Interview with Fred Hilmer on the proposed Foxtel-Optus agreements, Business Sunday, Nine Network
-9 June 2002
Michael Pascoe
 "we have very powerful players who have made it very difficult on this platform to allow anybody on who might be competing with any one of the parties, in any one of their businesses."
The proposed pay TV shuffle between Telstra, Foxtel and Optus is certainly creating a lot of heat.
Next Thursday the ACCC meets to discuss the proposed merger and to try to work out guidelines for further negotiation with the
three players.
Opposition to the deal has come from suppliers and media groups such as the Ten Network and publisher, John Fairfax, whose
chief executive, Fred Hilmer talks to Michael Pascoe.
Reporter: Mr. Hilmer we saw Australis go under a few years ago after not being allowed to do a similar deal with Foxtel, do you
want Optus to go the same way?
Fred Hilmer: Well I think the situation's quite different. I mean, we're not talking about a small company we're talking about a very
large company that's a division of a very large global company, we're talking about the company that bought into that business with
its eyes absolutely wide open and we're talking about a deal now that's going to create a monopoly in what's an important industry,
it's going to create a monopoly that'll be held by people about whose behaviour we've had quite serious concerns and it's going to
have, from our perspective, no off -setting public benefits.
Reporter: But from Optus's perspective for a moment, do you think Optus is a viable pay-tv player in its present form, it's losing a
packet and no sign of improving?
Fred Hilmer: I don't have any inside information on what the true profitability of pay-tv is for either party but on the other hand I think
it's really important to understand that we're not worried here about failing companies, we've got a company that has a long-termcommitment, through its programming contracts, to continuing to provide this service, we've got a company that's been claiming
benefits from bundling its service to its core business, and we have seen no indication that they're going to leave the industry.
If they were going to leave the industry then the Foxtel partners are bunnies for doing this deal because they're paying, by their estimates,
something between 600-million and 1-point-3 billion to take on liabilities that they don't need to take because, if Optus is going to
leave the industry then all the customers will come to Foxtel, if Foxtel have to assume these liabilities it's going to cost them
something like two to three thousand dollars per subscriber when they get them for free, so this whole deal makes no sense.
Reporter: You said you've already had concerns about the party's competition record, what do you mean by that?
Fred Hilmer: Well we have very powerful players who have made it very difficult on this platform to allow anybody on who might be
competing with any one of the parties, in any one of their businesses. I'll give you a couple of instances: have a look at the Foxtel
channels, only one of those channels is operated by people who might, in some way, have an interest in competing with either
News or PBL or Telstra. We've been trying for years to get content and to get channels onto the pay platform. We've had no serious
negotiations.. and then most recently we had the little AFL kerfuffle where, as a consequence of the AFL rights being bought by the
pay consortium and PBL, our reporters were told they couldn't go into the locker-rooms after the games.. that those rights, in a
market that had nothing to do, nothing to do with pay-tv, that those rights were also bundled in, so these are parties who will use
monopoly power in one market to compete in other markets and from our point of view that is really concerning behaviour.
Reporter: How serious have you really been though about trying to get into this business, isn't Fairfax buying into Foxtel's fight a bit
like a hire car company buying into a Qantas competition issue, just in case you want to get into the airline business?
Fred Hilmer: Well, this is a bit less than just in case, I mean we have firstly tried - been trying to get into this business as a
channel provider for some years but without success and, in fact, our effort to do that was lead by Kim Williams some years ago.
We've also successfully provided content through market-wrap to pay-tv and we have invested in creating the capacity to do that but
more importantly you look ahead Michael, what's going to happen in this industry, what's going to happen in this industry is that this
is an important channel and gateway to the home and it's going to be important in the internet related areas and we've invested quite
a lot of money in that area and we would like to see all the avenues through which we can get a return for that money, opened up..
and we would certainly like to see those opened up in a way that's consistent with a competitive market and not consistent with a
monopoly market.
Reporter: The pay-tv cables though have always been mainly about telephone and telephone competition, isn't that the bigger game
here, isn't that the one that the A-triple-C and the Government's going to focus on rather than pay-tv which itself is a very minor
industry?
Fred Hilmer: Well I think the Government needs to look at all of these industries because they're inter-related and I think if you're
going to be concerned about telephones well then can every telephone company now bundle pay-tv or is this just Optus and Foxtel
that are going to be allowed to have this so-called contact between pay-tv and telephony, so, what is the real concern and if the real
concern is about using this as a bundling or competitive avenue in telephones, why can't everybody get into the act and then why
can't we do it in newspapers which was one of the things we asked because if News Ltd were to say bundle newspapers and pay-tv,
would we have that opportunity, and I think these are all questions about a monopoly's being created, is that in the public interest,
why does that need to get done, and what are the consequences and how can those consequences be dealt with, these are very
complicated questions and you can't just rush in there, particularly when there's no urgency, 'cause nobody's going out of business.
Reporter: A line among the analysts is that Fairfax seems to have enough problems running its own business at the moment, one
of the criticisms made is that it tends to exist in a bit of a vacuum, waiting to be taken over by somebody, that no-one carries
responsibility, no-one carried the can for the big Olympics loss, no-one's carried the can for the hundred-million dollars or so on the
internet losses, in fact you just promoted the boss of F2 and given him control fo Classifieds?
Fred Hilmer: Well firstly, I carry the can for everything that goes on at Fairfax and executives who work with me are clearly
accountable for what they do. Secondly, we have a very clear direction, we've invested some 300-million in our core business, we're
improving that business and that business is going well in a market that is, by any standards, at either 10 or 20 year lows. The
business is being improved, we have a very clear sense of direction and we're very comfortable with how we're heading in that core
business.
One of the big issues for us is how we move beyond that core business, particularly if you take a longer view and you
say, convergence is real, it mightn't be as immediate as it was thought to be but it's real, how do you move beyond that, how do you
get scale and scope to get the benefit of the investments that you've made and that is a real issue for us, and this is an important
part of that issue as is reform of the cross-media laws.
Reporter: Mr. Hilmer must leave it there, thanks for talking to us.
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