The Rs 297 billion Indian broadcast industry is all set to confront the biggest technological turnaround of the decade, with the government passing an ordinance to completely digitise all television services by 2014. Results of the first litmus test for implementation of this ordinance will be visible after March 2012, when the four metros will undergo 100 per cent digitization. But is the industry prepared to meet the deadline set by the government?
According to the recommendations of the Telecom Regulatory Authority of India (TRAI) and the Ministry of Information & Broadcasting, there’s less than six months to meet the massive target of reaching 30 million analog homes in the four metros. However, the clock will start ticking only after the President inks the ordinance.
While experiments with digitization of cable networks in India - to implement Conditional Access System (CAS) – has once been done in 2007, the time seems to be right now. The industry is geared up for the change. The uproar over the earlier move had put the government on the back foot. The new system of Digital Access System (DAS) will answer the question of addressability, which CAS had failed to do. Not just the big players of the broadcast industry, but MSOs and DTH operators, who are likely to be at loggerheads post-digitization, have responded positively to this move.
There is a reason why an ordinance was required to push the much-awaited makeover over a planned bill in Parliament. India, the third largest TV market of the world, lags way behind in the Utopian race of technological advancement called digitization, and cannot perhaps wait for detailed discussions and consensus of parliamentarians. The big question before broadcasters and distributors now is whether the 2014 digitization deadline is feasible.
“The time has come for a complete revamp in the system. It is the right time for digitization and when something right is happening, then any time to do it is good,” says Yogesh Radhakrishnan, MD and CEO of Prime Connect, a distribution company from the Times Group. According to LV Krishnan, CEO of TAM Media Research, the four metros are streamlined and prepared to take on the process immediately. “It’s going to be easy for the markets in metros as operations in these cities are streamlined. Mumbai is more prepared than Delhi and Kolkata, but it is not going to be very difficult. Now that the ordinance has been passed, suburban and B-towns too will gear up for digitization.” But preparing metro cities for the digital wave will also require about 7 million set-top boxes along with the cooperation of local cable operators (LCOs) who will execute the ordinance in the real sense.
In the 2007 uproar over CAS, advertisers claimed to have made losses to the tune of Rs 100 crore, as connectivity of pay channels went down by 71 per cent. The government’s decision to make CAS compulsory in selected regions of Mumbai, Delhi and Kolkata, which affected at least 1.63 million homes directly, left broadcasters and advertisers worried about a possible permanent loss of viewership in key Indian markets. In the new ordinance too, there is a lack of clarity on whether the tariff rates for paid channels will be regulated by the government.
Industry experts are expecting more clarity on the ordinance and its implementation once the President signs the ordinance. “There will be many issues if the government interferes in the tariff plans,” says Radhakrishnan. This leads to the second big unanswered question: Will digitization of the cable system lead to loss of paid channel viewers? The big challenge is to convert all viewers to digital in such a way that pay channels don’t lose viewership. According to Krishnan, the first task for every player would be to educate viewers about digitization, followed by awareness programmes for cable operators. “Viewers have to understand the advantage of digitization and it cannot happen if they are not aware about what’s happening around them.” Considering the 2007 chaos and anticipating the effect of digitization on the Rs 5,000 crore television ad spends, broadcasters are extra conscious about the importance of educating viewers. “In the earlier roll-out of CAS too, TV channels played an active role in communicating to viewers. Collectively, we have a greater responsibility and would be able to communicate this very effectively to our viewers. Who would not want their viewers to continue?” asserts Sunil Lulla, MD and CEO, TV Business, Times Global Broadcasting Co. Ltd.
It’s not just broadcasters, Multi Service Operators (MSOs) too are critical to the process. Compulsory digitization has come as a wake-up call for MSOs who will be key to converting all cable homes to digital. Around 7,000 MSOs will address the systemic challenges involved in reaching over 80 million analog homes all over India. “The industry may face immense challenges in this transformation. It majorly includes funding arrangements for technological upgradation and other needs; revenue share mechanism with business and channel partners; fiscal support in the nature of incentives, subsidies, policies and level playing fields with competing digital distribution mode,” says Sudhir Agarwal, CEO of Wire and Wireless India Ltd.
Interestingly, over the years, eight DTH players have addressed the service needs of over 40 million households through a massive investment of over Rs 14000 crore. MSOs, relatively smaller players when it comes to investment and logistics, now seem to be open to competition from DTH operators. MSOs will not only have to organize over 70,000 LCOs, but will also face the challenge of supplying 7 million set-top boxes (STBs) in the first phase. “Anything done hurriedly will cost more, so raising capital will be a challenge for MSOs in this short period and will come at a cost,” cautions Jagi Mangat Panda, Managing Director, Ortel Communications.
There is also a widespread concern among MSOs about immediate shift of analog systems to digital. Ashok Mansukhani, president, MSO Alliance, says, “The logistics of deployment of millions of STBs will be a challenge and some MSOs have suggested that even for Phase 1, the switch-off of analog signals should be done in two phases, i.e., first pay channel should be switched off on a prescribed date and approximately 90 days later, free-to-air channels should be switched off. But this has been rejected by broadcasters.” Apart from need for massive investment and availability of STBs, MSOs will also have to convince underprepared LCOs. A large number of LCOs had resisted CAS in 2007.
In a collection business of over Rs 15,000 crore every year, LCOs in India pay only 15-20% of collection amount to broadcasters and a large share of this pie goes undeclared. A recent statement of Minister for Information &Broadcasting, Ambika Soni, that each operator will have to spend Rs 3 lakh to avail direct digital signals from head-ends has spelt more trouble for LCOs.
Rohinton Dadyburjor, VP- Operations, Hathway, says, “LCOs have already aligned to some MSO or an ICO (independent cable operator). If the MSO/ICO is not ready on the given sunset date, the LCO will be forced to align with some other MSO. The market is large for many MSOs to co-exist. Also going forward, volumes will play an important role in the pricing of services and being a part of a larger family will certainly help the LCO retain his subscriber. He will have to focus on service and by offering additional services, earn more revenue.”
It now appears that a system on the lines of the telecom operators would be needed to be adopted to protect interests of LCOs and align them with MSOs for uninterrupted services, as TRAI will constantly monitor the system. Industry experts believe it’s a win-win situation for cable operators too as it will organize the sector and bring more transparency in the system. Krishnan says, “Operators who have not been comfortable with the present unorganized system of cable network should now be happy if they want to deliver better service and improve transparency.”
(Read the complete report in the IMPACT issue dated October 29, 2011)