DTH Industry is going through a tremendous change as cable TV mandatory digitisation has added to the competition. Already beleaguered DTH operators experienced a new lease of life once helped by the impractical ways of implementing mandatory digitization of cable TV by the I&B Ministry. The more the Ministry officials made it difficult for the cable MSOs to comply by the regulations and meet the deadlines, the more the cable TV subscribers opted for DTH services. A well settled DTH service was allowed to make the best use of teething problems of digital cable. Thus started a boom time for DTH operators.
Videocon a laggard and the youngest DTH operator among the six private ones won the digital race. It has emerged as the fastest growing DTH network in the world adding more subscribers in 2012 than any other DTH player worldwide, according to US research group SNL Kagan. Videocon d2h added 2.33 million subscribers last year, closely followed by Indian rivals Dish TV with an additional 2.2 million subscribers, and Tata Sky’s 1.9 million. Overall 3.7 million connections were added to the DTH service during first two phases of Digitisation.
India’s $1.5 billion, 32.4 million subscriber (2012 figures as per Media Partners Asia) DTH industry is the second largest in the world. According to TRAI, there are an estimated 56.5 million DTH subscribers in India as of 31 March 2013, registered with six private DTH operators. However 25- 30 % connections are inactive making the active connections to about 40-45 million.
A report by Media Partners Asia, an independent provider of information services focusing on media, communications and entertainment industries projected that the Indian DTH industry will grow to $3.9 billion and 63.8 million subscribers by 2017 and $5 billion and 76.6 million subscribers by 2020.
History of DTH Operation
There are six private DTH operators in India. The seventh operator DD Direct Plus is an FTA platform operated by Prasar Bharti, the Public Service Broadcaster and not counted amongst the DTH operators.
The service was opened in 2003 with Dish TV being the first operator to get the license. News Corp (STAR TV) had tried to start operations of a DTH platform ISkyB in 1996 but could not do so as there were no regulations in place at that time. More over, government was reluctant to introduce such a service due to security reasons and cultural invasion. The service was banned till it was again opened in 2000.
Till 2006 there was no competition for Dish TV but its progress was dismal as it did not have any other content except TV channels from Zee and Turner groups. It’s only in 2006 when Tata Sky (Joint venture between Tatas and News Corp) got the license and started operations. Due to refusal to provide content of their pay channels to the rival group, both these companies were busy in fighting court battles till 2006. The DTH sector in India truly opened up in 2008 when telecom companies joined the sector. Sun Direct, Reliance Big TV, Airtel Digital and Videocon all came after 2008.
DTH Operators
Dish TV: It is a division of Zee Network Enterprise (Essel Group Venture). Launched in October 2003, Dish TV is the largest player in India having a 28% share of India’s $1.5 billion DTH industry. US-based College Retirement Equities Fund picked up 64.64 lakh shares of Dish TV last month for an estimated Rs 32 crore.
Tata Sky : Tata Sky is a joint venture between the Tata Group and Rupert Murdoch’s STAR. Currently, Tata Sons owns 60 per cent, while STAR owns a 30 per cent stake. Omega TC Holdings and Tata Capital will be the new shareholders in Tata Sky as the Attorney-General of India has given his approval to the new equity structure of the DTH company last month. Both Omega TC Holdings and Tata Capital are Tata Group companies.
Sun Direct : Started operations in December 2007, it is a 80:20 JV between Sun Group of Kalanidhi Maran and Astro Group of Malaysia. Sun Direct is India’s first MPEG4 DTH service and has a total domination in the Southern states because of their popular regional channels.
Airtel Digital TV : Airtel Digital TV is a DTH service provider owned and operated by Bharti Airtel, a telecom company having mobile and wired telephone service and broadband provider. Its satellite service was launched in 2008. Bharti Airtel is looking to divest 20-25 per cent stake to private equity players. It is believed that talks are going on with Liberty Global.
Reliance BIG TV : Launched on 19 August 2008, Reliance digital TV limited is a part of Reliance Communications Ltd., a subsidiary of Reliance Anil Dhirubhai Ambani Group owned by Anil Ambani. BIG TV started operations from 19 August 2008 with the slogan "TV ho Toh BIG Ho". Reliance Communications is said to be in talks with South-based Sun Group to sell its DTH business for an estimated 20 billion rupees (US$367 million).
Videocon d2h : Videocon d2h is the DTH service provided by the Videocon Group, an industrial conglomerate with interests all over the world, and is an Indian multinational company. The group has 17 manufacturing sites in India and plants in China, Poland, Italy and Mexico. It is also the third largest picture tube manufacturer in the world. It manufactures LCDs & TVs and offered DTH enabled TV sets with sizes ranging from 19" to 32" with integrated STB for the first time in the country. Company has also put up an STB manufacturing plant in India to meet the increasing demand of STBs from DTH and cable industry.
Videocon d2h is the youngest player in the field providing DTH services since its inception in Aug 2009. 
DD Direct Plus : Doordarshan launched Ku band transmission (free-to-air DTH “DD Direct Plus”) in December 2004 with a bouquet of 33 TV channels. The main objective of this service was to provide TV coverage to the areas hitherto uncovered by terrestrial transmission. With the launch of this service, multi-channel TV coverage has become available in the entire country (except Andaman & Nicobar Islands). Capacity of DTH platform was later increased for transmission of 59 TV channels and is being further increased to 97 channels. Channels get a space on this platform through a bidding process and the minimum bid has reached 3.5 crore which is more than some private DTH operators charge for carriage.
Present State
After a stint of substantial gains during the initial stages of cable’s migration to digital, DTH operation is coming back to its normal growth rate. In fact as per statistics, DTH started losing its gains to digital cable once cable operations became stable in the four metros. Since each DTH operator provides nationwide services, survival of six players in the same market is very difficult. Already DTH had to compete with analogue cable in most of India due to which ARPUs remained very low, between Rs. 150- 180. Churn rate was very high and increasing acquisition costs made it difficult to subsidise STBs.
Three players, namely Dish TV, TataSky and Sun Direct own pay channels of multiple genres and can negotiate with each other over carriage deals but for the two telecom players ( Bharti Airtel and Reliance BIG TV) it became a white elephant to get popular channels on their platform. Now both these players are acquiring their own content and also bundling their telecom services with TV service. Videocon is a manufacturer of STBs as well as TV sets, so it is easy to subsidise its servise through hardware sale.
Technology
All DTH service providers are providing world class technologies including DVB-S2, MPEG 4 and DVR/PVRs. Interactive services and video-on-demand have been introduced to make additional revenue. Innovative services are being introduced to differentiate the services as the must provide regulations ensure same content with all players. All operators are providing HD channels.
Hike in DTH Subscriptions
The weakening rupee has forced direct-to-home (DTH) service providers to raise prices of set-top-boxes, as a majority of them depend on imports.
Dish TV’s standard definition set-top box, which was priced at Rs 1,999 will now cost Rs 2,249. Its Dish + recorder will cost Rs 2,349. The company has kept the price of its high-definition set-top boxes unchanged.
TATA Sky- Tata Sky, too, will be increasing prices. Harit Nagpal, CEO and MD, Tata Sky, said, “As Tata Sky imports its set-top boxes from the international market, changes in currency rates do impact price of the hardware.New customers will now get a Tata Sky connection at a marginal 8-10 per cent increase.
Sun Direct and Airtel Digital TV have also decided to hike the subscriptions as well as STB rates to face the inflation.
Reliance Big TV- A Reliance Digital TV spokesperson, too, confirmed a Rs 260 hike in SD set-top boxes to Rs 2,250 from July 4.
Videocon d2h- Videocon d2h, which manufactures its own boxes domestically said it is not insulated from the adverse impact of the currency fluctuations. Anil Khera, CEO, Videocon d2H, said, “DTH industry has from time to time been forced to raise prices of set-top boxes to adjust for resultant cost inflation. On account of imported components, even domestic manufacturers are not insulated from such currency changes. The further depreciation of 8-10 per cent in rupee is a cause for concern and we are studying the impact of the same.”
DTH Regulations
DTH Guide Lines
DTH services are governed by DTH Guidelines framed after ban on Ku band was lifted in 2001.
Under the DTH guidelines, companies are supposed to have Indian management control with majority representatives on the board as well as the CEO being a resident Indian.
An entry fee of Rs. 10 crore has to be paid to the government with a bank guarantee of 40 Crores. License is valid for 10 years and a license fee of 10% of gross annual revenue is paid to the I&B Ministry.
FDI in DTH
A total of 74% FDI is permitted in DTH services with 49% on automatic route.
Interoperability
Guidelines mandate interoperability in DTH STBs but in reality, it is not being implemented. There is no CI STB in India.
MDU
Guidelines do not prohibit use of multi dwelling units (MDU) by DTH services although cable TV industry has been protesting that it harms the business of cable operators.
Mobile Vehicle based DTH system
Some operators (Airtel and Dish TV) also provide mobile DTH terminals for vehicles, trains and even aircrafts.
Challenges and Issues to be resolved
The way forward for the Broadcasting sector is Digitization, DTH is playing a very important role in Digitization but this Sector at present is reeling under the heavy burden of license fee and multiple taxation, which is causing lot of impediments in its growth. Also, DTH service providers offer set-top boxes to consumers at subsidised rates. This coupled with content costs, taxes and license fees has got the industry reeling under losses. There is an urgent need to address these issues in order to give the necessary boost to the digitalization process.
(a) Rationalization of License Fee
At present the DTH operators are required to pay license fee @10% of their Gross Revenue (GR). It has been the long standing demand of DTH operators to not only reduce the license fee but also to charge the same on Adjusted Gross Revenue (AGR) by excluding the pass through revenue, as is being done in case of Telecom operators. On a reference received from MIB, TRAI has already recommended for reduction of license fee from 10% to 6%.
(b) Multiple Taxation- Need to move towards GST
The Cable and Satellite Television sector is the only sector where both Service Tax and Entertainment Tax are being levied at present which amounts to double taxation. It may be mentioned that levy of both service tax and entertainment tax ultimately make the services costlier for the consumers. It is pertinent to point out that when a movie/ film is shown in a cinema, only entertainment tax is levied and no service tax is charged for screening the movie in a cinema theatre.
In the current regime, Entertainment Tax as being levied by various State Governments which together with the Central levies of Service tax and Annual license fee, VAT on customer premises equipments escalate up to as high as 56.65 %. No other sector is charged as heavily as these services. Such levies are exorbitant. and render the service less affordable by the masses.
The rate of entertainment tax varies from State to State, e.g in Maharashtra it is 45%, in Uttar Pradesh it is 30%, in Rajasthan it is 10%, in Uttaranchal it is 30%, in Karnataka it is 5%. The entertainment tax burden is not only extremely high but it also results in levy of differential tax on the subscribers depending upon their place of residence.
In order to address the issue of multiple taxation in the sector, both DTH & Cable services should be brought under unified GST regime. This would result in much needed rationalization by levy of a single unified tax replacing the multiple tax levies.
( c) Offering STBs at subsidised rates. All DTH operators claim that they provide subsidized STBs to compete with analogue cable where no STB is required. This has become tough in this inflationary environment and most of the operators have hiked their rates to make up the losses to some extent.
The DTH industry is on a growth trajectory thanks to compulsory digitisation prescribed by the Telecom Regulatory Authority of India. Industry experts feel DTH players will benefit the most in the third and fourth phases of digitisation, covering the entire nation by December 2014.
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