I&B Ministry’s decision to modify the June 30 deadline for a complete digital switch-over to October 31, 2012 for all four metro cities has received different reactions from the industry. Obviously the MSOs and LCOs are breathing a sigh of relief. However, DTH players are the most disappointed; broadcasters too, to some extent.
Analysts feel this is a practical decision, given that most of the industry was not prepared for the digital switch. “LCOs and MSOs were not ready for this shift and even broadcasters, to some extent don’t have their digitisation strategy in place,” said Ashish Pherwani, Associate Director, Advisory Services, Ernst & Young.
The new deadline of October 31 is about five and a half months from the time TRAI had issued the ‘Quality of Service Regulations and the Consumer Complaint Redressal Regulations’. This should be a decent time for the industry to pull up their socks.
MSOs and LCOs
Even though it was not official, industry insiders knew that meeting the deadline of June 30 was going to be a Herculean task for MSOs and LCOs. Until the order was issued in April 2012, MSOs were treading very cautiously and also the orders for procuring digital STBs were placed below the required number as there was no clarity on the modalities such as pricing deal with the LCOs, carriage fees structure, etc. By the time the tariff order was issued by TRAI on April 30, 2012 followed by the regulations in May 2012, MSOs had to install a minimum of 10,000 STBs a day, working all seven days up to June 30 in order to meet the deadline, which was realistically impossible.
Now, by October 31, they need to install STBs in a total of 10 million households required in the four metros with only 2.7 million STBs already in place. “This decision of deadline extension was expected and will help us work in a more organised manner towards cable digitisation,” said Ashok Mansukhani, President, MSO Alliance.
K Jayaraman, Managing Director and Chief Executive Officer of Hathway Cable and Datacom said it is a short extension but it was expected.
For DTH operators, the government’s decision on cable digitisation and the initial switch over date of June 30 was a blessing in disguise. The industry which was running on such low ARPUs finally found a way to push up its volumes. Players went all out in terms of increasing their capacities, stacking up their warehouses with STBs, laying the infrastructure for installation, scaling up engineers and call centres and to top all that, invest in branding and marketing activities. But the extension in deadline was a dampener on the entire effort.
Harit Nagpal, President, DTH Operators Association of India said, “The extension is a major setback for the DTH industry, which has invested a great deal in terms of set top box inventory and installer manpower to cater to the expected demand on the cutover date. It is difficult to understand what different is being planned in the next three months that was not in the last six which would not lead to another postponement in October.”
The DTH industry has been around for quite a few years now and they have seen through the learning curve, they had all the systems in place in order to scale up to the volumes required. But now, having scaled up their capacities, they will face a dent in their working capital. “The delay in implementation is disappointing and expensive. As an organisation, we were fully geared up for the earlier deadline of June 30, with significant investments made already to facilitate seamless adoption of this technology,” said Shashi Arora, CEO, DTH/Media, Bharti Airtel.
Broadcasters’ disappointment in the delay in implementation of digitisation is understandable as their inflow of subscription revenues gets delayed by another four months. But even they were not fully ready with their digital strategy. For example, a channel had to decide whether it wants to go pay or free to air in the digital environment. If it wanted to go pay, what should be the right price, the right bouquet and the right packaging?
Vikram Chandra, Group CEO and Executive Director, NDTV Group said, “We are very disappointed that the deadline has been extended. We hope there is no further extension. We appreciate the fact that this time the Ministry of Information & Broadcasting and TRAI, will take action under the provisions of the Cable Act, wherever and whenever necessary.” He added that they were not factoring in the subscription revenue right now, but even for long-term; they will see how the entire cable digitisation process pans out.
Ashok Venkatramani, CEO, MCCS said, “Most people are doing interim deals today. Many of them are doing deals by quarters. This deadline is anyway for four metros, so analogue and digital deals were going to happen concurrently. Now with the extension, the digital deals will get extended.”
Subscription revenues of broadcasters should double within two years of cable digitisation, shares Pherwani of E&Y.