TELTRA'S decision to spend $153 million for the exclusive internet rights to AFL games for five seasons has been exposed as a poor piece of strategy, thanks to a decision in the Federal Court yesterday that paves the way for Optus to deliver much the same football programs to its customers.
In the digital age the issue of copyright is a complex one. Content owners of all descriptions - be they newspapers or football clubs or movie studios - spend plenty of time and money in courts around the world establishing where ownership starts and finishes and the extent to which piggybacking is allowed.
Content has become ubiquitous, and legislators and courts have been spinning their wheels attempting to keep up with new developments.
The Federal Court decision yesterday allows Optus to provide its customers internet access to football on a small-time delay basis even though Telstra has paid for these rights exclusively.
Justice Steven Rares decided that the Optus service was in essence a personal-based recording device and that its customers were making the choice from a digital program guide about whether to record the AFL, the NRL, or even a movie for that matter.
Thus Optus was not breaching copyright.
Given that we consumers are not selling these recorded programs, we are not caught by the copyright law. And while Optus recorded the games and stored them in the cloud, the consumer (not Optus) was responsible for electronically transmitting and making the content available online thanks to pressing the ''record'' button.
Optus charges its customers for a bandwidth package, but not for specific programs.
While it is almost certain that the football clubs and Telstra will appeal yesterday's decision, at this point Optus has clearly outsmarted its larger rival by skirting around the copyright law with a certain deftness.
Telstra has $153 million to argue this in a higher court and the football codes and perhaps other content providers have an even greater incentive.
The free-to-air networks appear unfazed by the decision. They will probably take the view that if people want to watch the football they will do so on television where they can see it live and free. Those that need to watch it later can use the various TV storage devices rather than rely on internet relays.
It becomes a bigger issue for pay TV because Optus is in effect charging for the right to access programming.
There was no noise from Foxtel yesterday. Although pay TV has the advantage of broadcasting live, the Optus service allows customers to tailor their viewing and pay for just enough bandwidth to take football without having to take the broader pay TV service.
Of wider significance, the judgment was a test of the individual's right to watch content online against the broadcaster's right to exclusivity.
Justice Rares has come down on the side of the consumer but acknowledges that the decision is of such commercial importance and legal significance that he offered the parties the right to appeal.
For Telstra, spending up big on internet rights was always a gamble. It will undoubtedly argue that the legislation around copyright has not kept pace with technology. This decision, if upheld, will lead to a rush of lobbyists to Canberra. Telstra has already hinted that this is an option.
But in the fast-paced world of communications and the relatively slow-paced field of the law, undertaking a five-year contract was a risk. Had Optus been unsuccessful in cutting Telstra's football broadcast lunch, the real value of the internet exclusive rights was debatable.
It was more of a marketing feature to attract customers to its phone and internet offers. The same goes for Optus.
The broader principle of supplying exclusive content will become increasingly important for mobile phone and internet suppliers in the national broadband network world.
Providing an attractive package of bundled services including content will increasingly differentiate competitors in this market.
However, at this point it is the AFL and NRL that have been most undermined. The AFL negotiated its five-year $1.25 billion television, pay TV and internet rights deal last year.
The NRL rights are up for negotiation at the end of the year and losing the leverage of providing exclusive internet rights could be very expensive.
