Who Will Bear the Cost of Digitization?

Cable TV digitization is the buzzword among MSOs, LCOs, aggregators, DTH players, broadcasters, and cable TV operators. This is also a big opportunity for all stakeholders as the entire exercise would lead to an investment of '30,000 crore in

2 years' time. So the big question is: Where will the investment come from and who will bear the cost of digitization?

It is true that a part of this investment will be borne by the consumers in terms of DTH set top boxes or cable TV set top boxes but it would not be enough to complete cable TV digitization in the country. From the MSO/LCO side one has to look at custom duty, tax holiday and service tax but the new budget has been a big disappointment for all. Even the increased subscription from consumers would not be able to fund such large investments and MSOs/LCOs have to opt for cheaper bank loans or look for strategic investors who can look at this network for providing triple play service. Presently, only wireless does not have the potential to provide high bandwidth services based on 3G or 4G technology and one has to leverage cable TV networks as they have last mile connectivity.

As per Cable Television Networks (Regulation) Act 1995, there would be complete digitization of cable television in the 4 metros of Delhi, Mumbai, Kolkata, and Chennai by June 30, 2012. In the second phase, plans are to digitize cities with over 10 lakh population and to complete pan India digitization by December 31, 2014. So, from 2015 there would be no analog signals and the entire country would move to digital.

In the first phase, there are 7.5 mn subscribers in the 4 metros of which only 2.5 mn are digitized. So, the big question is: How will 5 mn subscribers switch to cable TV set top boxes or DTH in 90 days? Where will so many technicians come from who can do this work on a war footing? Will all metro homes afford the cost of digitization? There is no easy answer for all these questions and the government needs to make the first phase successful so that they can move to the next phase on a clean chit.

The task looks impossible, and as per government guidelines all analog signals will be switched off as per the cut-off date. To complete this task for 130 mn cable TV subscribers serviced by 65,000 cable operators will not be easy, and there would be lot of resistance in small towns and cities. If we are able to succeed in the process, it would be the most aggressive cable TV digitization in the world, and the consumer will have the choice to settle for either a cable set top box or DTH services.

Digitization will definitely provide a huge potential for all stakeholders. Consumers will benefit in terms of quality and quantity by witnessing high quality viewing and also higher number of TV channels. Subscribers will also upgrade themselves to HD viewing, live TV recording and interactive experience. Broadcasters will benefit in terms of new revenue streams as they would not have to be totally dependent on carriage fees collected by MSOs or cable TV operators. Even cable TV operators can charge a premium for providing digital services to subscribers. The cable TV operators can also collect information on subscribers' viewing habit and monetize them by charging premium from advertisers. All this will lead to higher valuation for cable TV investors. Even the government will benefit from increased revenue as there would be transparency in terms of subscribers that each MSO or LCO possesses.

Once digitization is taken care, one can see real convergence in IT, communications and entertainment (ICE) and this is going to benefit everybody as we will see lot of innovations.