A Win-Win for All
Sanjay Rohatgi, SVP,Service Provider, Cisco India & SAARC
The cable industry in India has grown rapidly to an estimated 94 million in 2011 from trifling 0.4 million in the beginning of 1992. The total number of TV households in the county is estimated to be around 147 million. Additionally, the number of pay channels has grown steeply from 20 in 1995 to around 167 and there are more than 800 channels registered with Information & Broadcast (I&B) ministry. Furthermore, the country is witnessing a drastic shift in consumer behaviour; customers today do not shy away from forking out extra money to get best in class services. All of these put together has provided an impetus to cable digitization in the country.
The Indian government has been pretty aggressive about cable digitization in the country; the parliament recently cleared the bill to amend the Cable Television Networks (Regulation) Act for ushering in digitization. As per the act, cable digitization will be implemented in four phases across the country and completed by December 2014. In view of the development, I & B ministry has decided to modify the June 30th, 2012, deadline for a complete switch over, in the main metros to October 31st, 2012. The new deadline would be monitored more vigorously and reiterates governments commitment to digitization in the country.
Impact on various stakeholders
The ever increasing demand from consumers, combined with a massive increase in number of TV channels has posed an insurmountable challenge for analogue cable TV. The advent of cable digitization, in the country, is a much required change not only for consumers but also for the rest of the stakeholders. The consumers will have access to 500 plus TV channels, a better viewing experience, new and better services such as HD, Broadband, and Video on demand. TV viewing will become more interactive, personal as well as social.
Cable digitization will also streamline the underreporting of subscription revenue by LCOs; as a result MSOs would gain an estimated six fold increase in subscription revenue. Digitization will further help cable service providers to tap additional business opportunity in the form of value-added and interactive services. It will enable broadcasters, satellite operators, and cable operators to provide more interactive services to the customers and enable operators to grow their ARPUs.
Bundled broadband will boost revenues, profits, and serve as competitive differentiation to DTH, which in turn will help LCOs increase scalability to cross-sell other services and gradually help in consolidation of LCOs. This will in turn help curtail the service tax leakage and provide an impetus to the economy.
To ensure cable digitization is completed as per the set timeline, the entire ecosystem needs to focus on a few crucial factors such as awareness, collaboration between eco-system players. The government on its part has to usher in encouraging policies as well.
Consumers on their part need to know what cable digitization would bring to them to help them make an informed decision about the need to switch. Communicating and informing consumers about what 'going digital' means in terms of choice, access and quality is crucial here. The Indian Broadcasting Federation (IBF) and News Broadcasters Association (NBA) have in fact begun awareness programs and already have tickers running on almost all TV channels to inform end consumers about the benefits of digitization.
Training and orientation for more than 200,000 cable operators in the country is another critical step, since many of the LCOs have misplaced anxiety about cable digitization. In reality cable digitization will help LCOs to thrive and by co-operating with MSOs they can transform into channel partners for ISPs and Service Providers because of their last mile access.
Keeping pace with changing times, Information & Broadcasting Ministry has begun to use media to create awareness about their plans to digitize the cable sector in the country. Players such as Cisco for example organized a 'cable summit' in the country to create awareness. The a two-day event was attended by CXOs from leading multiservice operators (MSOs), content providers and industry stakeholders, to discuss about the benefits of cable digitization.
Collaboration among stakeholders
The scale of the cable digitization initiative needs large-scale planning and co-ordination among all stakeholders involved. Going by the numbers, digitization of around 100 million homes will require a capital investment of about $10 billion to have the requisite infrastructure in place. Therefore the government as well as private players must provide cable operators with flexible payment policies and affordable, yet uncompromised quality set top boxes. The increase in FDI across platforms from 49 percent to 74 percent is a welcome move from the government, incentives such as offering customer concessions and Income tax holidays are expected in the future. Private players on their part need to come out with flexible, new business models without incurring huge costs.
It is equally important to provide customized and locally designed set-top boxes at an attractive price point. In fact there are set-top boxes available in the market today having varying price points that cater to the disparate purchasing powers and choice of consumers. In a nutshell, the government along with other eco-system players has to create a model that is win-win situation for all the stakeholders involved.
The MSO digital penetration today stands at five million. In order to meet the deadline of 2014, cable service providers will have to sell about 90 million set top boxes to their consumers. While complete digitization may or may not happen within the given timeframe, even ensuring a 60% digitization, will help India in taking a giant leap and be at par with the developed economies.
Digitization will result in radical change in consumers' expectations and the industry will witness many mergers and consolidations, because LCOs will tie up with triple play service providers or MSOs, to upgrade their infrastructure. However, a rise in the number of pay channels is expected, although there will be substantial improvisation in the content. This will also put pressure on free to air channels to maintain viewership.
Digitization will lead to more 3D content creation for urban consumer and more regional content for the rural consumers. It will also spur the demand for 3D and HD TV sets. A consultation paper released by TRAI indicates that the TRAI has revamped the entire regulatory structure of the broadcasting, cable TV and DTH industry, pertaining to carriage fee, channel prices and channel availability etcetera. Once digitized, all channels (pay and free-to air) have to be offered on a-la-carte or individual basis to subscribers according to the TRAI.
Some of the concerns pertaining to digitization as expressed by the cable industry include revenue sharing and the availability of set-top boxes. The larger issue of the role of broadcasting continues to remain unaddressed.
However, once cable operators are able to overpower the challenge of video being fragmented across different content sources, devices, and technologies by combining TV and web applications, consumers will benefit from being able to watch videos and interact with friends on any screen. Next generation architecture solutions will enable local content monetization and efficient management and publishing of content across multiple screens - TV, PC, mobile and tablets. That will ensure content following the consumer rather than the other way around.