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Conditional Access System: Way out of cable conundrum? Part I

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Conditional Access System: Way out of cable conundrum? Part I

Amit Agnihotri & Nawal Ahuja

On 7th May, in a momentous decision, Cabinet passed a bill seeking to amend Cable Television Networks (regulation) Act 1995 making it 'obligatory for every cable TV operator to transmit or retransmit programme of any pay channel through an addressable system.' This bill also covers free-to-air channels. This 'addressable system,' will bring about transparency in cable distribution landscape by potentially regularizing all cable homes, and allowing consumers to directly exercise choice.

Media watchers opine that addressability of cable homes is essential and in fact inevitable. But, the implementation of CAS is fraught with issues that industry must recognize and address.

A key issue is that while CAS is expected to bring some transparency, it still plays in the hand of cable operator. Broadcasters might still have to rely on cablewallah's subscription numbers given that the system is not directly addressable by Broadcasters. Another issue is significant investment in Set-top-boxes. To provide just 10% of the total 38 million C&S homes in India with set top boxes, investment to the tune of Rs. 1600 crores is needed. Who'll pay for this? Value-sensitive consumer, broadcaster or cable operator? A key broadcaster has also raised concerns on whether the system will actually benefit the consumers.

But make no mistake. This indeed is an important step by the Government and possibly in the right spirit. Need to regulate the Wild West that cable distribution scene resemble today, transparency and protection of consumer interest has been felt for long.

To help you form an informed and independent opinion on CAS, over the next few days, exchange4media would bring you special editorials, perspectives from the leading industry voices and a poll where you can share your opinion.

We kick off this special series by looking at background of reckless growth of cable distribution industry, need for regulation and the key provisions of the amendment. Tomorrow, we'll analyze how this amendment can change the existing paradigm and who will get affected most.

Lets start by look at the current bill in detail and touch upon some of its implications. The bill addresses both 'Pay' and 'Free-to-air' channels and segregates the two through a two-tier approach. The bill makes it "obligatory for every cable TV operator to transmit or retransmit programme of any pay channel through an addressable system" and also "specify one or more free to air channels to be included in the package of channels forming the basic service tier." The bill also empowers the Central Government "to specify the maximum amount which a cable operator may demand from the subscribers for receiving the programmes transmitted in the basic service tier."

Importantly, the bill provides for direct day-to-day involvement of government in management of cable conundrum. "Every cable operator shall submit a report to the Central Government in the prescribed form and manner containing the information regarding a) the number of total subscribers, b) subscription rate and c) number of subscribers receiving programmes transmitted in basic service tier…," notes the bill.

This then would really spit the cable & satellite access (and viewership) into two basic sets; those who access only the ‘Free-to-air channels’ and those who also access 'Pay' channels. In all likelihood, the mandatory basic tier fee, stipulated by the government, would accrue only to the cable operators while the pay channel fee may be split up between the carriage provider (read cable operator) and the content creator (read broadcaster.)

This split up of subscribers and audiences into two sets a) 'Basic tier' homes that access only the free-to-air channels and, b) 'Premium tier' homes that access pay channels also can change the current paradigm. For 'Pay Broadcasters,' it means assessment of brand and content pull and a choice of either remaining 'pay' or switching to free to air format to avoid being dropped from the current households and thereby affecting the advertising revenue drastically. On the other hand, advertisers and their agencies need to carefully comprehend the scenario and keep a close watch on connectivity and viewership numbers that can be cataclysmic for a standard media plan done at today's viewership numbers and executed under the shadow of CAS.

We will address, in detail, this new paradigm in tomorrow where we bring the perspective of leading industry voices.

Lets briefly look at the reckless evolution of cable television distribution in India and reasons for this conundrum.

Early 90s, post the CNN telecast of gulf war, Indian entrepreneurs overnight converted video libraries and a satellite dishes, springing up cable wires all over cities to provide the customers some of the best entertainment available in the world. With minimal government control and maximum Indian entrepreneurship, cable operators connected more homes by the day and making money in the process. According to some estimates in the first half of 1992, almost 4,500 households were being cabled up daily. That figure increased to 9,450 homes daily in the second half of the year! From a mere 412,000 urban households in January 1992, the number of cable homes went up to 1.2 million by November 1992. And by 1994 the number of cable & satellite homes was placed at 11.8 million out of a total of 32.4 million TV owning homes.

As the number of channels started growing and the fragmentation started to pinch the channels. Enter the media magnates. Quick to realize the immense clout enjoyed by the local cable operator in deciding which channel to beam, large media houses by mid 90s started making their presence felt. InCablenet, Siticable, Asianet, Hathway, and RPG Netcom appeared on the scene with in the span of a few years and today control a large part of Television connectivity in the country. In the process they are assured of carriage of their bouquet of channels, which in most cases have carried lemons along with apples, irrespective of whether the consumer is interested in watching a particular channel or not.

Uncontrolled growth, though faster, invariably has a pitfall. The business due to its inherent lack of controls leaves itself vulnerable to the rules set by people running them and in the process makes the consumer pay an unfair value for the service. That's exactly what has happened in this case. From a pittance of Rs 50, consumers today are paying as high as Rs. 350 to receive the channels in their homes. In most cases out of the 100 or so channels being beamed only a handful are really watched.

And since the distribution system involved multi-points (Multi System Operator have franchisees and even sub franchisees!) under declaration of subscribers became an ugly reality with broadcasters getting only about 20% of pay revenues. This massive under declaration led broadcasters to raise subscription prices, some times several time in a year, leading to much strife.

CAS is expected to sort things out. It, in spirit, gives the power in hands (or remotes) of ultimate consumers allowing them to choose the channels they wish to see and pay. But significant investment in hardware (approx Rs. 4,000 per set-top-box) and inability of CAS to make the subscription information transparent directly to broadcasters (broadcaster will still have to rely on MSO's subscription figures), can act as roadblocks.

In Part II of this story tomorrow, we evaluate the changed paradigm and bring perspectives of key industry voices. Stay logged.


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