A Win-win for All

The cable industry in India has grown rapidly to an estimated 94 mn in 2011 from a trifling 0.4 mn in the beginning of 1992. The total number of TV households in the county is estimated to be around 147 mn. 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 the Information & Broadcast (I&B) ministry. Furthermore, the country is witnessing a drastic shift in consumer behavior; customers today do not shy away from forking out extra money to get best in class services. All these factors put together have 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 digitization. As per the act, cable digitization will be implemented in 4 phases across the country and would be completed by December 2014. In view of the development, the I&B ministry has decided to “modify the June 30th, 2012 deadline for a complete switchover, in the main metros to October 31st, 2012. The new deadline would be monitored more vigorously and reiterates the government's commitment to digitization in the country”.

Impact on Various Stakeholders

The ever-increasing demand from consumers, combined with massive increase in number of TV channels has posed an insurmountable challenge for analog 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 6-fold increase in subscription revenue. Digitization will further help cable service providers to tap additional business opportunities 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 the consolidation of LCOs. This will in turn help to curtail the service tax leakage and provide an impetus to the economy.

Complete Switchover

To ensure that 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 ecosystem 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, the 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.

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 mn homes will require a capital investment of about $10 bn to have the requisite infrastructure in place. Therefore, the government as well as private players must provide cable operators with flexible and affordable payment policies, yet uncompromised quality set-top boxes. The increase in FDI across platforms from 49% to 74% 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 and 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 having varying price points that cater to the disparate purchasing powers and choice of consumers. In a nutshell, the government along with other ecosystem players has to create a model that is win-win situation for all the stakeholders involved.

The MSO digital penetration today stands at 5 mn. In order to meet the deadline of 2014, cable service providers will have to sell about 90 mn 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.

The Future

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 improvization 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 Trai has revamped the entire regulatory structure of the broadcasting, cable TV, and DTH industry, pertaining to carriage fee, channel prices, and channel availability, etc. Once digitized, all channels (pay and free-to-air) have to be offered on a-lá-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.

Sanjay Rohatgi
The author is senior vice president,
service provider, Cisco India & Saarc
vadmail@cybermedia.co.in