Thursday, 1 March 2012

Much More Needs to be Done for Digitalization

Media is abuzz with the news regarding implementation of digital cable in the country after the notification of the latest amendment in the Cable TV Act, mandating total digitalization of all cable networks by 31 December 2014 was issued in December. However, different factions of the industry are projecting different views on the subject to suit their business plans. This is causing a lot of confusion in the minds of the masses who are the most affected from the new law. Unfortunately, there is no one to project the point of view of the masses because, their plight will be known only after the government decides to switch off analog cable on 01 July 2012 in the four metros and force them to go for the DTH service or go without the TV entertainment. So far, government is also taking them granted.
Cable Operators who face the subscribers every day are the next most affected because they are being forced to change their 25 year old business in favour of some large corporate. Since they have invested in lakhs to develop this business, they are not prepared to give up to the pressures of big players or the government.  it is their private business and the government cannot force them to adopt a particular technology to run their business without giving them a guarantee of employment and supporting regulations. The war like situation that has been reported in the media is due to the allegations of cable operators that the government, in conspiracy with some big players, is forcing impractical regulations on them so as to force them to quit, handing over their business to the big players, ignoring the adverse impact on millions of their existing subscribers. 
Their fear is not baseless as the regulator as well as the Ministry has helped some big players to establish huge vertical monopolies since 2004, after TRAI took over the task of regulating the broadcast industry. These monopolies are threatening the very existence of cable operators who still control the last mile of cable.  Operators feel that the government, in order to help the big players to take over the industry, is hurrying up with such regulations that will force cable subscribers to buy services of DTH players who are supported directly by the Broadcasters. This way, cable operators will be left with no choice other than quit the industry.
Digitization will blur the distinction between broadcasting, telecommunications and multimedia services leading to convergence not only in technology but in carriage infrastructure.
There is no doubt that Digitalization of Cable Television is very important for enhancement of Quality, Bandwidth Utilization and Implementation of Value Added Services. It can play a vital role in increasing the GDP of the nation if developed as a broadband infrastructure that the TRAI has mentioned in its recommendations to the Communication Ministry. But, while making the cable TV regulations, it is not going on that line of action because sacrificing cable to DTH is suicidal for the nation as DTH is not a broadband infrastructure and will fill the coffers of only some foreign players for whom, even the FDI limit has been enhanced to 74%. 
Cable Operators are now questioning the modus operandi, the timelines specified and the proposed implem-entation plan. The moot question is whether the plans of the government will ever succeed or land up the industry in another mess. This question is very important at the moment because TRAI in its recommendations had given some pre-digitalization actions to be completed before the process commences. The present analog market is estimated to be 90 million cable homes and implementation of the amended Cable Act will require huge investment by the cable sector with investment in set top box procurement itself topping US 2.5 billion for the current analog universe, though the overall number will be much higher because of digital Head ends and additional network upgrades. The analog consumer acquisition is considered to be costing `2500 and in the digital networks, it is likely to go up to `7500 per subscriber. This means another `5.0 billion are required for the network upgrades.
From where will these investments come? The last mile of 90 million cable TV homes is under the control of more than 60000 LCOs spread all across the country. So far, the MSOs only have temporary affiliation with them to provide their services, mostly in the TAM cities. Rest of India has independent small operators managing the networks keeping direct contact with the broadcasters for content. So far, these LCOs have been investing their own money to keep their business going. However, now the government is forcing them to adopt the new digital technology even if subscribers do not demand it. This is where the things seem to go wrong. Broadcasters who have a direct approach to the government have convinced it that total digitalization will bring great benefits to all and government has accepted the same without carrying its own analysis of the issue.
In reality, broadcasters are trying to regularize their own follies of pushing their pay channels without any addressability for the last 18 years by making the LCOs accept the same by hook or crook. They are in a dilemma now. They tried to side line the LCOs by launching their DTH services but instead, landed up competing with them keeping their subscriptions very low and subsidizing the STBs. Even with that, they could not get more than 10% of the urban market dominated by cable TV,  after eight years of operation. 
The main reason, which they do not want to accept, is that the Indian masses are still not ready for Pay TV. They have always received a whole package of channels from their LCO and have been paying a single tariff. They are not aware of the rates of the individual pay channels. 
Now, with the help of the new digitalization law, broadcasters are hoping to usurp the business of cable TV operators by making the process difficult for them through these regulations with the help of the government. They already have their DTH ready to take over the subscribers who suffer a blackout after the deadline of implementation of Digitalisation. This is imminent because it is next to impossible to procure 100 million STBs from foreign manufacturers of China or Taiwan in the next three years, who already have the demands from the developed markets of US and Europe, giving them much higher prices. Indian manufacturers are not yet ready to supply this large number, thanks to government’s lack of vision. Also, it is impossible to physically install these STBs in the subscriber homes within the stipulated time limits. How TRAI chairman or the Ministry officials are hoping for this to happen is beyond imagination. In this whole process, what will happen to the small players in the business is any body’s guess. 
sacrificing cable to DTH is suicidal for the nation as DTH is not a broadband infrastructure and will fill the coffers of only some foreign players for whom, even the FDI limit has been enhanced to 74%

Never the less, seeing the positive side of it, the government will have to relent to the demands of Cable operators for more favourable regulations so that they retain their last mile control and also accommodate demands from the broadcasters and provide better services upgrading their networks. 
Let the MSOs provide the back haul services and concentrate on adding triple play for more revenues rather than focus on capturing the last mile from small operators. This is not an easy task considering that they have not been able to do this in the last 18 years.
Digitization will blur the distinction between broadcasting, telecommunications and multimedia services leading to convergence not only in technology but in carriage infra- structure. 
Increasing use of digital technology will lead to freeing of precious analog spectrum and for all the huge benefits to flow equitably, it is necessary to incentivize the digitalization initiative so that the Industry is encouraged to spend a large sum of money in a tight span time but at the same time ensure that the cost of supply of content by the Content Distribution Service providers is affordable for all sections of people.  
As a pre requisite to the full fledged implementation of the Digitization plan, TRAI had in its recommendations, dated 05 August 2010, recommended some essential measures to expedite the digitalization exercise seamlessly. Unfortunately most of the recommendations have not been addressed, till date and there is no clarity as to how and when these requirements will be addressed and it is apprehend that it will become very difficult for cable industry to complete the digitalization process within the stipulated timeline of 2014.
A clear timeline of not-less-than 6 months from the date of announcement of the recommendations was assured, but the ministry as well as TRAI is mum on the subject.

Actions recommended by TRAI in 2010, but yet to be addressed / completed:

  • Accord Industry Status 
  • Finalization of revised Cable Rules for  DAS - yet to be announced.
  • Licensing Guidelines for DAS Regime - yet to be formulated.
  • Duty Waiver for STB’s and Digital Headend Equipment. 
  • Tax holiday for the business and Rationalizations of Taxes and Levies.
  • Clarity of ARPU/ Tariff, post implementation of DAS.
  • Revenue share structure to be specified -no clarity and therefore no estimation on Return on Investment.
  • Content Must-provide from Broadcasters.
  • Finalize Standard Interconnect agreements.
  • Training for staff, yet to be started. BECIL has made a feeble attempt at training, but this seems more like a private venture initiative with a Cost Factor and the same is not sponsored by the Government.
  • No other Agency appointed For Certification & Audit of Cable Networks except BECIL. Monopoly in this exercise is extremely dangerous and exploitative as per our previous experience and further this will hamper the pace of Digitization as only one agency cannot handle the task of training the technical staff of all the cable networks in the designated DAS markets.
  • BIS Standards for STB and other digital head end and distribution equipment.

OTHER Factors not addressed by the MIB and TRAI

  • A full-fledged advertisement campaign to be launched by the MIB, TRAI through the Mass Media including broadcasters to create awareness amongst the subscribers. 
  • Addressing Vertical Monopoly and Unfair Competition.
  • Addressing Cross Media Holdings.
  • Very little participation from the local electronic manufacturers - otherwise there would be a substantial foreign exchange drain, adversely affecting our economy.
  • Provision of Content and its Regulation
  • Standard Interconnection Agree-ment
The roadmap of Digitization of such a large market and that too within a short timeframe is very complex and is a first-of-its-kind exercise in the world. What is apprehended is that the entire cost of this huge exercise will borne almost entirely by the MSO, the ICO’s and the LCOs.  
The Digitalization exercise, as mentioned above, calls for huge investments and unless these issues are addressed the investments may not accrue and the process will face lot of implementation hurdles leading to discontentment amongst the“AAM AADMI” against Digitization per se. A higher implementation cost in the 1st Phase will further hinder investments required to fuel the 2nd, 3rd and 4th Phase of Digitalization. 
What this may ultimately lead to is that partial Digitalization would happen, which would lead to utter confusion and uncertainty giving an unfair advantage to a few DTH players over Cable TV operators and the affected and disenchanted Customers will question the government initiative. 
Cable Operators fear that none of the investors would come forward to invest for Cable Digitalization in the current scenario of uncertainty where there is lack of clarity on the revenue share structure. This will, encourage the broadcasters to support DTH companies and take full advantage of the situation and encroach upon the Cable TV market. This again will not be in the interest of the customers and it will be against the spirit of digitalization of Cable TV and also against the efforts put in by the Ministry. 
DTH operators are already sitting like vultures to usurp the Cable TV connections. This is evident from their remarks in the Media and advertisements. Incidentally, The day government’s first ad to create awareness regarding digital cable was published in the National Dailies on 5february, a countering ad by a DTH operator had appeared in the some newspapers calling cable STB as a ‘Dabba’.
Today, livelihood of thousands of small Cable Operators especially in rural areas and small colonies in the Metros and bigger cities, where no MSO wants to provide service is at stake and this is contrary to what the I & B Minister had assured in the Parliament.
Prasar Bharti has a deadline of 2017 for digitalization despite  the fact that Prasar Bharti is a government owned entity and has no limitation of investments and have ample resources, whereas Cable Operators have limited resourses and have to explore investment options. 
The digital cable last mile is much more important than any other broadcast infrastructure as it is the most efficient broadband network in the country capable of boosting national economy to a great extent. Utmost care and protection must be provided during its development.  There is a need to realign the timelines for digitalization making it in sync with other existing services like DD Direct plus and Doordarshan terrestrial services. Government must thwart the efforts of some large companies planning to create vertical monopolies in this trade and misuse digitalization to edge out smaller players.


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