbers of people rely on their Foxtel service to watch Free to Air TV.

This means switching your TV to HDMI1, and flicking through channels, both free-to-air and pay TV with one remote.

Via Satellite, not all Free-to-air channels are re-broadcast on Foxtel.  Instead, on the IQ3 Foxtel Satellite box there is a free-to-air tuner which plugs into your antenna – but is your antenna up to scratch?

Customers will be unhappy when they suddenly realise that their free-to-air antenna, which may not have been used for many years, doesn’t work since the Analogue switch-off and there’s going to be much frustration for customers as they get the call to ditch cable and install a Satellite.

Outages – Satellite vs HFC

If you read the community forums at Foxtel, there’s certainly some concerns about Satellite coverage and outages in heavy weather.  The response to this is normally along the lines of any outage on Satellite is restored much faster than HFC outages which can last many days.

Problematically though, Satellite weather interruptions are much more widespread it could be argued so this will be a pain point for Foxtel during the migration and beyond.