Cable TV digitisation and the chaos about pricing of STBs, packages
As TV viewers from four metros are getting ready for digital cable TV, some issues like diverse pricing for STBs and channel packages being charged by MSOs are creeping up. In addition, there is no clarity about revenues and cost sharing between LCOs and MSOs
With the government and players in the cable TV industry forcefully marching ahead with the digitization of cable TV signals, it seems that from 1st November onwards viewers in the four metros—Mumbai, Delhi, Kolkata and Chennai—would not get any analog signals on their TV sets. However, while the government is claiming a high rate of installation of set top boxes (STBs) in the four metros, there is no parity on price of STB or information on whether the pricing declared by multi-system operators (MSOs) or broadcasters would remain the same.
Several local cable operators (LCOs), who would continue to provide last mile connectivity between TV channels and customers, are complaining about the difference in pricing and revenue share. STB pricing in Mumbai is higher compared with other three metros. In Mumbai, LCOs are charging Rs1,000-Rs1,500 per STB, whereas in Delhi and Kolkata the price is lower at Rs800-Rs1,000. Earlier in August, the MSO Alliance of four major operators like Siti Cable, In Cable, Digicable, Hathway, and DEN Networks came out with an offer to provide STBs at a standard price of Rs799 each. But the scheme was only for a month.
The information and broadcasting (I&B) ministry has said that as per the stipulation by the Telecom Regulatory Authority of India (TRAI), the basic service tier (BST) consisting of at least 100 channels should be offered for Rs100 and MSOs were expected to uphold this direction.
However, none of the four major national level MSOs, except WWIL have come out with the basic package of Rs100. . WWIL offers a ‘Janata’ package of 118 channels at Rs100 per month. At present monthly pricing in the analog environment varies from Rs130 in Dharavi (Mumbai) to Rs300 in Kalkaji (Delhi).
“While the subscribers will be able to exercise their choice post digitization, many of them are still likely to subscribe to ‘packages’ as they would be more cost effective as compared to the a la carte pricing. In addition, price increases are likely to be taken to offset higher tax incidence like service tax, entertainment tax and content cost post digitization. Our interactions with MSOs and LCOs indicate that price hike post digitization is likely to be blamed on the government policy action,” said Motilal Oswal Securities in a research note.
The Cable Television Networks (Regulation) Amendment Bill, 2011, was passed for the complete digitisation of cable TV in the country by the end of 2014, in four phases. The first phase involves the metros of Delhi, Chennai, Mumbai and Kolkata and makes it mandatory for customers to install the STBs in order to receive encrypted digital signals from the broadcaster through cable operators.
LCOs have also been crying foul about revenue sharing; interconnect agreements between them and MSOs. West Delhi Cable Operators Association, in a letter to Ambika Soni, I&B minister, has complained about opaqueness in revenue sharing and other issues. According to the association, MSOs are not giving the copy of the agreement between them, which does not have details of revenues sharing, carriage fees and no pricing for consumer is mentioned in the agreement.
“All MSOs are taking advance payments from LCOs but giving STBs on instalments or at ‘no ownership’ basis to subscribers. Even after giving lakhs of rupees neither the LCO nor the subscriber owns the STBs. The subscriber activation forms mention the amount (paid toward STB) as activation charges,” the association said in the letter.
While the government had earlier fixed a deadline of third week of August for contracts with MSOs to be in place, many of them are still likely to be in the negotiation stage. Distributors continue to sign fixed-fee deals with MSOs (similar contracts are prevalent with DTH operators as well) even in a digitised environment. The Cable Operators Federation of India (COFI) said it believes that fixed-fee contracts undermine the broadcasters’ argument of “under declaration” as there will be no per subscriber payment even in a digitised environment.
COFI also mentioned that transition from analog to digital took almost a decade in the US even after a subsidy was provided by the government. Still, about 15% of the subscribers in the US continue to receive signals in the analog mode. As compared to this, India has undertaken a humungous task of converting about 80 million analog subscribers to digital within a span of three years.
“While we agree that deadlines are challenging, we also note that most of the industry participants are already building in delays in the digitization progress, especially beyond phase I,” said the brokerage.
According to data from the I&B ministry, overall 77% cable TV digitisation has already been achieved in the four metros. City-wise data shows that the achievement of cable digitisation in Mumbai is 99%, followed by Kolkata (73%), Delhi (66%) and Chennai (59%). Taking into consideration, the progress made by DTH in this sector, the level of digitisation goes up to 84% in four metros, the ministry said.
City wise data for metro cities can be seen in the Table below.
Meanwhile, as per media reports, following pressure from various broadcasting and advertising associations, TAM will cease releasing its pan-India TV ratings data for nine weeks from 7th October to 8th December. Possible disruption in TV signals in analog cable households, which form a bulk of TAM’s sample size, close to the Phase 1 digitisation deadline has led to the data suspension.
Looking at the preparations by the government and MSOs for launching digital cable TV services in the four metros, this time there may not be any extension for the 31st October deadline. However, with the chaos regarding STB pricing and channel packages, several customers expect the government, MSOs and LCOs to provide some clarity in these issues before stopping the analog TV signals across four metros.
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