Project Timeline 2005–2010

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Proof of Concept Phase – Interview J

Categories: Interviews, Proof of Concept Interviews, Support Material
Date: 20 April 2005
Contributors:

Andy Lloyd James: The first, there’s only six questions. The first question is what do you see as the key issues for the future development of television? This is television, as we know it now, but completely reshaped for 2015?

Interviewee: Well I think our… it just sort of starts with what you know about today’s world that will translate and the first thing is that television today is principally an entertainment medium and will continue to be principally an entertainment medium, in my view. So I think that that’s the first thing. The second thing is that there are some things that work very well on broadcast. You know, live sports events are a classic broadcast product, and in many respects I continue to believe that sort of episodic television is a broadcast event as well, you know the idea that there’s a regular occurrence of something that’s currently running…

Like a drama series or…?

Yeah, I think is a paradigm that will continue to exist as a principle staple of television. And I think that those things are ideally suited too, to broadcast. But a lot of the rest of television is equally well served, and maybe better served, by a more on-demand environment. So I think the biggest issue for television is how to marry broadcast and broadband if you like, given that I think broadband is the likely deliverer of on-demand. And some of the things that are ideally suited to on-demand are for example, movies. In my mind much niche programming, you know things that are oriented towards niche thoughts.

Yep, arts and that sort of stuff?

Arts yes. Lifestyle many other things like that are much more suited towards an on-demand type of environment.

Gotcha.

So I think the biggest single challenge is how to marry the broadband with broadcast.

That’s a great way of describing it, yeah.

Yeah, I think that the technologies in my mind within… by 2015, the technologies are relatively ubiquitous, you know we’ve got lots of ways of addressing broadcast today. Be that satellite, cable television, digital terrestrial, all are viable and economic. And I think broadband penetration by 2015 will be, you know well up there. It will be a great majority of homes at least where there’s incomes in today’s terms of $50,000 or so will have broadband.

Nationally or cities?

No, I mean nationally.

Right.

I think even, pretty much nationally yes. Because I think by 2015 there’s a variety of technologies – be they wireless, fixed line, other mechanisms that will be able to provide that broadband connectivity, and at sufficient speeds to be able to deliver a television signal of good quality. The second thing I think though is that… I think the whole sort of television business models is the second key area. Now, the television business models today are under challenged in two perspectives. One is that, a sort of… that free-to-air advertising driven model, in my mind in Australia is something that will survive… and is I think in our market, our climate, is a powerful tool.

Yeah.

But there’s undeniably a diversification of advertising channels underway. And that I think represents the biggest single challenge to that industry. It’s not… I don’t see the challenge being, you know that other mechanisms would overwhelm it, but I think the sort of stabilisation of, or the movement of advertising revenue is out into lots of other channels is sort of the big challenge at the end of the day for that model.

Yep.

Having had a lot to do with Foxtel, I can tell you quite honestly that I think that a subscription television model is not stable in Australia today. By 2015 it probably will be, but it will be something different to what we know.

Oh, really?

Well, yeah I think it will be something different to what Foxtel is today. It will have to be. It doesn’t mean that it won’t have the level of diversification that we’re talking about, but I think it will… it needs to find a new positioning, and a new way to present its product. In arguably in today’s model we’re headed for a penetration rate of around 30% of homes. And at that rate it is barely a sustainable… I mean it can be made a sustainable business and that’s okay, but it doesn’t mean that it’s a…

A roaring success.

Yeah, exactly and arguably there is another 30% to 40% of homes that are looking for a television product, over and above free-to-air each day. So…

What’s the limitation there [xxxxx], is it to do with things like anti-syphoning, or is it actually…?

It is to a fair degree.

Or the way the audience looks at it?

No, it’s a fair degree, it’s basically… it’s a value proposition, you know there’s [xxxxx] for what it delivers, for what you’ve got to pay, is it worth having. And I don’t believe that – in fact, I think that Foxtel does this well – they don’t trade on the idea that it’s more television, it’s not that, it’s all about… their mantra is more about choice, which I think is what it is.

Diversity.

And I think people will… you know are willing to pay for the things that they really want. And that’s why in some respects I think this whole sort of on-demand versus broadcast or broadcast versus broadband, is kind of an important debate to get… an important thing to get right, because I think it will… it has an enormous potential to stimulate something like that… another television product. And that’s…

Separately again from subscription or would that be the kind of [xxxxx] where subscription would morph into?

No, I think it could morph into or embrace or combine, and in fact I think, that’s why I’ve sort of said a marriage between broadband and broadcast because I think, today in broadcast you’ve got two sorts of models, you’ve got free-to-air and you’ve got a subscription.

A subscription. Yeah.

I think on-demand is a different model that marries across both of those potentially. And you can see how it could fit into both models reasonably well. And I think there’s a whole range of questions then as to how people pay for it. I mean in its pure sense, it could simply be an on-demand product.

Yep.

Or it’s pay as you go.

Which I segregate from the subscription product.

People, in fact very few people, but some people are talking about the notion of … not necessarily Foxtel doing this but… listening to what you’re saying, of an operation like Foxtel actually becoming if you like a home for people who want connectivity of all kinds, so that it delivers anything which has got a subscription model in it, so if it delivers your television, it could deliver packaged, if you like, so that you’re not running risks with the kids or this and that and the other online. It could be deliver almost anything that I wanted to do in terms of connectivity.

No, I don’t believe it personally. I’ve… and I say this because we already know that that battle is being fought out by in the broadband market today.

Is it?

Yeah absolutely. I mean the broadband penetration is running at the rate of upwards of 80,000 homes a week.

Really?

And… sorry, 80,000 a month. Not 80,000 a week, yeah, yeah. And I think the issue is delivery to which broadband subsumes television rather than whether television subsumes broadband. So I don’t believe… I mean do I think that Foxtel at the end of the day, I think Foxtel is a great television content aggregator and they do a very good job of delivering television, they understand that world very well. I think the question is more… you know does Foxtel deliver over… you know today they use satellite and they use cable, in the future is Foxtel something that you get delivered over broadband, filed into the home technology, and might they deliver through a range of infrastructure owners and operators, who are delivering connectivity of which one of the services is television, is much more likely to be the model than the other way around. I also don’t believe that the Foxtel model at least today, doesn’t support the delivery of a set top box that you would regard as if you like, a home gateway. They couldn’t economically architect such a box and do it. Now other parties can, and that’s really a combination of… and I think, yeah I think you might have said a couple of years ago that could happen, but you know, the world has moved on and the Telco market and the ISP market now are so big and aggressive and will be, and that’s really what’s going to play out, they’re really the people who are going to deliver the connectivity. I think the big question is whether, and this is a separate question to television, it’s really a question around broadband as to whether, you know the pure ISPs overwhelm the Telcos or whether the opposite happens. And that’s really what the voice-over IP arguments are all about. And also a number of other things too. Now today, you would argue that that battle is sort of well under way.

It is.

Absolutely, all over the world. All over the world.

You were saying that’s what voice-over IP, that’s the core of it because that’s…. Sorry, that’s where it’s being fought over right now.

Yeah I think… I’m kind of off the topic but… today the model of broadband is, at least in Australia, is that you know a customer a relationship with an ISP, and that’s different to your telephone provider. But once an ISP has entrenched the ability to deliver a voice over that, or in fact any service, be it television, voice, security, any number of other services because at the end of the day, they’re all just bits on the pipe. So the question is to what degree do the ISPs branch out, and all over the world, we see them do it, they move into voice-over IP services and they move into television services. In the U.S the model is a little different, because you’ve got the cable companies fighting the Telcos, and they really own the ISP businesses between them. But again they are encroaching on each other’s territory. So you know, the cable company has got into delivery of broadband, and are now getting into the delivery of telephony. So I think that’s where the battlegrounds are all about.

Under content?

I think that the content – there’s two or three games here – one is that the content today is, you know it’s fundamentally important, you have to be cautious of what you’re talking about in terms of content; if we talk about entertainment content, you know the things we know and love: sport, television, movies, music, games, all of that sort of area. You know it is an emerging field in the broadband area, it’s established in the television area. I think at the end of the day, the questions were that the content guys find a way to deliver their product direct to the consumer independently of the current aggregators and gatekeepers along the way. So you’d argue today that you know Foxtel at the end of the day produces some television, but not much. It’s an aggregator.

Yes.

And it legitimises its position because maybe investment in all the infrastructure and architecture it takes to get to the consumer. You know the question is whether in the future there are so many alternate parts to get to the consumer, that maybe the content provider can get there directly himself. And certainly we’re seeing on the Internet some models around that, for example the major league baseball, MBL, Major League Baseball in the U.S. originally provided their broadband vision through Yahoo, but then they took it back and set their own business up. So now consumers subscribe directly to them, and it’s a product that they pick up off their ISP, they don’t pay their ISP for access to it, whereas under the Yahoo model they were. So it’s a question – at the end of the day, the content, you know you’re going to argue content’s always king, but it’s always a constant battle between the content owners’ ability to either disintermediate or leverage the channels and visa versa applies, and the more concentration and ownership there are of the channels, the more share of the wallet the aggregator can provide… or can claim. That’s the battle.

Yeah, and that presumably the vendor also provides a fair old battle for the current operators of the television channels, as they exist at the moment because…

I think they…

… [xxxxx] no longer working in the monopoly world.

Well, they’re not today no.

And less so in the future.

Yeah, and you know today we’ve got… we’re on the cusp of television-like product being whatever you want to call it, vision being delivered certainly through free-to-air television, through Pay TV, it’s starting to appear now in broadband. In fact we are doing quite a number of things like that, and we’ll do more and more. And it won’t be long before we see it in the mobile world. So…

Are there robust business models growing in there, or is it still very much…?

No, I mean at the end of the day there’s only… at the end of the day there are, the robust business models around television and content are principally advertising the subscription, you know it doesn’t get much more than that.

Yep.

I think in the broadband world it is… you know we don’t see it today, models that you would argue are robustly viable. However, the classic example is that you know Apple have made an enormous success of music downloads, but they don’t depend on the content to make the money. They make the money out of the i-Pods they sell, or similarly if you like Big Pond today, we’re doing a whole lot of content over broadband, but we don’t necessarily make money out of content but we do out of the ISP subscription. And arguably that is an important differentiator for us, and a package that works. So, you know the model and… do we think in the long run that you can make money out of broadband content, yes you can. But more and more it will be when we get back to where broadband can deliver to the television. So when someone sitting in front of the TV can look at something, you know look at a very high quality product with high convenience, in a manner that they are accustomed to, and it’s transparent to them as to whether it’s coming off broadcast or broadband, then content over broadband will make money. One other point I was going to make though is if you look at the free-to-airs, I don’t know that their story is that sad, because the first is… I certainly think that their product is underpinned by two things. One, it’s underpinned by… no, probably three things. It’s underpinned by the [xxxxx] regime. It’s underpinned by I think a unique ability to pull content out of the U.S. and the British markets…

Yes.

Which makes it a very diverse product in this country. And thirdly, they’re underpinned by the relative inability of Pay TV to make enormous penetration differences. But having said that, they’re now on the cusp of… if they’re smart about it, there is a whole range of new infrastructure being invested in they can deliver their signal. You know it can be, we’re now getting to the point where we can deliver over the broadband. As people like Telstra go and put fibre into homes, then there will be a high desirability in putting, you know the television signal directly over the fibre, and there’s no reason why it won’t ultimately be able to be effective… when it’s not that far away, we’ll be able to deliver it to mobile devices. If free-to-air is smart about it and recognise that at the end of the day, these are just alternate forms of infrastructure that other people are willing to invest in, and consumers at the other end are willing to consume their product, I think that they’re in a strong position to leverage their current ability to aggregate.

Yeah. And that’s part of their distribution.

Exactly, and then all they’ve really got to do is sell through their advertisers the idea that they’ve got a broader network than what they deliver today in terms of their first run television.

Yeah.

I think the big question then is the degree… the other wild card is the degree to which you know ad skipping technologies, otherwise known as PDRs, digital video recorders or whatever. Anything that has got a reasonable amount of computing power, and I include a mobile phone, a PC, or a set top box, that has got the capabilities, can relatively easily skip over advertising.

I mean it’s an issue that’s going to come anyway.

Well that’s right, it’s going to come on all these formats, and it’s a question as to how they reshape their… you know their concepts around what advertising is and how they make it and so forth.

Yes.

Yeah, so do I think they’ll overcome it? Yeah I do, but it’s probably a big challenge for them, in the short term.

The question that… the only place where it comes up with intense heat is around the question of if you like high-end Australian non-event, high-end Australian content like drama, like documentary, and that kind of thing. But if the… where so much of what the commercials do, I don’t think I’m being unfair to them, is done because of regulation. If the slice of the advertising dollar starts to reduce, howsoever slowly, obviously the regulators, the AVO and people lose their leverage pretty quickly to compel the public service style…

Yeah.

… of programming. And I suspect, I don’t know what you would think, I suspect that those kinds of things will probably translate… long form drama, documentaries will probably translate least ease certainly to a mobile.

But [xxxxx], yeah

But perfectly easily into a broadband.

I think that translating to a broadband will go reasonably well. You know, remember I think the broadband world is a much more on-demand world than it is.

Yes.

I mean I think that a product like that, as a television show that airs at 8:30 on Tuesday evening, is absolutely a world-class product. But where broadband fits is that, for all the people who weren’t able to be home at 8:30, it is kind of like what I need to be able to do is on-demand I want to be able to… well a beautiful piece of imagery here as well as look forward through the EPG, I want to be able to look backwards.

Yeah, that’s nice, yeah.

And say, well I wasn’t here for that, I missed it last night because I had to be somewhere else, but I’d like to watch it now, thank you.

The Janus factor?

Yeah. And if the… if at the end of the day the free-to-airs can expand the potential perceived market, as the number of eyeballs that ultimately see this thing, then I think that works to their advantage, not against them at the end of the day.

True.

I think mobile though, actually I don’t know that mobile isn’t ideally suited because… I suspect that mobile is, it’s a shorter grab, so if it’s the same product re-cut, re-sliced, re-diced, into a… you know, because we all know that every one hour drama could probably be cut down to 5 digestible chunks giving you… you know 4 digestible chunks of 5 minutes.

Yeah.

… and you still get the story.

They get down in the back.

I reckon that it’s that sort of re-use of the product that I think you have got to go after.

It’s going… the one group that I’m absolutely convinced is going to make a lot of money out of whatever the future is, is those people who are specialists in intellectual property and the digital rights management…

Probably.

Off the… The issues that you’ve described… 2015, what’s the best outcome realistically for them? How much of what you’re talking about do you think you’ll actually see come to fruition by 2015? Most of it?

Oh, yeah. Yeah I think that the rate of progress of… the rate of progress of infrastructure build and the sort of technology capability will be able to do most of that in that sort of time-frame. I think there is a big question by 2015 as to whether we are spending a lot of time watching high definition television or not. And I think that’s a technology in my mind that will ultimately come, but…

But not as the lead?

But not as the lead, no, and…

We’ll be no worse off [xxxxx]?

Yeah, two years ago I would have said it will never happen. Now I think it will happen, but it’s hard to know when, and frankly I’m not sure I care. It’s sort of like… so that’s kind of the only element. I think that people enjoy the very high definition product and I think that that will come to you in various ways. Whether it’s you know, the next two generations of DVD technology that give you high definition…

Engine… it certainly doesn’t need a broadcast model to deliver it to me.

No, and I think that… I don’t think the broadcast models, I mean I think they can do it, but not particularly economically.

No, but…

I think broadband can do it, but not particularly economically.

Yeah.

Maybe by 2015 we will have found a way to do it reasonably economically, but it’s sort of… it’s out there. But clearly it’s got some merits and value at some point and will generate a product that will be consumed in some ways.

They’re in a use of spectrum market.

Yeah, but you know you would argue if the sort of quality of digital television you get today, that you know the majority of what we’re talking about, people are highly satisfied with that, because they are, then I don’t see too many challenges by 2015 to be able to deliver that reasonably, would be good I think.

And nothing that you’re saying seems to require massive re-thinks in terms of regulatory input by government [xxxxx]?

I think the regulatory challenges… I think it takes massive changes… actually I kind of think it does.

In terms of ownerships and things, or actually in terms of the spectrum use [xxxxx]?

I don’t mean in terms of spectrum use, I thinks that’s not the challenge. I think that… well we could go on all day with what’s wrong with the regulatory regime.

Others have!

Yeah, that’s right. I think the underlying… the underlying issue that I have with the regulatory regime, is that… I think that you would argue that it has failed miserably, in terms of delivering upon an improved television product, today. You know you would argue that Australia is by no means the leading edge of having…

No!

… sort of significantly moved our television product.

And nor has it delivered a sustainable production industry for home entertainment.

Yeah. So that’s the first point. The second point is that I think that regulation exists within a legislative framework, and I think our legislative framework has got some fundamental flaws in it as well, which are driven by the nature of… almost some of the personalities that they had there over time, so. But I don’t actually anticipate that that’s going to change much, you know, do I think anti-syphoning, I think anti-syphoning to a degree will get unwound, but it will not get overturned.

Yep.

I think that the sort of… the tightness of the… sort of the closeness of the holdings of free-to-air television licences will remain, I don’t think that is going to diversify much. I think that the biggest challenge is, for the regulator now I think is… with Foxtel we went through the exercise of putting in place a pre-investment undertaking. In other words seeking a known regulatory outcome in terms of access prior to making an investment in digital, and we got that, but then lost it, through the Tribunal on the basis the Tribunal believed or believes that… well I don’t… go back. The principle reason that such an undertaking would be accepted is because it is believed to be in the long-term interest of the end users. The Tribunal, upon appeal, didn’t accept that because they believe that the investment would have been made anyway. So therefore placing restriction in terms of access was not in the long-term interest. That… quite frankly, that will never happen again. And I think that the challenge the regulators have got is how to deal with the next wave of capital investment, particularly in terms of broadband and fibre, in terms of access regimes.

To provide some level of service to the investors.

Yeah, because quite frankly the scale of what has to be done, I just… as I said, it just won’t happen again. So next time around they’ve got to… they… there will have to be some level of genuine security around that in order for the levels of investment that need to be made to be made. And that’s not… that’s a side discussion to the television discussion but nonetheless it’s driven, in a fair degree it’s driven by television because the big consumer of bandwidth, I mean we can really do most of what we want to do on broadband today. We can do everything we want to do on telephony today. So the real driver, in the longer run frankly, is for a high quality vision television type services, and the degree to which they will be transmitted over new infrastructure. I also think that…

And it will require that new infrastructure to get us to 2015?

Oh, yeah.

So that… the regulatory issue does actually sit very firmly across all of that

It’s as simple as this, if you genuinely want on-demand television.

Right.

And so… if you argue my very first point that, you know television is a great product for broadcast and it does well, but there is a whole lot of things I can do over broadband, which is on-demand that I cannot deliver over broadcast. You know, the broadcast technologies do not get you there.

Yep.

Okay – fine. So I want broadband to television, that’s what I want. That is really… and we’ve done cable, and satellite, and digital television, and more television, and interactive television, and all of that sort of stuff and it’s all great stuff, but the next big step for television is that…. is that on-demand capability that says, of the 15,000 movies that you can… you know that are more than that… of the 35,000 movies that have ever been made, I want that one and I want it now. Or the ability to say, instead of looking just forward through the EPG, I want to look backwards through the EPG. I want to go back and see that thing I missed last night. If you genuinely want to do that and if that’s really going to make a substantial difference to television, and it is what television is all about, at the end of the day.

Yeah.

It’s what the next wave that television is. And I… well and I sort of skipped over interactivity, and I think interactivity has got its place, but remember I made the comment too, at the end of the day television principally is an entertainment product.

Yeah.

And the degree to which interactivity allows me to be entertained and that’s useful. But frankly, the next wave is with on-demand.

And that’s a huge investment?

Then the only thing that is going to deliver that is broadband technologies, not broadcast technologies, okay? So in order… and so, that level of investment is yet to be made, we’re making in terms of we’re doing it for high-speed internet access and all that sort of stuff, and we’re on the cusp of being able to deliver to television. But if you really want to get to the stage where you can deliver high quality television, there is lots of elements and investment that need to be made around that.

What sorts of things are they? I mean if this is…

There is two or three things, firstly you’ve got to be able to deliver enough bandwidth, okay? So it’s… if I want to deliver a television signal, I need to have… I need to be able to get to every home with sort of a lazy 6 megabits, laying around, so that I’ve got enough bandwidth but it’s always looking good. The second thing is though within the network, you’ve got to build in all of the technologies that deliver what’s known as quality service, which really means that… the whole of our, the whole internet technology and broadband is built today on IP. Well IP is a… it’s a non-guaranteed system, right, given their protocol is… it’s got some magnificent features to it in terms of its self-healing, its self-navigating, and all sorts of other stuff like that. But when a packet gets sent out, there is no guarantee it gets to the other end. And okay, the system self-heals in that process and it kind of works for data transmission and all that sort of stuff, but it doesn’t necessarily work that well for television. So what I really need to deliver is a high quality signal consistently, then I’ve got to put an overlay on that that says, well when I talk about 6 megabits being dedicated then I’ll make sure the 6 megabits gets there. That’s the second level. The third level then is all of the… other sorts of things that need to be built into the systems to enable the necessary intelligence to be able to monitor the network, track the network, understand what the customer is consuming, all of those sorts of things. And that’s… you know, all of those things are important. So it’s physical stuff, it’s…

Research the net?

It’s better ADSL.

Yes.

I don’t think…

Where was that now?

I think the research is done all over the place. I mean the work… all of the telecommunications industry, and computer industry, has heavily invested in research around Internet protocol, or IP networks. All that worldwide industry is making the investment, and that won’t slow. So I don’t see that’s the problem, your problem is really… it’s the infrastructure that it takes to get sufficient speed to each home with sufficient reliability, in order to make that television product work.

If you can… if the regulatory environment was resolved, so that there was a certainty for the investors. How long off would that be?

Oh, look it’s um…. I reckon within… in 12 months we could, to a portion of the community we could be delivering that product. Yeah easily. It’s not that hard. Yeah okay, but so that… so you would argue you could have started 12 months, and arguably by 2015, 10 years away, you could, if pressed, you would argue that 10 years is not an unrealistic timeframe, it’s a whopping investment but there’s… but arguably they’re, you know a corporation like Telstra could deliver fibre to most homes in Australia in a 10 year period, which well…

I’ll just check that’s still running.

But when you argue, you know it’s… and when you make the argument that you know what would that do for the community, and what would it do for industry, and what would it do for many things we just don’t understand to have that level of connectivity?

Oh, the economics…

It’s scary.

[xxxxx], yeah.

Well that’s right. So you know, it’s… but to make it stick you have got to fix some of these problems. I also think… so you talk about the investment. The other thing I think the regulatory regime has got to deliver is, if there is going to be free-to-air television, then I as an infrastructure investor should be able to use that. An example I will give you is that if I do go out and build fibre at all these homes, what I would like to be able to do is put the free-to-air signals over that. I don’t want to charge them anything for it, I just want to get it to the homes so consumers can use it over that infrastructure. But what they should be obliged to do is give me their signal, in… you know, in good shape. And they should be required to give me the service information that goes along with that, that is the stuff that says – here’s what here’s and here’s what’s there. And I’ve written that in a couple of documents that I’ve given to the ABA and others. Because I actually think it’s a looming issue, for… if they really believed, and you really believe that infrastructure is important in that respect, and that broadband is important because it delivers, it’s the only thing that can deliver on-demand, then you have to start… you have to mandate the delivery of the electronic program guide.

Yeah and that… even from my time at the ABC which was now 4 or 5 years ago, even then you could see that was a looming massive issue.

Yeah, but at the end of the day, is it… I mean what did they lose. I don’t know that they lose much…

[xxxxx] at the moment in terms of digital Foxtel?

Well Foxtel has… there’s two or three things. Foxtel in terms of what it delivers, has an electronic program guide. It has re-transmission agreements with Nine, SBS and ABC.

Yes.

And they’re electronic… those agreements incorporate the electronic program guide information. So in fact the Foxtel electronic program guide incorporates the programming for those channels. And I think those arrangements work very well. And I don’t believe that they come at any detriment, in fact arguably, you know the people that have Foxtel appreciate and find it easy to get access to those signals.

Well, there’s a manifest in there too, because half of them are watching free-to-air most of the time as far as I know.

Yeah.

So, yeah.

So I think that… I don’t… I think that those are some critical regulatory issues.

Yeah, they’re fascinating.

That kind of need to be addressed.

Then the flip side of that question then, if the things that you’ve talked about are the best realistic outcome, assuming that things will move anyway what’s your worst nightmare for ten years away?

Oh I think the worst nightmare is that we… what’s the worst nightmare? This is a really hard question to answer.

I know.

I think that… ah…

Well, what are some worst nightmares, sorry it’s unfair for me to say [xxxxx]?

I think that probably the biggest concern that I’ve have would be that… that we don’t find a way to… I think my biggest concern would be that we just go slow. Does that make sense? That, you know, it just takes forever to deliver the… and the problem today is there are sort of big large vested interests, they’re all sort of manoeuvring around this stage.

Yes.

And mostly the tactics are, you know tactics associated with delay, or entrenchment.

In present places, yes.

Rather than sort of making some change. So you know, I think that that’s the biggest problem I think, that we just end up going slow. And so you end up with sort of mediocre outcomes.

Yeah, and a lack of…

And it takes a long time.

Yeah and the lack of access when you’re putting across [xxxxx].

You know, I don’t know that I feel too bad about that though because you sort of wonder if, whilst you can argue that we haven’t made a lot of progress yet, I still have a feeling that there’s a fair amount of diversity developing now. You know there are a range of credible alternatives coming along, and… so you know, my feeling is that there will be alternatives, so I think that… one thing I know for sure, is not everybody will get everything.

Yeah, sure.

I think that’s really obvious. As we go…

I think that’s true everywhere.

By the time we get to 2015, you might get the most people getting everything, but, you know the simple reality is that most of the things we talk about will happen in clustered areas where it can be done sensibly. And that’s just the way it’s going to be.

That presumably has to be, unless a government is going to come in with a vast injection for political and regional reasons.

Yeah, that’s right.

Yeah.

That’s just the reality of it.

Yeah I can understand that. Right now what are the things… we’re nearly at the end, what are the things that actually, not just from your perspective but… not just from the perspective of Telstra but globally if you like, but globally within the nation, what needs to be done? What are the first things that actually need to be kicked off?

In terms of television?

Yeah, in terms of moving towards what you were talking about as a potential for 2015?

From my perspective the biggest challenge is that I think we face right now is, as a shareholder in Foxtel, what is the… what does Foxtel do next? If we think that… you know penetration, the ceiling on penetration today in the current business model is about 30%. What do we have to do to move that to 50%, and can we? That’s the first question. The quality of that question when I put my Telstra hat on is, if Foxtel doesn’t do that, what’s the potential competition for others to deliver a television product that might fill the gap? And we have done sufficient work to say, it ain’t that hard to produce, I can tell you what the product is that would fill the gap, and I could probably get it there inside of 12 months. So, you know my view is that we will see other people enter the market, unless… they probably will anyway, unless Foxtel can figure out how to cross that gap.

Yeah, so they’ll get there anyway. But the last thing that you would want obviously is for them to get there on their own.

You mean Foxtel or the other guy?

No… No, the other guys.

I’d hate the other guy to get here on his own, yeah. I’d hate to leave that… let’s say that Foxtel can get 30, then you know, 100% of Australian households would not pay for televisions gap, but arguably 70% will pay something. So I’ve got another 40% who are sitting there ready today, willing to pay some money, for a television product. I’d hate to leave that landscape unchallenged.

Yes, it’s a huge slice.

It’s a huge slice. I think it’s a very huge slice. So I think that’s the biggest single… that is, those two issues encompass the channels.

Yeah.

Actually… I’ve got…

And that brings me to that, because actually that’s also the core… in a way it’s the core of the issues for the free-to-airs, because it expresses it in nice detail like that.

Mm, hmm… well the free-to-airs are happy to see Foxtel limit it at some level. And I think their question is… you know is that product, if Foxtel can’t bridge that gap, then in what way do they or some other Pays, or in combination with them, bridge that gap. You know, what is it?

Yeah, which takes us all the way back to the question of ownership, again.

Ahh, yeah.

Richard, this is the last question, if you ruled the… is there was something that you could do, it doesn‘t have to be realistic, it doesn’t even have to be practical, but if there was something that you had complete power to do, which would clear up that pathway through to how you perceive 2015, is there anything any other to what we’ve talked about or is there one glorious stroke of the axe?

No, there is no one glorious stroke of the axe, it’s a whole range of things that have to happen, you know they’re sort of… there’s… there’s a degree of technology investment that needs to be made. There’s a degree of infrastructure investment, you know… because what I’m really talking about is… I actually… I’m very much of a view that the ultimate television product is that product we talked about, it’s a combination of broadband and broadcast.

Yeah.

And we know how to do that, and there are people around the world that are doing it.

Yeah.

But we’re not quite there, in many fronts in Australia there is a range of things we need to do.

Yeah.

Ah… and it covers a broad spectrum of things, it’s about our broadband infrastructure, it’s about the networks and systems we have to back that up, it’s about the kind of content deals that we can do and get. All of that sort of stuff.

It’s… the one thing that keeps coming up in this and it’s not making the majority of sense, people keep raising the issue of if you like an absence of strategic vision for the entirety, at a – I’m mot going to say government level but a parliamentary level, as governments change. A kind of… a capacity to deal in a sophisticated way with a strategy for everything that sits on this great round thing.

Yeah it is interesting. All right… I don’t necessarily believe that the government has to have the answer.

No offence there.

I actually think that, I mean it’s a combination of policy and markets, right? So it’s a… you have got to get the right policy settings and then you’ve got to let the market do what it does, and regulation is the process of, you know greasing the wheels of that and…

But that’s may be the vision that’s…that’s status.

Yeah I think it is a bit. I mean I actually think that we’re in danger right now that I think the regulation process is overwhelming the policy process, so to a degree regulation is setting policy rather than attacking the response to it.

Yeah.

And… you know, do I think that the policy side and the legislative side could swing things around a bit? Yeah, they’ve got the potential to do that, but they need to… do I think that necessarily… the things they can do is get some things out of the way.

Yeah.

But I understand why it’s hard.

Yeah.

I don’t know that I have the answer to that question.

No, sure. It’s just… I mean policy and regulation are often used to try and stop problems occurring way before they occur, and they can get down to a micro management level. It actually just means that things don’t [xxxxx]?

That’s right.

But is that sort of really what you’re getting to?

Yeah, I think that would be a fair amount of…

But you need to know from a more open field?

Yeah.

That’s good, lots of good [xxxxx] yeah…

I’m sure you’ll have lots of fun with that.

All right that was helpful.

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