Spectrum 1/5/00

I repeat for you here a most illuminating article from Sunday's age. My comments below.

Sunday Age April 30th 2000

"When a person turns on the TV in Britain, it's increasingly likely they're not simply switching it on to sit passively and watch their latest soap. Instead, the many British homes that have been pulled into the digital broadband era by being offered free set-top boxes may instead turn on the TV to order a pizza, pay a bill or check their bank balance.

There, the pay TV industry has taken the lead by spending millions of pounds giving away the boxes that plug their TV's into high-speed Internet gateways, thereby transforming the TV into an interactive communication device.

Here, that same industry has been stymied by government regulation and the posturing of its competing share-holders, resulting in the stifling of similar broadband services. But as executives from all types of media companies witness the escalating share prices of their overseas counterparts with interactive broadband services, they too are hoping to join the game.

They are also being tempted by heady predictions from the likes of Forrester Research, which recently forecast e-commerce transactions to total $US207 billion ($A354 billion) in Australia by 2004.

Kerry Packer's Publishing and Broadcasting Ltd is arguably the company best positioned to successfully introduce broadband services to Australia. It has great visual content courtesy of its ownership of the Nine Network, an established online franchise through its Internet portal ninemsn, and owns 50 per cent of the data marketing business Acxiom which it could use to tailor advertising and e-commerce offerings to the people most likely to buy. And its TV magazines and online businesses provide a powerful promotional vehicle for any new service PBL wishes to introduce. The only piece missing in this potentially highly profitable jigsaw puzzle is broadband Internet access to Australian homes.

While people today complain about the "www" of the Internet referring to "World wide wait", broadband promises to end that. The technology gives companies the data capacity and speed to send a range of new services to TV's or computers, which could range from video streaming to data services and even telephony.

Although the Nine Network will be broadcasting digital TV signals from January, its potential as a broadband system has been limited by a government decision to make the networks broadcast signals with varying picture qualities to homes, eating up the amount of spectrum which could be used for other broadband services. Another option for PBL could be to use the cable on which its 25 percent owned pay TV business Foxtel sends its signals as a broadband platform. But its partner in Foxtel and the cable's owner Telstra, has ruled out Foxtel's partners using the cable for broadband as it presumably hopes to keep that market to itself.

Consequently PBL turned to C&W Optus. C&W Optus already has a limited broadband offering through its joint venture with the US cable company excite@home. Customers connection to the service can assess interactive games, numerous e-mail accounts, video news and film trailers. But the resources that PBL could have brought to the table would have made that offer even more enticing. But after weeks of negotiations, the deal collapsed as PBL also wanted its content given priority access to C&W Optus's mobile telephony network. Analysts agree PBL remains keen to find a broadband partner, but unfortunately for the media giant the alternatives are not as tempting.

C&W Optus's cable passes 2.2 million homes and already has 400,000 customers. The pay TV company Austar has only just begun rolling out its broadband satellite service, chello, and other companies have announced plans to offer similar services via satellite and microwave. But those systems do not yet provide the same high speed return path as does cable, and even worse, none of the alternatives have yet to launch their services. As a result, C&W Optus was in a position of strength when negotiating with PBL, which is probably why it did the unthinkable and called the Packers' bluff by publicly stating it would not extend the timeframe for their exclusive negotiations. Unaccustomed to being threatened, the Packer camp quickly announced the negotiations were over. But C&W Optus knows there are plenty of other media companies keen to negotiate a similar deal.

So now the most interesting question is where to from here for PBL?"

end quote

I urge subscribers to watch developments here, and even try to understand this business a bit. Notice Telstra seems to be behind the game on these issues now. Could I even be cynical enough to suggest this is deliberate ??? Telstra is not up there bidding aggressively for spectrum, instead going for what I reckon in the future will be low margin high volume pain in the arse web portal development for the mums and dads. Serious money is in the monopoly spectrum rights. It's almost as if the big boys are saying "just leave that to us thanks" !

If you want to understand this perspective more, do the EIS cycles class. Next course in August at the CAE.

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