digitization

With the March 2017 deadline, all analog signals have been switched off in the entire country. However, it seems that it will take at least 69 months before India can declare to be a digitized nation.

The Indian television industry with more than 170 million television households ranks as the second largest market globally after China. The distributors, comprising local cable operators (LCOs) and multi-system operators (MSOs), direct-to-home (DTH) service providers, IPTV service providers, and terrestrial TV service provider (Doordarshan), play an important role, operating as the key intermediaries between the content providers (broadcasters) and end consumers (subscribers). While, under a digitally addressable cable TV system (DAS), MSOs decrypt signals supplied by broadcasters via satellite and pass them onto LCOs, who act as local retailers offering last-mile connectivity through set-top boxes (STBs), in the DTH space, encrypted signals supplied by broadcasters are directly decrypted by end users. However, over the years, limited bandwidth availability and lack of subscriber addressability had resulted in the concentration of bargaining power with the LCOs providing last-mile connectivity to the subscribers. The implementation of the DAS mandated by the MIB (Ministry of Information & Broadcasting) over four phases seeks to plug the gaps in the distribution value chain, improve subscriber addressability, and improve content monetization for distributors with higher bandwidth availability.

digitization

The mandate was, in Phase-I digitization of TV households in the four metros, Mumbai, Delhi, Kolkata, and Chennai; Phase-II focused on the 38 top cities with a population of one million-plus; Phase-III focused on the rest of urban India; and Phase IV therest of India; primarily comprising of the rural, unorganized part of the country.

While Phases I, II, and III saw reasonable success, the 61.08 million TV homes across the country (Chrome Data and Analytics pegs this figure at 89.5 million households.) under Phase-IV are far from digitized. In any case, in accordance with the MIB notification, all analog signals have been switched off on March 31, 2017.

digitization

Among the states to be covered in DAS Phase IV, Tamil Nadu has the highest number of TV homes, with 8.15 million households followed by Andhra Pradesh and Telangana with 7.6 million TV households. The other states included are Kerala with 4.77 million TV households and Karnataka with 3.8 million. Other states are Maharashtra and West Bengal, totaling 4.92 million and 3.86 million households respectively, while Uttar Pradesh has 5.99 million TV households.

digitization

According to MIB, 64.4 million STBs were seeded in Phases III and IV areas of DAS, excluding Tamil Nadu, which meant 67 percent of the total requirement. Thus, 33 percent STB seeding was left to be done before the deadline of March 31, 2017. For Phase-IV, actual seeding data was up to 50 percent, as some MSOs have not been filling seeding data in spite of repeated requests from the ministry.

In Tamil Nadu and Andhra Pradesh, there are still 30 percent analog homes, which translate into 27 million households, as per Chrome Subscriber Establishment Survey (SES).

Tamil Nadu has remained a challenging market since the rollout of Phase-I, nonetheless, the state reported seeding of
2.9 million STBs in Phase-II as against targeted households of 6.6 million. The center has recently issued Digital Addressable System (DAS) license to the Tamil Nadu Arasu Cable TV Corporation Ltd. (TACTV). This should take care of its 7.052million subscribers across Tamil Nadu.

"For Arasu to order the set-top boxes, seed them, and activate them will take time; also to reach every village and operator, it might take a year.The whole TN is connected by them. My sense is that procuring STBs alone might take about three to four months. Andhra Pradesh too is a huge and a tough market. While, on the other hand, Punjab might happen in next two months. It is a highly digital market," comments Anuj Gandhi, Group CEO, IndiaCast.

In states like Madhya Pradesh and West Bengal, there seems to be a shortage of set-top boxes. Besides, some of the interconnect agreements between MSOs and broadcasters remain pending. In the election states – Manipur, Goa, Uttar Pradesh, and Himachal Pradesh – the progress of digitization was very slow. Only after the results came out, some action was seen in these markets. Parts of MP, Chhattisgarh, Orissa, and Haryana still have active analog signals in rural areas, says the Chrome survey.

It is not an easy task by any standard. The region is too vast and spread out, and tough in topography and expanse. In fact, even the exact data on how many cable subscribers there are in these areas is not available.

digitization

As per the latest Chrome SES, 50 percent of rural India is dominated by DTH players, while 20 percent by digital and 30 percent by analog players. MSOs definitely see a drop in subscribers as DTH is taking shape in rural India. Free Dish dominates rural India with more than 23 million subscribers (25 percent market share) and it might come up as the biggest gainer during cable-dark period. Broadcasters are expected to see a drop in viewership contribution by rural India but as per ground movement, within a month analog households will move to either digital or DTH. As per Chrome, this is an opportunity for DTH players and a challenge for digital players.

Infrastructure sharing proposed by the TRAI would also provide answers. Some areas in Phase-IV will find connectivity through satellite communication, HITS, and cable operators. Smaller LCOs cannot afford to put big digital head-ends. Bigger players will have to do it and extend infrastructure sharing.

Way Forward

Digitization will allow for streamlining the business model and make it more transparent as per TRAI guidelines. Digitization would lead to the introduction of new services for customers, and new revenue stream for all stakeholders not just impacting the seeding of STBs but also delaying monetization of currently seeded boxes in DAS Phase-III and IV. This is further impacting overall earnings of not just the MSOs but also of the government.

Digital India is a dream which is over-arching and in step with taking India ahead. Digitization is not just about the cable TV Industry, it is more about bringing access of digital content, choice, and better services to customers. It is about building an inclusive system which gives power to choose the type and quality of content to customers.

Sunil Vachani, Co-Chairman, CII National Committee on ICTE Manufacturing & Chairman, Dixon Technologies Pvt. Ltd.

"The program of digitization started by Government of India almost 5 years back has presented a big opportunity for Indian manufactures to make India a hub for manufacturing of digital set-top boxes (STBs) for cable and satellite. It is estimated that with the culmination of phase-IV of digitization, almost 40 million STBs would have been manufactured in the country. The Government of India has also played a major role in promotion of local manufacturing of STBs by solving major issues of the industry, such as C' form and introducing duty differential in locally manufactured STBs versus import.

Government of India has pushed for development of indigenous Conditional Access System (iCAS), which will promote local manufacturing of STBs in the country. Many Indian players have invested huge funds in R&D (Research and Development) to design cable and satellite boxes. However, there are a few issues still creating problems for the industry, such as import of STBs from ASEAN countries under various free trade agreements. The Government of India needs to take proactive measures to protect domestic industry to ensure India emerges as a hub for manufacturing and exporting of STBs."

Sunil Vachani
Co-Chairman, CII National Committee on ICTE Manufacturing & Chairman,
Dixon Technologies Pvt. Ltd.

Ashish Pherwani, India M&E Advisory Leader,Ernst & Young
Industry Speak
The New Customer on Digital Television

With the rise of India's economy, growing at a steady 6 to 7 percent per annum, customer dynamics are changing like never before. The amount of content – both entertainment and news – being consumed is increasing on linear TV and on digital platforms.

Erstwhile customer segmentation based on SEC/NCCS, geography, and platform is now less relevant, and ARPU is becoming a more important basis for segmentation.

While the top 2 to 3 percent of customers will be pure OTT customers at an ARPU of over 500, the growth of free dish to over 30 million subscribers, and headed to 50 million, bodes well for FTA television. The rest of the customer base can be segregated into sub 200 gross ARPU (75 percent) and 200+ ARPU (25 percent).

For distribution companies, the game will now be to prevent loss of the former into free TV, and build them up over a period of time, and prevent the movement of the latter to OTT platforms.

Given the 4 percent annual growth rate in TV households and the proposed MRP-based tariff order, distribution is poised to grow significantly over the next few years in India – be it cable, DTH, IPTV, or even HITS, which can make a comeback. Customer service and original content will be key differentiators. And the customer will benefit most of all.

Ashish Pherwani
India M&E Advisory Leader,
Ernst & Young

Nishant Sharma, VP,UCN Cable

"Converting to digital from Analogue means changing everything right from control room system to last mile operators, STBs were the first priority of Digitalization, to adopt this all process of control room starts from Zero, this requires heavy investment on implementation and the Equipment's'. As government decided to digitize they are rigid with their norms and most of the pressure falls on MSOs starting from paying huge amount to invest in new equipment and STBs.

The business partners (LCO) were less aware about the digital technology, due to which there was a big mess in business results and in growth of other platforms in the market (DTH). Digitalization brought transparency with numbers of connections along with growth in revenue. The maintenance part on ground have increased, now the customers are getting best services as per there requirements.

Phase IV is the toughest, especially in terms of topography and expanse. With such different geographies in country only one policy will not solve this issue. MSOs are trying and approaching these places having very low subscriber base. Seeing the real picture, there is still a large area which is in total blackout due to non-availability of real business partners and investment issues. Though MSOs have started approaching these areas now but it will take some time to make these rural places fully digitized."

Nishant Sharma
VP, UCN Cable

Jaideep Ghosh, Partner & Chief Operating Officer-Management Consulting,KPMG in India.
Industry Speak
Ongoing Digitization

"Television remains amongst the most important entertainment media in India. The ongoing cable television digitization is bringing a paradigm shift in the overall operations of the TV sector. The process of digitizing the TV medium began with Phase-I in 2012 and has progressed slowly due to persistent challenges. Uncertainty in the market in terms of pending court cases and poor progress of set-top box (STB) installations have adversely impacted digitization across different phases. Phase-IV, in particular, has posed a major challenge in terms of logistics and infrastructure, given the topography and expanse of areas covered under it. This has made reaching people, installing STBs, and activating digital signals difficult.

At the end of 2016, the digitization of cable and satellite (C&S) households was about 70 percent, up from 60 percent in 2015, with parts of Phase-III and a substantial base in Phase-IV, still non-digitized. The ministry of information and broadcasting (MIB) has extended the deadline for Phase-III and Phase-IV of digital addressable system (DAS) to January 31, 2017 and March 31, 2017, respectively. However, major parts of Phase-III and IV still continue to run on analog.

It is likely that digitization would be largely completed by the end of 2017, with related benefits being realized gradually. Once complete, digitization is likely to bring significant long-term benefits in terms of addressability, offering choices to consumers, ensuring minimization of carriage fees, increasing transparency, and plugging the leakages of revenues – which would result in average revenue per user (ARPU) increase across the value chain and higher taxes for the government."

Jaideep Ghosh
Partner & Chief Operating Officer-Management Consulting,
KPMG in India.