The government may bring in separate guidelines and foreign investment rules for the cable industry based on the mode of distribution of signals to end-consumers.
With the government gearing up to announce the policy for digital platforms like Headend in the Sky and IPTV, industry experts say digital services like DTH, HITS and IPTV will need huge foreign direct investment to expand.
For this reason, they want different FDI rules for these services than the analogue cable industry.
This means the cable companies engaged in last-mile distribution of TV channels will qualify for the existing 49 per cent FDI limit, while operators of DTH, HITS, IPTV and multi-system operators will be able to bring in up to 74 per cent FDI, a limit proposed by broadcast regulator Telecom Regulatory Authority of India.
Sources say the policy for HITS has been delayed in the Ministry of Information and Broadcasting due to FDI issues.
Several MSOs and media companies interested in becoming licensees of HITS are waiting for the policy. Subhash Chandra's Essel Group is the only HITS licensee so far.
"But the government is now looking at an FDI regime based on the mode of transmission. This will sort out regulatory and foreign investment issues," said a highly placed source.
HITS is similar to DTH services as in both the platforms digital cable channels are distributed at one go through a satellite. But unlike DTH, where the end-user is the consumer, the HITS end-user is a cable operator, who delivers signals to consumers using a fibre optic network.
"The I&B ministry will be required to take Cabinet approval for the HITS policy. Also, 74 per cent FDI cap for HITS, IPTV or DTH will require amendments to the 1995 circular of the RBI on FDI limits in the cable sector as well as the Cable TV Act," said an industry source.
Trai has suggested that HITS is a faster way to digitalise the cable industry compared with the conditional access system. It has also suggested a higher FDI limit for HITS sensing the need for heavy investments.
Explaining the significance of the 74 per cent FDI cap for HITS, DTH or IPTV services, Ashok Mansukhani, president, MSO Alliance, said: "HITS operations require heavy investments, upwards of Rs 1,000 crore. For this, foreign investment is required. I hope the government will treat digital distribution of cable services on a par with the telecom sector and allow 74 per cent FDI."
There are over 6 million subscribers of digital cable channels and about 70 million analogue homes.
"Look at the expenditure of any DTH operator. In order to net over 5.5 million subscribers, they have invested thousands of crores (of rupees). HITS will require similar investments, which is not possible without a distinction between the FDI rules for analog and digital services," said Mansukhani.
A HITS licensee will have to book transponder space on a satellite and invest in set-top boxes and digital headends, among other things. There will also be an initial requirement of one-two million set-top boxes, according to conservative estimates.
