The competition watchdog has cleared the way for Foxtel's $2 billion proposal to fully acquire its Pay TV rival Austar but with explicit limitations that the Australian Competition and Consumer Commission (ACCC) stressed should safeguard competition in the industry.

In a statement, ACCC chairman Rod Sims said on Tuesday that the deal can now go ahead following Foxtel's acceptance of specific undertakings that for the most part will keep the firm, majority controlled by giant telco Telstra, from totally dominating the Pay TV market in Australia.

News Corporation and Consolidated Media Holdings also hold 25 percent stakes each on the Pay TV operator, according to the Australian Associated Press (AAP).

Prior to handing down its decision, which came almost two weeks after Austar shareholders had approved the deal, the ACCC has ensured that Foxtel will not end up enjoying too much of the Pay TV pie by securing first the court-enforceable undertakings from the firm, which remains effective for eight years.

As embodied in the undertakings and once the merger has been completed, Foxtel will not be permitted to purchase exclusive internet protocol television (IPTV) rights that cover specific movie titles and television shows.

The undertakings also prevent Foxtel from exclusively carrying rights to TV shows within its IPTV ranges and where the company competitors have formally laid out application rights.

There will be no transactional video-on-demand services within the Foxtel Pay TV packages under the deal, the ACCC added.

All in all, up to 62 premium channels will remain in the service packages of local Pay TV providers as the undertakings dictate that Foxtel will never enjoy exclusive rights on them.

"The proposed undertaking has been offered by Foxtel to address the harm to competition which is likely to arise as a result of the proposed acquisition," Sims said.

"By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets," the ACCC chair added.

Sims expressed confidence that the healthy competition in the Pay TV market will be maintained in spite of the deal, which empowers Foxtel too to secure exclusive telecast of individual sport events.

However, the undertaking, Sims reminded, "is not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition."

According to BusinessDay, Consolidated Media, owned by James Packer, has committed some $225 million for the smooth realisation of the deal, which was described by Foxtel chief executive Richard Freudenstein as the fusion of innovative digital products and services.

The merger is expected to get the final nod from the Federal Court on April 13, according to The Herald Sun, paving the way for the new Foxtel Pay TV outfit to exist thereafter.

Telstra called the ACCC approval as a plus for Australian consumers, with the company's digital media group managing director, Rick Ellis, stressing that the deal would soon deliver Foxtel services to regional centres currently served by Austar.

These regional customers, Ellis said, will finally have a taste of premium Foxtel channels that can be accessed via broadband connections.