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Cable sector sees churn

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Cable sector sees churn

A huge churn is in the offing in the cable television industry with groups of small cable operators seeking to break away from the larger networks (known as multi-system operators or MSOs) to set up their own control rooms. Lucrative 'carriage fees' being paid by broadcasters to place their channels in a more 'visible' band appear to be contributing to this new trend.

Sample this: Space Vision, a large cable network promoted by Ranjit Mathur in the south Mumbai region of Grant Road, has been seeking to break away from the largest of MSOs - Hathway Cable & Datacom - and is believed to be in the process of setting up its own control room.

While 'carriage fees' are normally negotiated by the MSOs, Space Vision has been independently negotiating these deals with broadcasting groups. Another network in a working-class area of Kalchowkie called ICN is also believed to be in the process of setting up a control room.

Another big operator in the Borivali area, Ganesh Naidu, who is currently allied to the Hindujas' IN Cablenet, is in talks with other smaller operators to set up an independent control room in the western suburbs.

An operator from Malad in the western suburbs, Mr Swarna, who is allied to a Hathway subsidiary, Win Cable, is also in the process of setting up networks of small operators for independent operations. K Jayaraman, CEO of Hathway Cable, said he was not aware of any such moves of his affiliates. IN Cablenet's executive director Ashok Mansukhani also denied any such breakaway moves, but he put the blame on Siticable for trying to woo away local cable operators in various parts of Mumbai.

Relations between MSOs and local cable operators (LCOs) have been traditionally synergistic. MSOs normally undertake the investment-heavy task of setting up control rooms and a chain of head-ends to downlink satellite signals of the various channels.

These are then provided to the LCOs to distribute to consumer homes. The LCOs, on the other hand, set up the last-mile cabling, provide connections to consumers, and finally collect the cable fees on a monthly or quarterly basis. Of these collections, the MSOs receive a share of approximately 30%, while around 20% passes on to the broadcasters.

However, the booming carriage fees market has upset this cozy formula. According to Jawahar Goel, head of another large MSO, Zee's Siticable, the carriage fees market has boomed, generating over Rs 150 crore per annum on account of this 'irregular' income from broadcasters.

The three big MSOs this year have collected Rs 20-25 crore each on this account, industry sources said. Carriage fees, if negotiated by smaller networks with independent control rooms, will provide a windfall to these operators. An independent control room also implies that LCOs will have higher returns with no big-brother MSO to share their revenues with.

Industry sources said setting up an independent control room requires an investment of Rs 2 crore. In earlier days, this was a daunting task for small cable networks and thus, provided a rationale for MSOs to provide the cable feed. But as subscription collections boom and local cable networks form larger sub-groups, investment in a control room hardware is not seen as too expensive.

Ashok Mansukhani, executive director of IN Cablenet, said this trend was an aberration as the greed for carriage fees was sure to be short-lived. The 60-70 channels that the last-mile cables supplied will be overtaken by digitalisation, where encryption technology will provide consumers the choice of as many as 500 channels. This will end the 'carriage fees' regime and the 'breakaway' tendencies of local cable operators, he argued.


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