After a long wait Ministry notified the Cable TV Rules and the TRAI issued the Interconnect and Tariff Orders at the end of the last month, just 60 days before the first phase ends. Some provisions of these regulations were expected but some of them which were not even discussed in the open-house were a rude shock to many.
At the outset, it appeared that Ministry as well as TRAI had well planned the move to release the regulations late so that operators who were planning to operate independently were discouraged considering the huge investments and insufficient time for the first phase.
The biggest beneficiary of these new regulations is the Star and Zee Group who gain from all sides. They have well entrenched MSO networks on the ground in many cities and only have to upgrade to 500 channels, which is a child's play for them. Subscribers of other MSO networks and independent cable operators will either shift to these networks or get their DTH connection. TataSky has been advertising since the day the government started its public awareness campaign, discrediting the cable STB as a 'Dabba' in order to derail the government scheme. Since there was no reaction from the Ministry, I feel, everything was not coincidental here.
Zee I think will revive their HITS plan for the second phase onwards.
Legalising the carriage fee was another shock to small broadcasters and the News Channels who were so far dependent on the big brothers in the Industry, who own large content aggregation companies and made these channels as part of their bouquets. Now it will be difficult to survive because consumers have been given the right to choose a-la-carte channels and to keep their subscriptions low, they will exercise this right. Under such circumstances, they will have to shell out much as carriage fee. Who benefits? The large MSOs like DEN, Hathway, WWIL, DigiCable and INCable. Small operators and Franchisee operators, in any case do not get the carriage fee.
So here too, it is broadcasters like Star and Zee who benefit the most because they own these MSO networks.
Consumers in for a Shock
Contrary to what many media reports have been saying, consumers will land up paying ` 100 for all free to air channels like the Doordarshan which are available free of cost on the DD Direct Plus.
Even today the MSOs are providing more than 100 channels in FTA package for which only ` 88 are charged in the CAS areas and in non-CAS areas operators charge as low as `50 per month.
Whereas now consumers get all the channels including the popular pay channels, in a single package deal, now they will pay for each channel.
Pay channels received by a subscriber today and their present cost is given in the Table below. Cost of all pay channels is about `800.00 in the non-CAS areas. For DAS, TRAI has not gone in for `5 as the MRP like in the CAS areas but has made it 42% of the non-CAS area rate which will benefit all pay channel broadcasters. Thus, cost of the existing pay channels received by a subscriber in the metros comes to `336. With basic package of `100, it totals to `436, which is much more than the average of `180 paid now.
Apart from the above, subscription will be paid for each TV set in the house.
Earlier, cable operator paid the taxes from his pocket but now, they will be added to the consumer bill.
About 40 % of the 100 million analog subscribers are in the poor category. Will they be able to afford the cable entertainment now?
Many Independent MSOs who have been forced to work as distributors of large MSOs due to the arm twisting tactics of Pay Broadcasters having stakes in these large MSOs want to start their own headends and work independently now. Unfortunately, they also feel that the present regulations are not fair to them. According to them the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television System) Regulations 2012 are apparently contradictory to the interest of small Cable Operators/MSO's having presence in the Industry for the last 25 years and is also against the principles of Natural Justice and the provisions of the Indian Constitution under Article 19 (1) and Article 14. They have pointed out many loopholes in these regulations as below:
Unfair to New Entrants
a)In general, Regulations favour the existing large players in the market and create a barrier for the new entrants into the industry.
b)Not a Level Playing Field. As per the new cable rules they have to apply for registration for MSO after the issuance of the 30.04.2012 regulations. Average ideal time taken for the registration is one month i.e 30.05.2012. there fore they will be left with no time to set up the infrastructure to compete with the existing players.
Not Sufficient Time
c)The government had issued an Ordinance dated 25.10. 2011 wherein under Section 4A it is been made mandatory for the Cable Operators to transmit or re-transmit programs of any channel in an encrypted form through digital addressable system. The Ordinance further provides a period of 6 months to the Cable Operators to install the equipment, as required for digitalization.
d)The November 2011 Notification makes it obligatory for the Cable Operators to re-transmit signals through Digital Addressable System in First Phase in the four Metro Cities by 30th June, 2012 and in Phase II various cities of India had to be covered by 31st March 2012 and phase III and IV, various Urban areas and rest of India has to be covered by 31st Dec, 2014.
e)As the Government delayed issuing of the rules and regulations by four months since its notification in Nov 2011, issuing it finally on 28 Apr 2012, the fresh applicants who register now will not get sufficient time to get the licence, negotiate with broadcasters for content and install the equipment.
f)500 Channel Headend. Imposed a minimum requirement of five hundred channels at the last moment is also unfair as huge investment and technological infrastructure is required for setting up a digital headend in compliance of the government rules. It is just not possible for a new entrant to compete with the existing players in such a short span of barely 50-55 days (approx) left for the first phase.
g)Procurement of Set Top Boxes (STB's). New entrants will also face great difficulty in organising huge investment and time for ordering the digital headend and procuring the STB's. It is impossible for them to procure the STBs in a short span of 50-55 days.
LCOs are the worst sufferer in this game. Their share of the basic package has been reduced from `100 to `45. In 1990 when Cable TV started, operators charged `100/- per month for one or two video channels. Today after 22 years they charge `180 per month. How does TRAI think will they survive?
As reported in the media LCOs enjoy a strong bargaining power because they own the last mile and leave the poor broadcasters in a lurch. So TRAI has cut them short in a single stroke of ` 45 per month per subscriber.
I am surprised how these people can think that a small cable operator having 1000-2000 households, working for the last twenty years serving all types of people can blackmail a company owned by a media Mogul like Rupert Murdoch or Subhash Chandra and withhold their payments?
One cable operator sent us his monthly accounts (Please read the letter to the Editor). His calculations are based on an LCO having 500 connections. His monthly expense comes to approx ` 40,000. What he gets in DAS area will be `50x 500= `25000/-
In these circumstances LCO will not survive.
In 2003, when the regulations for CAS areas were being drafted, Cable operators worked out `180. Per connection as their requirement so that they could keep their networks maintained and provide international quality. But the government agreed on `77/- which after inflation has become `88 now. TRAI has reduced it further, making it half.
MSOs have only one time investment on their headend which has already come down tremendously due to advancement in technology. One can have a 500 channel headend in less than `5 crores. MSOs already have 200 channel headends in the Metros.
MSOs already have underground fiber optic cables in the metros and many other cities, going to the LCOs. They do not need to invest anything here.
They only need the STBs for consumers which again are being paid by the subscribers. MSOs have demanded cost of the STBs in advance from the LCOs. It is the LCOs who would install these STBs in consumer premises and recover the money over a month or so from them.
LCOs have to invest heavily for upgrading their HFC networks overhauling the whole network for the digital signals. They need to replace the co-axial cables, lay more fiber to carry 500 channels, replace all connectors and passive as well as active equipment like taps, splitters, amplifiers etc. They will even require two way equipment for broadband and VAS services.
Without improving the networks of the LCOs TRAI cannot expect broadband enabled networks in Cable TV. This should have been the Priority rather than transmitting all the TV channels because broadband will improve our economy.