Compulsory digitisation could run the small players out of business and benefit the big ones
For the last decade or so, Vijay Munnur has been working out of his home office on the first floor of a duplex house, tucked away in a residential layout in Rajajinagar. A faded board, hung precariously over the gate, announces that his cable TV company has been “servicing people” since 2000.
Mr. Munnur’s desk is inundated with mounds of paperwork and wobbly stacks of set-top box (STB) packages, all set to be delivered. His phone rings intermittently with costumers either asking for installations or with queries on how to use their new remotes. “I can’t not answer them, or they’ll just simply shift operators. There is heavy competition,” he mumbles, apologetically.
His business is one of over 1,600 cable companies working overtime to meet the March 31 deadline for switching from analog to digital networks. He grumbles that the multi-system operators (MSOs) — who sell, rent and supply this equipment — delayed the consignment by a week, forcing him to hire five more boys overnight to meet the rush. Most of the STBs are imported from China or South Korea.
On April 1, in Bangalore and Mysore and 36 other Indian cities, consumers who fail to install STBs (which decrypt/decode the digital signals from the MSO to the television set), will find their screens blanked out. This government-mandated digitisation drive pits local cable operators such as Mr. Munnur against powerful lobbies of broadcasters and MSOs in more ways than one.
For one, the revenue model prescribed by Telecom Regulatory Authority of India (TRAI) puts these small businesses at a huge disadvantage, he says. This model mandates that revenues from the “basic service tier” of 100 free-to-air channels be shared with MSOs in a ratio of 45:55. Above that, subscription from any paid channels is shared at 35:65. “This itself will drive us out of business.”
Mr. Munnur is pretty upfront about his earlier “business model”, which he concedes “will be destroyed by digital addressable system’s (DAS’s) transparency”. The “revenue model” was based on underreporting, he confesses.
V.S. Patrick Raju, president, of the Karnataka State Cable TV Operators’ Association, does not deny underreporting of connections. “Till now, if I had 500 connections, I would declare only 150 or 200. I would pay these subscriptions to the MSO and use the rest to pay for maintenance (which includes electricity, UPS, equipment) and salaries,” he explains. The only option is to pass the burden on to the customer, he says. “This is tricky because we have to compete with DTH, run by big companies. So, what does the government propose we do?” Mr. Raju fumes. Currently, DTH accounts for just over 20 per cent of the 22.68 lakh TV connections.
The compulsory drive could also deprive low-income families from the low-cost cable they now enjoy. For instance, in some areas near Majestic, monthly charge averages at Rs. 150. Sanjay Chavla, an operator here, says: “Till now I could afford to keep the price low by designing packages that cost less for these localities. They can’t afford Rs. 200 and Rs. 300.” Cable operators contend that subscriptions costs will rise after April. It already has in Mumbai and Delhi, Mr. Raju claims, where many players are charging Rs. 300.
DTH operators rubbish this claim. Rohit Malhotra, CEO, Bharti Airtel (Karnataka), says: “There is no reason why the pay channel rates and the basic tier rates will not go down too because of competition. In fact, this will bring in a market mechanism, which did not exist earlier.”
Industry will benefit
MSOs, who have invested heavily in new equipment to meet the digitisation challenge, say they are counting on the new revenue model to break even.
An official at a Bangalore-based MSO said that underreporting by operators has been a perennial problem in the industry. “Each connection having a separate address (as part of DAS) will turn the system transparent. The entire industry is set to benefit from this,” the official added.
Broadcasters stand to benefit from this as subscription revenues are set to increase as digitisation makes declarations transparent. There is enthusiasm, particularly in the advertisement industry, where more transparency means audiences can be estimated accurately and ads can be targeted better, according to insiders.
Yogendra Pal, Technical Adviser, Ministry of Information and Broadcasting, told The Hindu that operators should see this as a positive move.
“It will help them stay relevant in a digital market, where DTH operators are offering so much more. Consumers can also get up to 500 channels, he said, rubbishing any fears of a hike in subscription costs.