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We don't use direct connections to the phone line anymore, we use a Digipath, so one box is connected to the phone line, and the other to the Foxtel box, and they talk to each other wirelessly.
As for on demand not working, it's likely that your account just hasn't had On Demand turned on, so all you'd need to do is speak with our Foxtel Team on 13 22 00 and they can ensure that everything is set up correctly on our side to get you up and running :-)