The service gives Australian customers a lower-cost option for subscription TV, but is likely to continue Foxtel’s dominance of the local pay-TV market.

Foxtel hopes to attract new subscribers, particularly younger customers and renters who are frustrated by long contracts, or those who can’t afford a full Foxtel subscription.

Telstra will use the service to encourage its customers to take up a bundle fixed line services (fixed voice, broadband and subscription TV) and reduce customer churn to aggressively-priced competitors.

Lower-cost access and greater flexibility

The service promises customers lower costs and greater flexibility through a shorter contract period.

There is a risk of existing Foxtel customers switching to a T-Box service to reduce their costs, but Foxtel will be hoping the more comprehensive channel packages, HD channels and some extra features such as PVR functionality will discourage most existing customers from downgrading.

Staggered rollout aims to guarantee quality of service

Telstra’s decision to deliver the service using unicast streaming technology on its own content delivery network (CDN) will require careful monitoring to balance customer demand against network capacity.

Telstra will roll the service out progressively, first to its cable broadband customers and later to DSL customers, in a bid to ensure its CDN infrastructure has the capacity to deliver a quality service. Any network performance issues will be unacceptable for paying customers, so this launch will provide a crucial test of Telstra’s ability to deliver streaming video to a mass audience over its broadband network.