Foxtel iQ2 recorder.

Foxtel iQ2 recorder.

Rather than shying away from the NBN, Foxtel wants a slice of the action.

Rather than stick its head in the sand, Foxtel has actually gone out of its way to address the threat from broadband. In the last few years it has introduced a range of internet-based video services, on a few different devices, in an attempt to cater to homes who are no longer satisfied with the traditional Pay TV model. In the United States so-called "cable cutters" are abandoning traditional television in droves and Foxtel can see the writing on the wall, even if we're lagging a few years behind and television ratings are still fairly stable in Australia. 

Don't be surprised if Telstra and Optus bundles become more mobile-centric next year, to make it less attractive to switch every other service to Foxtel. 

Rather than waiting for the perfect storm to hit, Foxtel plans to further expand next year by becoming an Internet Service Provider. You'll be able to sign up for Foxtel broadband on the NBN or copper (Telstra Wholesale), but not HFC cable. If you're not a fan of Foxtel then the prospect of the Pay TV giant becoming an ISP is unlikely to change your mind. But if you're already a Foxtel-centric home then switching to Foxtel for your broadband could make a lot of sense. It all depends on whether Foxtel can offer the right plans, bundles and fine print to make it an attractive switch.

Telstra owns half of Foxtel so there's always been a close relationship between them. Telstra offers a range of Foxtel bundled deals if you combine your home phone, broadband, mobile phone and Pay TV on the one bill. Foxtel will at least need to match these deals, if not better them, in order to tempt customers away from Telstra. I'd say that Telstra and perhaps Optus customers are Foxtel's key targets, because they're more likely to be swayed on pricing or bundles. More discerning broadband users probably deliberately abandoned Telstra and Optus long ago in favour of less tangible benefits such as customer service.

Foxtel aims to offer the "triple play" of home phone, broadband and pay TV services – rivaling Telstra and Optus. While Optus doesn't offer Foxtel Pay TV bundles to new customers, some existing customers are still paying for Foxtel on their Optus bill. There's no talk of Foxtel becoming a mobile phone/broadband reseller at this point. This will be a key point of difference so don't be surprised if Telstra and Optus bundles become more mobile-centric next year, to make it less attractive to switch every other service to Foxtel.

Even though there's a close relationship between Foxtel and Telstra, Foxtel will still be expected to pay the same wholesale broadband price as other Telstra DSL resellers. The same goes with the NBN, Foxtel will be paying the same access fees as everyone else. The difference is that Foxtel can afford to take a hit on broadband profits in the knowledge that it can claw that money back in other areas. If Foxtel does decide to offer broadband at cost, or even at a loss, it will be interested to see if the ACCC has something to say about it – not that I have much faith in the consumer watchdog when it comes to such things. 

If Foxtel can offer really aggressive bundle pricing it might even tempt some Fetch TV users to abandon their ISP but, like I said, such people have probably avoided the likes of Telstra and Optus for a reason. Foxtel is unlikely to be a progressive ISP in the mould of Internode or iiNet.

To stay competitive Foxtel will also be forced to match Telstra's unmetered access to Foxtel content, which covers Foxtel on Xbox 360 and Foxtel Play. Of course some Telstra customers currently enjoy unmetered Foxtel access via Telstra's T-Box and it will be interesting to see if anything is put into place to cater for T-Box customers who want to migrate to Foxtel as their ISP. Telstra is unlikely to play ball here, because the whole point of the T-Box is to discourage you from leaving Telstra when a better deal comes along. If I was Foxtel I'd be offering discounts to ex-Telstra customers looking to upgrade from a T-Box to a second Foxtel box in their home.

If you're a Foxtel subscriber then Foxtel's download and streaming services probably account for the bulk of your monthly downloads, rather than third-party video services or BitTorrent. As such, if Foxtel downloads are unmetered then it's not under pressure to offer generous monthly download limits. You're unlikely to see unlimited plans which are likely to attract bandwidth hogs. Foxtel's internet plans alone might not be a great deal, but it's all about the triple play.

If Foxtel can get its plans and bundles right then it shouldn't have too much trouble stealing customers away from Telstra and Optus. After that they're unlikely to ditch Foxtel in the future when the NBN brings more online video services to their door. The new government's Fibre to the Node plans might reduce the NBN's short-term threat to Foxtel, but the Pay TV giant is still keen to fortify its position in Australian lounge rooms.

What would it take for you to switch to Foxtel as your ISP?