Digitization Phase II: Deadline round the corner

08 Mar,2013

L to R: Christopher Slaughter, Supriya Sahu, Sameer Manchanda, Man Jit Singh, Chad Dunavant, Ravi Mansukhani, Anuj Gandhi


By Ananya Saha


With the deadline for Phase II of digitization approaching on March 31, the stakeholders are implementing the learning of Phase I for smoother and seamless adoption of technology. Supriya Sahu, Secretary, MIB announced at the CASBAA forum recently that the government would soon bring change in the digitization policy that would make it mandatory to switch off the channels in phased manner. “We did not make it mandatory in Phase I but it will be regulated in Phase II so the consumer understands that they need to switch to digital platform,” she elaborated.


Ms Sahu seemed positive about the progress of Phase II. She said, “According to the data we have, which has been collated from industry feedback. We were not as comfortable so close to deadline in Phase I, as we are in Phase II now. There was a huge uptake of set-top-boxes (STBs), close to 2-3 lakhs, in 10 days before deadline and 15 days post deadline. We expect the same situation this time as well. We collect data every week and the taskforce meets every 15 days, and according to the data we are confident of meeting the deadline.” She also said that all stakeholders need to sit and sign an agreement so that it does not derail the deadline, as it happened in Phase I. “Our biggest challenge is how to convince different stakeholders to understand that their profit margins will decrease but only for a short while. It was difficult to get the different aggregators to sign the agreement last time, and it is happening this time as well. This was one of the reasons that deadline was extended.” She also pointed out that availability of STBs and the price points of STBs is also posing a challenge in the 38 cities where Phase II of digitization is nearing deadline.


Ms Sahu also asserted that customer acquisition form has been made mandatory, and notices are being issued to operators who yet to comply with this policy.


Man Jit Singh, President of the Indian Broadcasting Federation (IBF) and CEO, Multi Screen Media, echoed Ms Sahu’s views and said, “As broadcasters, we are aware that there will be a short-term reduction in our profitability. But there will be two streams of revenue going forward, and hopefully digitization will enable us to get 50:50 revenues from advertising and subscription.” Anuj Gandhi, Group CEO, IndiaCast pointed out the challenge of reaching the last-mile consumer. “Of course, each phase will be a bigger challenge because geographies differ,” he said.


Ravi Mansukhani, MD, IMCL talked about the challenges that the recent budget has brought. “We do not understand why the cost of STBs had to be hiked. If you want to promote the local manufacturing, which is definitely a good move, the government should have given incentives to the local manufacturers. This has acted a dampener. We might have wanted to enter new geographies, but since we have to spend much more on existing geographies for STBs, we are not looking at new markets,” he said.


Mr Mansukhani also emphasized that going forward, prepaid would gain more acceptance in Phase II. He also said that as digitization becomes a habit, ARPUs would go up drastically.


Ms Sahu insisted that government is pushing digitization for the consumer, and not to get taxes. “It is not the entertainment revenue or central tax that we are pushing for digitization, which is not huge any way. The entertainment tax that Delhi govt gets is only Rs 78 lakh per month. With digitization, it will go up to Rs 5 crore. But even that is not a very huge amount. The profit margin of govt is very low,” she elaborated and asked the industry to keep the focus on consumer.


Talking to MxM India about digitization in India, John Medeiros, CASBAA’s Chief Policy Officer said, “The stakeholders seem quite eager to implement digitization. There is of course a competitive dynamic between DTH and cable operators but given the stance of stakeholders now, and what it was three years ago, we see a more positive dynamic at work.”


Easing India’s Capacity Crunch

CASBAA’s report on assessment of demand and supply for television satellite transponders, developed with knowledge support from PwC India was released at the CASBAA India Forum 2013. Excerpts:


TV channels need to be transmitted over satellites to distribution intermediaries (e.g. Multi-System Operators, DTH operator head-ends) and end-consumers (through the DTH platform). This needs adequate satellite capacities (in terms of spectrum / transponders).


However, there has been a perception of shortages in satellite spectrum/transponders made available to Indian TV industry players. This is attributable to an overall shortage of spectrum that is available to India/ISRO. Although ISRO has been working hard to get additional spectrum, the process is long-drawn and the needs of TV industry players have grown manifold, raising the possibility of even the additional spectrum not meeting the needs.


India had 821 licensed TV channels in 2012, double the number in 2008. By 2017, India is expected to have about 1,600 licensed channels of which ~1,300 channels are expected to be operational. Furthermore, the number of high-definition (HD) channels is also expected to increase in line with international trends and is expected to increase to ~130 by 2017. The high growth in the number of HD channels is expected to be fuelled by growth in digital platforms such as direct-to-home (DTH) and digital cable. The rising sales of high-end TV sets that support HD viewing experiences are also likely to contribute to the growth. A key indicator of the latent demand is the large number of pending requests for new TV channel licenses which stood at 348 in January 2012 as per the Ministry of Information & Broadcasting. In the C-band, only ~160 channels out of the estimated 660 operational channels were carried by transponders on Indian satellites8. This represents only ~25% of total operational channels. The rest of the channels (~500) are being transmitted through foreign satellites.


In the Ku-band, out of the total ~73 transponders used by Indian DTH operators, only 18 transponders (~25% of total) belong to Indian satellites. The remaining ~55 transponders (~75% of total) are on foreign satellites.


Future increased demand for satellite transponder capacities is unlikely to be met by Indian satellites (supplied by ISRO). For DTH operators, it is critical to have adequate backup or redundant satellite capacity such that in case of a failure in their primary satellite(s), transmission can be switched to another satellite to avoid black-out.


In India, since there is already a shortage of Kuband transponders for regular transmission of TV channels on DTH, currently none of the DTH operators are able to make provision for such redundancy needs.


Supply of satellite services is also threatened by proposals to utilize frequencies currently devoted to satellite services for terrestrial wireless systems. There are also challenges that place practical restrictions on leasing transponder capacities from foreign satellite operators by Indian players.


Short contract durations between Antrix and foreign satellite operators bring in uncertainty for Indian players and raise the possibility of increased prices.


Need of DTH operators to procure incremental capacity at specific orbital slots further emphasizes the need for long-term contracts with satellite operators.


Shortage of satellite capacity can hamper growth of the Indian television ecosystem


Shortage of satellite capacity can lead to many adverse effects such as the curtailment of consumer choice, slowdown in industry revenues, losses to the government exchequer and under-achievement on India’s stated aim to be a teleport hub. It is also likely to lead to a distortion of the competitive balance for DTH operators and broadcasters. These effects can be detrimental to the development of India as a knowledge society.


Satellite capacity constraints can impede not just the growth momentum of the Indian TV sector but also have wider impact on the ecosystem of the industry.


Shortage of transponder capacity in Ku-band can also lead to distortion of competitive balances:


:: DTH players would be unable to match the channel counts of digital cable operators.

:: Delays in satellite launches favour a few DTH operators who benefit from allocation of transponders while disadvantaging others that are behind in the capacity request queue.

:: With DTH capacity constrained, many channels would not be carried by DTH operators, weakening their business cases.

:: The demand-supply gap also acts against new broadcasters as existing large broadcasters may have greater bargaining power to push their channels on various bouquets.


Suggestions for improvement

To overcome the challenges stated above, the following suggestions are being made for improving the current demand-supply gap:


:: Long-term contracts spanning 10-15 years should be encouraged instead of 3-year short-term contracts. This will provide price protection over longer terms for Indian DTH operators as well as broadcasters and eliminate uncertainty on price escalations at the time of contract expiry or renewal. In the case of DTH services, this will also help avoid disruptions of television services for Indian consumers and their associated costs since there will be no need to re-point satellite receiver dishes periodically, due to the longer term contracts.

:: The process to allow DTH operators to enter into contracts with international satellite operators should be simplified.

:: Industry players, including DTH operators, should be allowed to procure capacity on international satellites already coordinated and approved with the INSAT system without any additional approval from ISRO.

:: Similarly, DTH operators should be allowed to add transponders on satellites where they are already present (and hence approved by ISRO) without seeking additional approvals.

:: ISRO should be encouraged to share its plans for launching transponders meant for private broadcasters and DTH operators over the medium-to-longer term so that the industry players can make necessary business decisions.

:: The Indian government should formulate and drive policies as well as processes to spur growth in satellite services which will thereby help in the growth of the Indian television sector. For instance, specific three-to-five year targets for launching satellites designed for use by private broadcasters and DTH operators can be set, with allocation of the necessary funding, apart from facilitating private satellite operators to provide necessary transponders to Indian broadcasters and DTH operators. Future decisions on spectrum allocation should take into full account the importance of satellite communications – especially in the C- and Ku-Bands – to a country as large as India. Spectrum currently available for satellite services should not be reduced or deteriorated by allowing interference from terrestrial wireless systems of any kind.

:: Access to additional Ku-band frequencies currently allocated to satellite services should be allowed, such as the Fixed Satellite Service (FSS) and Broadcasting Satellite Service (BSS) Planned Band frequencies. Given the congestion in the conventional “unplanned” Ku-band, opening up access to the mostly unutilised Planned Band spectrum would further address the shortage of capacity, leveraging on existing in-orbit and planned future satellites carrying such spectrum.


These initiatives will help the Indian TV sector to continue its forward momentum and achieve the scale for which it has the potential. This will also help take India to the next level in its drive towards becoming an information-based economy.


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