MxM Monday: Are the 4 metros really ready for digitization?

08 Oct,2012

 

By Ananya Saha

 

It is less than a month to go (24 days to be precise!) before the extended Sunset Date on Phase I of digitization arrives. The West Bengal government has already asked for an extension, and Chennai grapples with issues too. While Mumbai and Delhi seem on track, does 100 percent digitization in all four metros seem like a remote reality? Are the four metros ready to switch off analogue signals from midnight of October 31?

MxMIndia sought a variety of views from stakeholders – Multi System Operators (MSOs), Local Cable Operators (LCOs), and broadcasters – on the status of digitization for Phase I.

 

Susmit Basu, VP, Strategy & Business Development, DEN Networks Ltd

I will not comment about Chennai but Delhi, Mumbai and Kolkata are geared for digitization. The cable operators are positioned to digitise the market by the deadline. What is needed for digitization: setting up of digital head-end. Once the digital head-end is established, the same cable network that was running the analogue signals can transmit the digital signals. The third and the critical step is placing the set-top boxes in the homes.

 

The first two steps in the three cities have already been covered. For the third step, with the earlier deadline of June 30, it was true that a lot of MSOs were not ready. Many were, like DEN, since we were pushing for STBs aggressively. But in the three months that has passed since then, MSOs have ordered a lot of STBs. Also the ministry, I&B, central government and TRAI are playing a very active role and tracking digitization day-to-day. It is quite remarkable the detail and granularity that they go into on taking status from various MSOs, finding and visiting various kinds of households to see if the digitization is happening and at what level.

 

MIB has launched a campaign as well in the last few days, and that kind of consumer messaging was missing. We, as MSOs, came together and were doing a consumer awareness campaign. The kind of push that has been out through the new campaign by MIB, which is being beamed across various channels, is completely unprecedented in terms of the scale and the push from all stakeholders. Broadcasters are giving primetime inventory to run these ads. The entire ecosystem is working together.

 

This is the last one month, and if we continue to work like this it is a very achievable task. Between now and the deadline, a lot more awareness is going to come into play.

 

Swapan Chowdhury, General Secretary, Cable & Broadband Operators’ Welfare Association, Kolkata

Digitization of the cable TV system is the need of the hour and cable operators of Kolkata and West Bengal are all set to welcome the next generation technology. The idea of adopting the technology is to win-win situation for all the stakeholders of the industry that started way back in 1990-91.

 

Digitization has been taken up in a fashion which is contrary to its actual application. If we set aside the WB state government’s request for extension, what we see on the matter is:

 

  • There was no movement/activity from any stakeholder after Ordinance and Notification vide dated 11.11.2011 from the central government and cable operators were only been communicated from late December 2011.
  • MSOs were delivering STB without assigning any appropriate scheme to opt with variable price that fluctuates, very often leading to confusion in the market and in the consumers’ sentiment. Neither have MSOs undertaken any consumer awareness programme.
  • Cable operators were not informed of the revenue that will be retained by them after executing their role and responsibility untill April 30, 2012. The revenue sharing model between MSOs and cable Operators in the term of Section 5 of the Tariff order is for FTA @ 55:45 and pay channel @65:35. It has given better right to the MSOs, ignoring the cost incurred by the cable operators in executing the service. In the CAS zone TRAI alloted around Rs 82 for analogue free-to-air channel, but in absolute digital system the revenue of DFTA has brought down to Rs 45 only. Despite objection from cable operators, TRAI has not considered while formulation the sharing nor did they reconsider the same. Cable operators demanded allocation of considerable /justified charges to enable them to deliver digital cable TV service to the consumers after taking into consideration all costs involved therein, including cost of providing services, network upgradation, repairing and recurring cost, salaries and wages, electricity and all government statutory charges.
  • There were no steps to declare the programme package and its price so that cable operators could start dialogue with consumers. Cable operators are the interface of the whole system but have not been considered and kept informed in the matter, though they are responsible for ultimately selling the product to the consumers. Recently cable operators have come to know about the package and its rate from the media, but none of the MSOs have officially communicated this to the operators in detail till now.
  • There was no arrangement from the MSOs in regard to the “Interconnect Agreement” which is to be completed with the cable operators. Only in the last week of September did one MSO come out with their interconnect agreement, while the others are still to come. The terms and conditions of such an agreement is absolutely contrary to the interests of the cable operators; it has been formulated arbitrarily and is biased in nature. The MSOs have failed to win the confidence and trust of the cable operators who have been doing business since the last 20 years and are the key architecture in building this huge industry.
  • There was no advertisement material in the print media from the Ministry of Information & Broadcasting except one only; as a result consumers were not convinced of the system. On the contrary the DTH service providers were coming out with different and negative insertion in the print media, causing even more confusion.
  • The DTH service providers are also using their own infrastructure for promotiom of their own service and system. At a time when the cable TV industry is on the verge of a massive migration process from analogue to digital platform, the DTH service providers have played a negative role and stalled the digitization process.

 

In absence of cooperation from the stakeholders, cable operators could not come forward. The malpractice of the broadcasters and the DTH service providers confused the consumers’ sentiment. Demand for STBs did not pick up as expected. Moreover, a few MSOs of Kolkata are running short of inventory and could not deliver set top boxes to their associated cable operators in spite of advance payment from the operators. The government is indifferent and not ready to understand the ground reality, and instead is trying to implement DAS forcibly.

 

In the process, the government and the TRAI are giving misleading information in connection with the seeding rate of STBs. The actual penetration is far below the recent announcement by the I&B Ministry. In Kolkata out of approximate 40 lakh STBs, only 12-13 lakh STBs have been seeded and hence forcible implementation of DAS on the deadline date will deprive around 65-70 percent of cable subscribers.

 

Anil Khera, CEO, Videocon d2h

All the responsible bodies, whether it is TRAI, MIB, Broadcaster, DTH operator & MSOs, are doing everything to achieve the deadline.

 

As a DTH operator we would like to welcome the efforts by the government and bodies affiliated to broadcasting & distribution. All DTH operators in country have jointly digitized nearly 50 million homes pan India. India’s total household population as per the 2011 survey is 240 million households, out of which 150 million have TVs, which takes India’s CTV ownership penetration to 60 percent. Out of 150 million TV households, 50 million have been digitized already by DTH operators.

 

In the first phase of digitization there are 11 million households in four metros. Out of which two million have been already digitized by DTH operators and as per MIB’s latest figures released, there are only 2.2 million homes left to be digitizes or where boxes need to be seeded. We all are 99.99 percent sure that this time, digitization dates will not get postponed. If this phase gets started on the specified dates, the rest of the country’s schedule will follow in a timely way.

 

The digitization process will bring about a level playing field for DTH and cable operators in the content cost, taxation and addressability. This also help the DTH and cable operators to increase the ARPUs because of non leakage of revenue. The digitization process will create a wonderful, transparent ecosystem whether it is DTH operator, cable operator, broadcaster, state government or central government. Everyone will reap the benefits of this law of digitization.

 

The consumer will get universal pricing, choice of packaging, enhanced picture quality, and better viewing experience, whether he stays on DTH or cable. Earlier the consumer used to switch between cable and DTH as cable has no entry cost. But now it will be a cautious decision by the consumer. This will create box rationalization. Also, everyone will migrate to ‘per TV price’ regime. Digitization is therefore will lead to a paradigm shift in home entertainment.

 

There is another benefit to the consumer, and that is high definition. We have almost all the required channels in GEC, movies, music and sports genres in HD format, and most of the DTH players are also capable of broadcasting 3D channels.

 

Sunil Lulla, MD and CEO, Times Global Broadcasting Company

A law has been passed and awaits implementation. Over the last many months, broadcasters, MSO, LCO, DTH operators and consumers have been made aware of digitization and the benefits of the same. MIB has released information which indicates that penetration of the four cities under DAS Phase I is rapidly progressing. The sunset date of October 31 has to be met.

 

Broadcasters, MSO s and MIB are all promoting the date and benefits, with a shared responsibility. There is never a perfect marketplace and perhaps some consumers may wait till late or beyond.

 

Television has come to be a part of every Indian’s life (definitely in these cities) and consumers will act. Perhaps some may be slow off the block. From a business point of view, Broadcasters and MSOs are in discussion to close DAS-based negotiations. Obviously each part of the eco-system is desirous of gaining an economic advantage. We must not take a short-term view of things – DAS will evolve to a more transparent and welcoming economic regime in satellite television and cable broadcasting, and that’s what we should look forward to.

 

In essence, digitization will and must happen. Significant investments have been made by MSOs, DTH operators and broadcasters in ushering in digitization. There should be no spoilers to what will be a new and healthier market place.

 

Digitization is not a rainbow; on November 1 we will not find a pot of gold there. It is the ushering in of uniform capacity in cable systems, resulting in transparent choices for the consumer. Moreover, the consumer experience is enhanced in terms of better picture quality and sound. Certainly we expect transparency in terms of declaration of subscribers, which is the first big step towards a stronger economic system. Adoption of channels is the key for viewer homes and that will be a big decision homes evolve, too. From an expectation perspective, with capacity being created and placement as such ‘banned’ as per law, carriage should not be an economic stream for cable systems.

 

However, given the investments made by MSOs we expect a phased increase in subscription revenues and it is likely that broadcasters and MSOs will jointly market channels in communities/ micro-geographies. Over time, ARPUs at the homes will need to go up, if there has to be an upside in terms of economic value for all stakeholders. Broadcasters, MIB, MSOs, DTH operators have expended significant resources in communicating the benefits and deadline of DAS. Moreover the beginning of digitization in terms of discussion, policy and partially via CAS all started eight years ago. So the industry cannot say it’s not prepared. However, it can never be perfect. Let’s move on and welcome digitization!

 

Ashok Mansukhani, President, MSO Alliance

Mumbai and Delhi are ready. Chennai is a question mark. Kolkata is a question mark.

 

The next step, hence, is up to the government to decide. MSOs are completely geared up for Kolkata, but if there is an issue of the state government, the will of state government prevail. Chennai as a market is not known to many, except there are 3-4 major players there. The ministry has said in its presentation that over 50 percent of Chennai has been covered through DTH and 20 percent has been covered by Sumangi TV, which is its own partner. So Chennai should not be a problem with so much of houses already covered, unless the state government has different view. The way I see it, is that the deadline will not be extended but if the state government is not ready they will speak to the central government.

 

The four metros are ready. But if you have political factors deciding on consumer issues, then there is no comment. What more can an MSO do than what we have done or are doing? The MSOs are ready.

 

The customers are ready. There have been surveys that prove the awareness of the consumers. What is needed is the education of consumers, and fast, by MSOs and DTH operators to explain various packages. There have been enough advertisements. Even the MSO alliance has campaigned in the four metros. Awareness of DAS is not an issue. Awareness of DTH packages is what has been submitted to the government and the packages should be available on every operator’s website soon.

 

The MSOs are ready to broadcast 200-300-500 channels. The question is: are customers ready to buy pay channels in the way they were paying for bulk channels? The cost of channels will be decided by the cost at which the broadcaster wants to sell their product. And whether customers are ready to pay a la carte or bouquet is a question that broadcasters need to answer. The pipeline owner cannot predict what a customer will do. Ultimately, it is their own product (broadcaster) and they should advertise on their own channel to promote their product. I do not see that happening.

 

Every broadcaster is thinking that it is the divine right to be bought by the customer. In the past you had packages being sold as bulk. The broadcaster sold a bulk package to MSO, who sold the bulk package to operator, who sold the bulk package to consumer. Now, the customer can ask: I have a budget of Rs 200, which channels can you give me in that budget? This is what going to be the question for the next few weeks. Everybody knows that we are switching to new technology, which is more cost beneficial, more attractive, more features. There is no negative in adopting new technology.

 

Vikram Mehra, Chief Marketing Officer, Tata Sky

Digitization would benefit every stakeholder including the government, broadcaster, MSOs, DTH operators and consumers. The consumers will have an immediate benefit of choice with more channels, a better viewing experience, attractive package options, new and better services like HD, VoD, DVR and an improved quality of service. Going with the latest MIB numbers and reports, we believe that all the four metros are surely geared to meet the deadline.

 

Digitization is in favour of every stakeholder especially the consumer. Every stakeholder including the government, broadcaster, MSOs and DTH operators are currently building awareness around digitization to ensure that the deadline is met.

 

Every stakeholder including the government, broadcaster, MSOs and DTH operators are currently running multiple campaigns to build awareness and educate the consumer on the benefits of digitization. The internal study across the four metros indicate that there is high awareness among consumers and many of them are now going digital.

 

As far as DTH is concerned, the industry has been driving digitization in the country for the last six years. It is currently adding over one million customers every month. With digitization coming in, the unfair pricing advantage arising out of structural anomalies such as under-declaration will go away, thus putting all pay-TV operators on a level playing ground. With pricing becoming similar, the brand that provides the greater customer service and value for money will become a winner.

 

Jehangir S Pocha, CEO, INX News

There is no doubt that people across India (not just the four metros) are not only ready but eager for digitization. It will offer consumers more and better quality TV channels, it will allow the ailing broadcast industry to grow, and most significantly it will allow average Indians to get cheap and instant access to broadband internet connections. All this will empower citizens and produce huge and obvious benefits for advertisers, equipment and IT companies, and a range of industries. The US was the first nation to reap these benefits when it built its ‘information superhighway’ in the 1990s and the rest of the world was quick to follow America’s example.

 

Unfortunately in India, some narrow-minded cable operators and misguided politicians have kept India 20 years behind the rest of the world. These people just don’t seem to understand how digitization, especially greater availability of broadband internet lines, can transform nations. They appear to be more interested in protecting the narrow vested interests of a handful of people benefiting from the current artificial scarcity in broadcasting bandwidth. Their main weapon is their ‘go-slow’ strategy, which sees them raising all kinds of spurious excuses to delay the rollout of digital services.

 

It is exactly things like this that have always hurt India’s modernisation and progress. I hope better sense prevails in our industry. Failing that, I hope the courts, government and the anti-monopolies commission protect India’s larger interest by ensuring rapid digitization.

 

Arvind Prabhoo, Owner, Orbit Television Network

The cable operators, MSOs and broadcasters are ready for digitization. But it does not look like the consumer is ready for it. In spite of all commercials, in spite of cable operators telling the consumer that digitization is a must, I think 30-40 percent of consumers are not taking it seriously. They are thinking that the cable operator is trying to push the product for their own benefit, or that since it is an initiative of the government it will get postponed. Unfortunately, on November 1 they will ask the cable operator or the MSO to resume the new service immediately, which is not going to be possible. To educate the consumer on how to use the set-top box (STB) is becoming quite an issue. And therefore, I predict that 30-40 percent of at least Mumbai will be blacked out by November 1 if immediate steps are not taken.

 

Seeding of boxes is also an issue in Mumbai. Imagine 30-40 percent of households not being connected. To top it all, there were thundershowers in Mumbai a few days ago and 3-4 percent of STBs got damaged. In my network alone, 80-90 percent STBs got damaged because of voltage fluctuations. When we approached the MSO, they said that they will replace it after a particular time. What happens to the consumer in a 2-3-5-day period when they do not have access to STB till the box is replaced or repaired? What is the cable operator supposed to do in that case? We have an inventory of 5-10 service STBs but in case there is more damage, where do we go? It would have been preferred in such a case that government allowed us to keep on the analogue signals, and the consumer would have had access to a few channels if not all channels.

 

I think the government needs to look into the matter. The government should come out with a white paper explaining why they have made digitization compulsory. This will help the consumer understand that it is not the cable operator or broadcaster who is initiating the deadline.

 

The only beneficiary I see in the whole digitization process is the government. I doubt if any of us in the chain are going to benefit.

 

Roop Sharma, President, Cable Operators Federation of India (COFI)

Two states out of the four are definitely not ready. Chennai has just got the tenders out. They do not even have the required number of STBs. Cases are on in the court currently for revenue sharing with operators. STBs are not inter-operable when they should be.

 

The lower-strata consumers are not switching to DTH saying they do not have the money. The government is not making the stance clear that every STB connection needs to pay 10.5 percent as service tax or entertainment tax nor that it will consume 20 watts of electricity.

 

The problem of the STB has not been solved. The cable operators are opposing it since they are the face of digitization. The cable operators will face the consumers, not MSOs and broadcasters.

 

We are all for digitization, but there should be transparency and consumers should be made aware of all the hidden charges and expenses by the government.

 

MR Srinivasan, General Secretary, Chennai Metro Cable TV

The calculation done by the I&B ministry for the Chennai market is wrong. They have taken Chennai’s cable and satellite homes at 11 lakh. Chennai metropolitan area in itself consists of 40 lakh connectivity of households. Out of 11 lakh, they have numbered 6-6.5 lakh as digital connectivity and two lakh of the existing MSOs in Chennai. Considering 11 lakh is the universe, close to nine lakh homes are digitised and only two lakh STBs are required to complete 100 percent digitization in Chennai.

 

But this is an absolutely wrong perception by the I&B ministry. Out of the four million households, seven lakh have STBs. Also, none of the STBs are seeded in Chennai. They are smuggled to the Middle East or Sri Lanka. Out of seven lakh STBs, which they are claiming are present in Chennai, 50 percent are not available. Since it is cheap in India, compared to neighbouring countries, half of the stock ends up getting smuggled. Only two lakh boxes have been seeded out of the 3.3 million STBs are required. Apart from the two MSOs already present, two private players have taken the licenses but are not yet ready. There is uncertainty in the business here in Chennai because of the presence of Government Cable Corporation. Hence, they are not keen to invest STBs.

 

Also, the last UPA government distributed free television sets. Hence, every house in Chennai has a second television set at home. To go digital, even the second TV set requires STB. The I&B ministry and TRAI have not come forward in Chennai to check the situation. We have requested the I&B ministry to have representation in the task force from Chennai, but it has not happened. With 25 days left, the tender has been floated recently. Thus, to procure boxes in fast-track mode is going to be difficult.

 

Implementing the sunset date in Chennai is impossible. If they still go ahead, only 10 percent of the consumers in Chennai will be able to watch through digital signals. If the analogue signals are turned off according to the current sunset date, it will result in a law and order problem in Chennai.

 

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