Sunday, January 25, 2004

Foxtel, Telstra, and the dogs we pay for – but can’t afford

A factoid left unchallenged, as far as I can tell, in the rush to defend specifics of Australian life from Germaine Greer’s latest (annual?) tirade is this:

Australian wages, on the other hand, are surprisingly low . . . Australian food prices are low but just about everything else is, for many, unaffordable.

An opinion to which I add my concurrence. The annual wage for your default Gen X uni graduate job – working full-time at an inbound call centre – hasn’t moved from around $30k for at least five years. Over this same time some of life’s essentials, such as landline phone rental (over which Telstra has a pricing monopoly) have more than doubled in price.

Talking of Telstra, when it isn’t acting as a charitable lost dogs home for failed dotcoms, the Oz taxpayer-controlled telco still hangs on to some sharemarket dogs it has had and held since they were mere corporate puppies – take a bow, Foxtel, Australia’s de facto pay TV monopoly.

The fact that Foxtel’s annual losses have inexorably escalated since start-up, to reach $100m (forecast) this year, has not, apparently, in any way dented Telstra’s (Foxtel’s 50% owner) enthusiasm for pouring Australian taxpayer’s money down the drain. If you’re wondering what Telstra is doing in the showbiz industry in the first place, it’s a long story. The simplest answer is Telstra was, and is, afraid that any mass-home cabling infrastructure could threaten its lucrative landline rental monopoly.

In case I’m not being clear enough here, think of this: Telstra is charging almost $400 a year (from March 2004) for annual “rental” of a piece of copper wire that was, in most cases, installed at owner expense decades ago. Further, it is “investing” a fair bit of this windfall –obtained through gouging the pockets of you and me – in a loss-making enterprise called Foxtel.

Back to the UK-based Germs, whose country has a pay TV uptake rate of almost 50 per cent; well above Australia’s rate of “about” 25 per cent (as optimistically claimed in The Australian) (same URL). With Foxtel’s recently-announced conversion to digital, the seers are predicting that Australia’s uptake rate will reach 40 per cent (same URL) within two years, meaning a net (inclusive of churn) additional uptake of about 900,000 households.

Which is a big big ask, IMO. I’m not saying that free-to-air TV isn’t a general wasteland – it’s just that Foxtel, with a minimum monthly price of almost $50 (for which you get bugger-all) is way too expensive for most of these putative Pay TV uptakers. In the UK, the minimum monthly price is $32, but the average monthly revenue per user is $75 (you do your own math, then, on what Foxtel’s own average monthly revenue per user is, my guess is close to $100; i.e. a massive $1200 annually). And if an extra 1 million-odd Australian households have really got this kind of money just lying around, I'd be very surprised.

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