Digitisation may not translate into smaller cable fees,but it will give more choice to the consumer
Hordes of TV channels beaming 24×7 into our living rooms may seem routine today,but it wasnt too long back that television the primary source of entertainment for a majority of Indian households meant only Doordarshan and its limited,and often,staid programming. Cable and satellite (C&S) television is a little more than two decades old in the country. It has,however,grown at a breakneck pace during this time.
According to the Telecom Regulatory Authority of India (TRAI),which also oversees the broadcast industry on issues beyond content,at least 580 television channels are on air in the country at present against about half-a-dozen in 1991-92. The boom in the number of players has happened alongside a phenomenal growth in the size of the consumer market. Today,more than 80 per cent,or 120 million of all the 146 million television households (accounting for more than 60 per cent of all Indian households) across the country,have C&S connections. India,today,is the third largest broadcast market in the world after the US and China.
This frenzied growth,however,has been haphazard and messy. In the initial days,the C&S industry was largely driven by zealous last-mile cable operators (LCOs) who connected millions of households across the country with cables and allowed eager broadcasters entry into consumers living rooms. A majority of these LCOs were small-time dealers with little resources to invest in technology or means to offer better services. Their distribution system was based on analog technology,which meant poor transmission. It also didnt allow them to carry more than 100 or 120 channels. The system also had some other lacunae that distorted the business structure and hurt other stakeholders,such as the broadcasters and the multi-system operators (MSOs). (Broadcasters uplink or transmit their TV signals to a satellite. These signals are downloaded by MSOs via their large antennas and then passed on to the LCOs,who then push them down their cables connected to TV sets).
The analog technology is now outdated. Broadcast distribution in most developed markets is now largely digitised. Now,even the Indian government wants the C&S distribution in the country to go digital. It has set a deadline of June 30 for complete digitisation in metros and December 2014 for the rest of the country. The new regime will require consumers to install a set-top box and buy a smart card from their MSOs to be able to access channels. Depending on whether consumers opt for Standard Definition or High Definition feed,the set-top box will cost anywhere between Rs 1,500 and Rs 3,000,and this will be a one-time expense.
Besides better transmission,digital technology will enable cable operators to carry more,at least 500,channels in the short term. The governments argument behind pushing digitisation is that it will help consumers be in control of what they watch and pay only for what they consume. TRAI has mandated that all channels be sold a la carte instead of bouquets,as has been the practice so far. Broadcasters,as of now,sell their entire bouquet of offerings to cable operators who,irrespective of consumers choice,force it down their cable pipe and also bill them for it. In the digital era,consumers can ask and pay for only those channels they want. This,however,may not translate into a smaller monthly cable bill. The pricing strategy of broadcasters for their pay and more popular channels is not public yet,but what is clear is that every TV set in a household will be accounted for and treated as an independent connection. This means consumers will have to install a separate set-top box for each TV set in their house and also pay for channels downloaded on each of them separately.
The governments claim of pursuing consumer interest notwithstanding,the process was set in motion after the broadcasters unrelenting clamour for digitisation. A set-top box,in fact,is a tool that will help them plug a large gaping hole in their revenue pipeline. With these boxes,every consumer household downloading TV signals will be accounted for and,hence,LCOs,who have historically been under-declaring the numbers of households serviced and pocketing almost 75-80 per cent of the subscription fee,will have to come clean. According to audit consultancy KPMG,in 2011,consumers paid more than Rs 21,000 crore in subscriptions but only 15-20 per cent of this reached broadcasters.
A legitimate share in this revenue pie will give a boost to broadcasters who have,so far,been dependent on advertising. Broadcasters are,however,unhappy with TRAIs advice that they pay MSOs a certain fee for carrying their channels. Carriage fee is a much maligned phrase in the current environment. Since,in the analog system,cable operators could not carry too many channels,some broadcasters began paying them what may be described as a bribe for carrying their channels and placing them at suitable positions against rivals. The imbalance between demand and supply led to a steep rise in carriage fee and broadcasters have,of late,been raising a hue and cry against it.
Carriage fee,however,is a legitimate business component in most markets such as the US,Europe,Canada,and several Asian markets. TRAIs argument is that operators are entitled to it against their investments in setting up the high-cost distribution infrastructure. Having secured their financial interest,broadcasters must allow others their fair share in the game.