For most of those living in the metros – Delhi, Mumbai, Kolkata and Chennai, the way you watch (and pay) for television will change considerably from 1st July 2012. The Cable Television Networks (Regulation) Amendment Act comes into effect, and all analog cable TV signals will be switched off and the digital signals will replace them. In effect, just like Direct To Home (DTH) and existing Digital Cable services, you will need a set top box to receive the digital signals.
With a clear set of guidelines now emerging from the Broadcast Regulator, Telecom Regulatory Authority of India (TRAI), we clear the picture for you.
What are the upgrade timelines?
The analog signals will switch off in the metro cities on the midnight of 30st June 2012. There will be two more phases of rollout, which will cover the entire country by 31st December 2012.
But what does this mean for the consumer?
Quite a lot actually - some things are good and one slightly bad!
First off, the number of channels that you get increases massively. On the current analog system, technically about 200 channels can be broadcast. However, in the real world scenario keeping issues like quality of wiring, signal drops due to distance etc., usually you get 90 – 100 channels that are watchable. On a digital network, the operator will be able to offer anywhere between 400 channels to 700 channels.
Secondly, the picture quality will see a huge improvement. Gone will be the days when fuzzy picture with all sorts of vertical and horizontal disturbance running across the screen will be tolerated. It is still too early to say if it will be as good as the quality DTH offers, but on a technical basis, that should ideally be the case. Here also, the quality of hardware implemented will have some bearing.
Third is the ability to tailor the channel package more to your needs. All channels will be available on an ala-carte basis, meaning you can pick up channels individually as well. Also, unlike the current scenario with cable television, you will have the choice of picking channels bouquets – something that DTH does.
Fourth and very critically, cable operators will be able to offer High Definition channels to subscribers, something they couldn’t do at the moment, unless you were using Hathway’s Digital service, for example. This will help them target the “premium segment” customers, which was the advantage DTH had till now.
The caveat here is – you will need to buy a set top box from your cable service provider to continue using the service. This will cost anywhere between Rs 700 and Rs 2000, and will be offered with the option of complete up-front payment or part payment and part EMIs. Without this box, you will not be able to watch television, not even free to air channels (FTA). This could have an impact on the number of people who may actually upgrade their cable television connection, or simply shift to a DTH service, since both will incur a relatively similar hardware.
“Digitization of cable network will hugely benefit the entire ecosystem consisting of the government, broadcasters and consumers. For consumers, this translates into wider choice of TV channels, better quality of transmission, increased value added services and paying for what they view. For the government, greater customer declaration will lead to better tax compliance and tax revenues. Lastly, broadcasters will enjoy a reduced dependence on advertising revenues with subscription based services as well as a lowering of carriage fees”, says Shashi Arora, CEO - DTH & Media, Bharti Airtel.
TRAI recommendation: To begin with TRAI has mandated that all Multi Service Operators (MSOs) carry a minimum of 200 channels from the beginning. This number has to be bumped up to 500 channels by 2013. Also, subscribers will have to be offered 100 free-to-air channels as a basic pack – Basic Service Tier, if they wish to subscribe to that, at a minimum of Rs 100, carrying all 18 Doordarshan channels and five channels of each genre - news, sports, infotainment, music, lifestyle, movies and general entertainment. Also, TRAI states that a set top box should cost Rs 1500, with the customer paying Rs 850 up front, and the rest in installments. There will be a 1-year warranty on the hardware.
Visit page two to read more about just what Cable TV Digitization means for you...
What does this mean for the local cable operator and the bigger MSOs (multi-service operator)?
First and foremost, both the MSO and the regional cable operators will have to upgrade the hardware at their end – digital signal reception, decoding and forwarding to the local cable operator who services the area around your home, as well as upgrade to fiber optic cable throughout the service area. What will be critical is the availability and ready stocks for the set top boxes. However, after repeated attempts in early year 2000s to introduce the digital route – Conditional Access System attempt, if you remember – there will be apprehensions about the smoothness of the process.
The second critical element is the channel packages. Instead of all channels at a flat rate, cable operators will have to go the DTH way and offer basic packs, as well as optional add-on packs.
For quite a while now, many of the concerned parties had been cribbing that cable operators are in the habit of underreporting subscribers and eating into what would have been due to the broadcaster and the government as tax. All that will get sorted, now that every television will have a set top box registered to it.
“Digitization is certainly a boon for the DTH industry. This will enable the service providers to add new subscribers to their respective platforms, which shall lead to abundant growth and take the industry forward aggressively. The sector is set to grow multi-fold by this move. With set top boxes (STBs) in place it is impossible to under-report”, says a spokesperson from Videocon D2H.
What does this mean for DTH operators?
At the moment, all DTH operators are struggling to reach the number of channels that a cable network will be able to offer post digitalization. Satellite transponder space is quite scarce, and most DTH operators are being very careful about what channels they add, keeping some channel space for future channel additions. This will be solved to a certain extent by 2015, post the launch of some satellites carrying Ku- band transponders.
Airtel had planned well in advance for the transponder space situation. According to Mr Arora, “We have planned ahead and have adequate capacity planned. However, in a country with 815 approved channels and 13 official languages, there will always be a need for additional transponder capacity. As more HD channels come up the demand for transponder capacity is going to go up further.”
Secondly, DTH will not have the exclusivity for value-add features like video on demand and pause-play and record live TV (with DVR / recorder set-top boxes) anymore. Over a period of time, expect the cable operators to add these services to their packages. However, these might take some time, particularly since it involves additional infrastructure at the operators’ end and expensive hardware at the consumer’s end. Hathway currently offers a basic set top box, a DVR and an HD set top box, competing head on with what DTH offers.
At the moment, the cable operators are under pressure to tailor channel packages at prices that remain affordable for the masses. On the other side, DTH operators are also adopting a wait and watch strategy to see how this compares to the packages they offer, but with a sense of optimism.
“A regular SD box from Airtel digital TV costs as low as Rs. 1590, which includes installation charges as well. We also offer a year warranty on Set-top box maintenance. We offer more than 300 channels. Compare this with the cable offering which will be a shade lesser than the prices but lesser number of channels. Also, to ensure money is not a deterrent for customers - we have a national entry tariff point 'Value pack' which starts at a nominal price point of Rs. 158 taxes and comes with 191 channels and services”, says Airtel’s Shashi Arora.
Videocon D2H is similarly confident. “As far as the statement of competing with cable operators is concerned, we are unfazed by it because they cannot match DTH operators in terms of quality of services, value added services and the scale of operations. We have planned to come up with more innovative measures like EMI’s to tackle the price issue rather than cut further into our costs.”
But, cable operators will have the ability to customize channel offerings according to the subscriber base – area, language, etc. based on the regional demographic that will allow them to keep costs down, while DTH cannot do anything except offer pan-India packages.
Visit page two to read more about just what Cable TV Digitization means for you...
Where the government should step in
What hurts DTH operators even more is the current tax structure. And in turn cripples them in face of the competition from the cable operators, who will be able to offer services at competitive (read: possibly lower) rates to the consumer. Agreed, the cable operators will now be more compliant as far as subscriber declarations and taxation structures is concerned, but still have an advantage over DTH. The problem for DTH operators is compounded when individual state governments levy more taxes on them.
Airtel’s Shashi Arora isn’t pleased with the current scenario, “Currently, about 33% of the monthly tariff realization from the customers goes to the government in the form of taxes and fees. For an industry that is today an 'essential' service, this high incidence of tax is detrimental to the consumer and the industry. The tax structure has to be made a level playing field with cable for DTH industry to compete.” He continues, “The DTH industry is already under severe pressure on cash flows and profitability because the STBs are sold at below cost price since the benchmark is the cable market. We are competing with the local cable operators who give new connections with almost zero charge and provide artificially depressed tariffs due to 80% under declaration. This has forced the DTH industry to give new connections at a highly subsidized rate.”
A spokesperson from Videocon D2H echoes the same, “It is certainly difficult with the current tax structure to reduce costs and provide and maintain high standards of service. Also, we must understand that such high costs lead to a much longer gestation period which will add to the pressure and be a bane for the industry in the long run.”
What does this mean for the broadcaster?
Very simply – more money in the kitty! Some would say it had been a long time coming, considering it has been alleged that cable operators have been underreporting subscribers for a long time. The dependence of channels on advertising will slightly come down, as the subscriber revenue will go up.
Secondly, TRAI has made it mandatory for Multi Service Operators (MSOs) and Local Cable Operators (LCOs) to declare the carriage fees that a broadcaster will pay them to carry the channel on the platform. At the moment, that is largely not being done.
What are the options for the customer?
For someone who is currently on the cable TV network, you can either continue with the same service. You will need to contact your cable operator for the set top box. Either pay upfront for the hardware, or pay some amount and then the rest in EMIs. While TRAI has guidelines for the basic set top box price and payment structure, upgraded hardware (like HD box or DVR) will surely see customized offers from operators - unique schemes to reduce the immediate financial burden on the subscriber.
Alternatively, you can switch over to a DTH connection. DTH operators are offering hardware and bundled free viewing period for a variety of packages. Post that, you can choose from a variety of channels packages and add-ons. Here is a lowest indicative price of the hardware some of the leading DTH operators offer:
If you are a DTH user at the moment, but are not satisfied for some reason, you just might find the upgraded cable TV services premium enough to shift back!
What we recommend
Our recommendation is based on two scenarios, primarily based on satisfaction levels with the service. You can only be the true judge of what category you fall in.
1. Happy with cable operator: In that case, you may wish to continue with the same service, post digitization implementation. Get the STB, and also check if there are options to upgrade to an HD package (depends on if you have an HD television) and even a DVR.
2. Unhappy with cable operator: If this is the case, then you don’t really need to think. Weigh up the offerings from the DTH operators, consider the entry price points, channel offerings and packages, and make that call to buy the service!
Alternatively, if you are still in the “cannot decide” phase, we would give you a gentle nudge towards DTH, simply because it is an established industry that has the processes, hardware and offerings in place. On the other hand, cable operators will face the teething problems with hardware availability, possibly even quality, channel packages and offerings and even on the technical side, considering it is a completely new avatar of the industry.