|Rediff India Abroad Home | All the sections|
Discuss | Email | Print | Get latest news on your desktop
Let's get digital
Shuchi Bansal | July 26, 2008
Does your cable TV operator ever give you a bill when he comes to collect his monthly payment? Chances are he doesn't. But if he does, does the bill explain the charges under various heads like subscription fee, service tax and entertainment tax, among others?
If the draft recommendations prepared by the Telecom Regulatory Authority of India on the cable TV industry are accepted, then he will be obliged to offer you a proper bill in lieu of the payment. The move is aimed at bringing greater transparency into the cable TV network business, and ensure the service provider pays his taxes.
Talking of transparency, the cable operator, who used to register himself at the local post office for Rs 500 a year, will now have to submit various documents including an ID proof, PAN number and Income Tax Returns and pay Rs 10,000 to get a five-year licence from the district post office.
In fact, if the recommendations, released for the cable and broadcasting industry's feedback last week, are cleared, the cable operator will have to ensure that your idiot box remains snow-free. (The Bureau of Indian Standards has prescribed a television signal strength that the cable operator must deliver.) Each receipt issued by the cable operator will now have to have a contact number for addressing complaints.
To be sure, the draft recommendations haven't ignored the interests of the local cable operator either. One, he can expand his territory and ask for a state-level licence. Two, he will be eligible to ask for Right of Way to lay his cable - both underground and over-ground. This means that instead of hanging his cable wires over every possible pole and terrace, he will seek Right of Way from relevant authorities. The TRAI has recommended that state governments formulate a policy for the purpose.
But the TRAI's most critical recommendations are for Multi-System Operators or MSOs. For the first time, MSOs have been recognised as a legal entity and have been asked to seek a licence from the Information and Broadcasting ministry. An MSO, who has a receiving and distribution system, aggregates content from broadcasters and offers it to local cable operators. In short, he provides cable TV services to one or more local operators or any other distribution platform through a land-based system.
Even in the absence of regulation, MSOs like Hathway, Wire and Wireless India (WWIL is owned by the Zee Group) and the Hinduja Group's Incable have invested crores of rupees over the years in setting up their networks across the country. However, they can now apply for district, state or country-level licences for a fee. But within a licensed area, the MSO is not allowed to work as an exclusive agent or franchisee of any broadcaster.
A top Zee Group executive says that MSOs will benefit hugely as now they can attract foreign investment into their companies. "Till now, there was no distinction between a local cable operator and an MSO. And foreign investors shied away as the industry was not regulated," he says. The TRAI has also raised the foreign direct investment cap on cable from 49 per cent to 74 per cent.
It's not difficult to see why the TRAI has attempted a comprehensive draft for regulating the cable industry. For a start, the cable industry has lived without regulation for nearly two decades.
Two, it has grown into a whopping Rs 23,000-crore (Rs 230 billion) industry in a completely unwieldy way. Three, it feeds 78 million TV homes through 30,000 registered cable operators and an equal number of unregistered ones. There are 6,000 MSOs as well.
That's not all. Unlike in the developed markets, only a very small portion of the 78 million TV homes in India have two-way digital cable. The rest of the industry is largely analogue. Analogue cable carries 40 to 80 channels. Digital cable has the capacity to deliver 300. "The Authority's concern was that there is neither any technological upgradation nor any capital inflow into the industry," says TRAI Chairman Nripendra Misra.
Clearly, the reason behind recognising MSOs in the proposed regulation was to strengthen them in order to digitise the cable industry in India. "MSOs have the technical and financial wherewithal to digitise cable networks," according to Misra. In fact, cable needs to go digital to face competition from digital, addressable systems like DTH, HITS and IPTV, that offer interactive services, games and Video-on-Demand.
Interestingly, though the cable network industry has welcomed the recommendations, it sought a week's extension to give its feedback and offer suggestions. One of the provisions being questioned is the efficacy of involving the post office all over again. Critics argue that since it was difficult for post offices to monitor operators then, it will be equally tough for them to do so now. There is also little clarity on who will check whether an operator functioning in an area possesses a licence or not.
However, TRAI officials feel that the offices of the licensing authorities - the senior superintendent and chief post master generals - are computerised, so handling applications for a licence will not be tough. Besides, the TRAI has levied an administrative cess - 10 per cent of the total licence fee - on the cable operators which will be collected by the postal department while giving the licence.
Independent local cable operators want the TRAI to set quality benchmarks for signals coming from MSOs as well. "In exactly the same manner, it has set standards for our signals to the consumer homes," is how Roop Sharma, industry veteran and a Delhi-based cable operator, puts it.
MSOs are also objecting to the Rs 25-lakh (Rs 2.5 million) licence fee that has been proposed for a countrywide licence every five years. "We have already spent crores on setting up our networks. We see no reason why we should be paying so much money now," said an Incable executive.
But given how DTH operators pay Rs 10 crore (Rs 100 million) for their license, this may not be too high. The reason for the lower fee for MSOs, of course, has to do with the fact that, unlike DTH operators, the MSOs get just a part of the revenues customers pay. In those areas where users have a Conditional Access System (where TV signals come in through a set-top box similar to the one that DTH firms offer), MSOs claim they get just around 30 per cent of customer revenues - 45 per cent goes to the broadcaster and the rest to the local cable operators. In non-CAS areas, where the MSOs have to pay the broadcaster anyway, they claim the margins are much smaller and even negative in certain cases.
And, again unlike DTH, cable operators don't charge a flat rate across all users - this lowers their revenue stream, and is a factor in their license fees being lower.
The much bigger problem, however, is the TRAI recommendation that MSOs have to digitise their networks within five years, else their licenses will be cancelled. MSOs argue, and with reason, that unless the government mandates that CAS has to be used, very few people will opt for it (it is only in Chennai that all TV homes have CAS, and just around 18 per cent of TV homes in Delhi, Mumbai and Kolkata have CAS) - in which case, how do the MSOs digitise their networks?
TRAI chairman Misra admits this is a problem but is equally clear mandatory- CAS is not going to happen. Faced with the inevitable rise in TV bills, consumers will protest and, as in the past, the government will roll back the recommendations. In the event, Misra offers no solution except saying that cable firms/MSOs will have to digitise anyway if they hope to compete with the quality DTH offers; and that, once MSOs are digitised, the TRAI will also address issues relating to their viability and the amount of revenue that has to be shared with broadcasters - the TRAI has issued detailed guidelines on such revenue sharing in the case of DTH operators.
But, even if you assume MSOs and cable operators will start digitising and improving the quality of their signal, celebrations may be a bit premature. The TRAI has recommended that local cable operators not be allowed to operate any ground-based channel of their own. Shorn of the jargon, that means cable operators will not be able to show subscribers the latest pirated film or local events on the local cable channel.
Needless to say, cable operators are up in arms on the issue and have written to TRAI. Given this, and some of the legitimate issues raised - like the one about not being able to digitise without CAS being made mandatory - both the TRAI and the cable operators are in for some trai-ing times.
Email | Print | Get latest news on your desktop