Tuesday, October 25th, 2011 - OVUM
Tim Renowden, Analyst & David Kennedy, Research Director

Optus’ MeTV is a hybrid service combining digital free-to-air TV with on-demand and linear subscription channels, a PVR service, and web video. Packages start from A$9.95 over 24 months, with subscription channel packs an additional A$6.95 per month.
This aggressive pricing, additional mobile functionality, and the ability to deliver the service to customers of competing fixed line ISPs, gives Optus an edge relative to other FetchTV providers in the burgeoning Australian Internet TV market. The question is whether this is enough to take market share from Telstra’s T-Box service, which offers a similar hybrid DTT/streaming service, with comparable pricing and some high-profile content deals.
Addressing the differentiation challenge through infrastructure

Optus’ challenge is to differentiate itself from the incumbent (offering high-quality content on its own IPTV set-top box) and from tier-two and tier-three ISPs who are also offering FetchTV. Optus’ nightmare is to be relegated to permanent tier-two status, jostling with other ISPs.

While Telstra controls many major sporting rights through its Foxtel joint venture and standalone online rights agreements, Fetch TV’s offer is based around non-exclusive content. However, Optus is aiming for “value for money”, with aggressive pricing designed to grab as many IPTV subscribers in the early days of the market. Fetch TV will be available in Optus bundles at a lower price than other ISPs.
The announcement also differentiates Optus from its other competitors in several ways:
• By building CDN and related infrastructure that will allow it to keep control of the platform and future innovation.
• By leveraging this infrastructure to offer its IPTV service across its fixed competitors’ networks, driving content revenue for itself while driving traffic across competitor networks. This will ultimately push unlimited flat-rate broadband plans out of the market.
• By exploiting its mobile subscriber base to build a subscriber base for the fixed line MeTV service, and offering integrated service functionality including remote PVR scheduling and STB remote control apps (Optus controls one of only three networks in Australia). This could potentially be extended to include delivery of video on Optus mobile and tablet devices.

This illustrates how important possession of infrastructure will remain in the Australian NBN environment currently being assembled. As the fixed access network is monopolized and separated, the sources of market power are shifting to content and to other parts of the network. Optus’ strengths in mobile and content delivery infrastructure places plenty of daylight between them and their ISP competitors, and will secure its place as the number two operator in the Australian market.

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Tim Renowden Analyst David Kennedy Research Director

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