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Telstra partners with Fetch in bid to improve streaming potential

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Telstra has acquired a stake in Fetch TV in an effort to increase its presence in the video streaming market (Screenshot via YouTube)

Having failed to become a major player in the Australian video streaming market, Telstra is hoping to shake things up with a stake in Fetch TV. Paul Budde reports.

LIKE SO MANY telcos around the world, Telstra has been floundering through the video streaming market over the last few decades. It will be interesting to see if its acquisition of a 51% stake in the content aggregation company Fetch TV for $50 million will herald a new beginning.

For the last 25 years plus, its activity in the market has been through an original 50% share in Foxtel (currently standing at 35%). That company started in the 1990s as a pay-TV company. Telstra’s participation was a defence position where it didn’t want to see some of the media companies, namely News Corp, become too successful in this market.

It can be argued that that strategy worked as Foxtel has never been able to reach its full potential. The original goal was to have a 75% market penetration by the year 2000. It has never been able to reach much more than 30%.

However, by following a defence strategy, Telstra was never able to become a major player in the video streaming market. By the time Netflix arrived on the market, Telstra had lost any of its advantages as a national telecoms operator to add video streaming as a significant revenue stream earner to its retail product portfolio.

It has had several half-hearted attempts through a proprietary based system but none of them has been successful. The current system they are using is Roku. The problem with these platforms is that for a relatively small user group, you still have to invest in the ever-changing technology. More investments in Roku are needed or yet, look at another solution again.

Roku as a technology company has been struggling for a long time and the company is losing money, so the writing was on the wall for Telstra. They better jump ship now.

This is where Fetch TV comes in. This company has always positioned itself as a neutral content aggregator and telcos can use this service on a wholesale basis. Optus, TPG, Aussie Broadband and Vocus are the main users of this platform and Telstra will now join them.

It will be interesting to see how this will work out as the retail users of Fetch TV are all competitors. However, recent changes within Telstra have seen a structural change in its operations where wholesale strategies are taking a far more prominent position in the company’s overall business strategy. We see that with increased sharing facilities, both on its mobile and fixed networks.

This is a fundamental change in the company’s business culture, which since market liberation in the telecommunications market that started in the 1980s has been based on making life as difficult as possible for other telcos.

So, with this in mind, there is a possibility that Telstra’s involvement and its change in business strategy could give Fetch TV a much-needed boost which could lift the service to a more prominent place in the overall video streaming market in Australia. At the moment, Fetch TV has just under 700,000 subscribers. With Telstra onboard, another 800,000 users will be added. Still significantly below Netflix, Stan, Amazon Prime, Apple and Google.

I can’t help thinking “what if”. When Fetch TV was launched in 2010, it tried very hard to also get Telstra on board. If that would have eventuated, the combined Australian telecommunications industry would have been in a far stronger position to fence off the overseas video streaming companies. Not by taking them head-on, but by providing a neutral content-based platform for all content providers.

While the other video streaming companies all have been able to get prominent positions on smart TVs, Fetch TV was just not big enough to obtain a similar position, with Telstra on board that situation might change.

As a Fetch TV user, I might be biased, but I have also been very impressed with the service. Fetch TV has been able to survive the overseas video streaming onslaught and with Telstra now finally joining the company, it is a vindication that it had the right vision, the right technology and above all, the stamina and the tenacity to stick to its wholesale business strategy.

I envisage that Foxtel will also be made available on the Fetch TV platform. Telstra’s customers currently have access to Foxtel through the Roku set-top box and it is hard to see that they will be able to bring their customers across to Fetch TV without providing access to Foxtel. I expect that backroom agreements are in place, otherwise, Telstra would not have done the deal with Foxtel. But I admit I am guessing here as neither Telstra nor Foxtel have provided any information on this.

In a separate announcement, Fetch TV has started to roll out its latest set-top box, the Mighty Gen 4 Personal Video Recorder (PVR). It offers advanced multi-room features including the ability to stream free-to-air channels to a Fetch TV box located in a room where an aerial is not available. And it is interoperable with early versions of their PVRs.

Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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