The International Telecommunication Union (ITU) has set 2017 as the global deadline for most countries to achieve analog
switch-off. That implies that broadcasting signals will be distributed only in the digital medium. Closer home, we have not still talked of a broadcasting digital deadline publicly. The recommendation of 2016 as the deadline by the Telecom Regulatory Authority of India (TRAI) refers only to digitization of cable services. However, digitization of cable for India is an extremely important task and a monumental one at that.
According to TRAI, there are over 200 broadcasters and about 600 television channels currently. Among service providers, we have a large roster of over 6000 cable multi-system operators (MSOs), with 60,000 local cable operators (LCOs), alongside seven satellite television operators and many IPTV providers (apart from the terrestrial services of DD, of course).
Pay-TV services, largely cable and satellite services, reach 74 percent or 108 million television households, out of which only 33 million today are digital, mostly attributable to DTH subscribers, according to KPMG's report on M&E.
In TRAI's report on the digitization of cable services, they mention Rs.16,900 crore as subscriber revenue. Revenues from cable alone account for over Rs.10,000 crore and these are based on reported data from LCOs. Digitizing the cable platform will enable releasing spectrum for hundreds of channels, and provide dual/triple-play services including broadband and voice.
Many of the cable MSOs do not have the financial bandwidth to foot the bill. There have been gradual attempts within the industry to consolidate the LCOs, organize the industry, and streamline revenues, but the larger truth prevails that the sector is largely disorganized, political, and unmanageable, especially when it comes to LCO functioning. Regional revenues are not 100 percent accounted for; there have been frequent cases of flouting regulations, and industry leaders have been warranting digitization to check these issues.
Contest between DTH and Cable
Apart from a few MSOs, we have not observed a firm on-paper roadmap to go digital from the cable MSOs. I would attribute that reason to complacency. Larger stakeholders are relying on government mandates to make digitization an industry-wide mantra.
Apart from not having the money, many MSOs and LCOs are not fully convinced of the larger benefits of digitization, are unsure of the return on investment from the exercise, and continue to believe in acquiring customers with analog cable. If cable leaders want this venture to succeed, they need to have an industry-wide awareness and marketing to prep the value chain.
Many cable companies argue that they are not fully threatened yet by DTH services and that they can continue to compete well on price. Yes, there is no contest - but to the DTH advantage. DTH has been successful in penetration despite the high monthly costs because of the quality it assures and its digital platform. Why is the cable industry not motivated enough by this?
The cable industry has potential for growth. Not all subscribers, but a significant percentage is willing to pay more. An ARPU of Rs.500/month for good-quality television is not an impossible task. An average family in a metro spends triple that amount to watch a movie in a multiplex.
For cable digitization in India to succeed, digital efforts have to ramp up besides and despite the government mandates. Stakeholders can argue that this is no mean a feat, but the way the business looks today, MSOs have to reinvent themselves and upgrade without relying 100 percent on the government-driven mandates.
On a positive side, digitization of cable services is inevitability and the industry is looking at it realistically, while weighing the pros and cons. The next 12 to 15 months will be interesting time for the industry. Along with continued consolidation of LCOs, we would likely observe mergers and acquisitions at the MSO level. Hopefully, with eased out FDI rules, the industry stands to gain an impetus in the short term, resulting in faster rollouts of digital upgradation.
I also strongly believe that telecom carriers, who have entered the television space, could largely leverage their position by acquisition in the cable industry. DTH services, despite the benefits that they offer, are limited in the scope of penetration. Despite technical advancements, worldwide, it has been observed that DTH services penetration is lower in rain-prone areas. Considering India's topography, this is definitely a challenge for the satellite players.