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CASBAA India Satellite Forum: DTH operators decry taxes, content costs

By Tarana Khan , afaqs!, New Delhi | In Media Publishing | March 18, 2009
In a discussion on the DTH industry, it emerged that the operators still have to figure out a sustainable business model

The focus of the CASBAA (Cable and Satellite Broadcasting Association of Asia) India Satellite Forum organised in New Delhi on Tuesday was the changing nature of satellite communications in India, with the proliferation of technologies such as DTH, HITS (headend-in-the-sky) and IPTV (Internet protocol television).

In the panel discussion on Refreshing DTH, there was an effort to outline the market pricing, customer acquisition and regulatory issues facing the rapidly growing DTH industry.

& #BANNER1 & #The discussion was moderated by Vanita Kohli-Khandekar, media consultant and author. The panellists comprised Vikram Kaushik, chief executive officer, Tata Sky; N Arjun, executive director, Bharti Telemedia (Airtel digital TV); Ashutosh Srivastava, sales operations head, Big TV (owned by Reliance Communications); Salil Kapoor, chief operating officer, Dish TV and Preet Dhupar, director, finance and operations, BBC World India.

Speaking about the key challenges facing the DTH industry, Kapoor of Dish TV said that there was a need to reach the consumers at the extreme corners of India. "We are seeing a higher growth in smaller towns in the past four-five months," he said.

Kaushik of Tata Sky began by citing that Indian pay-TV households are expected to exceed 160 million by 2017. Of this, 60 million households will have DTH, implying that DTH will grow to six times its present size excluding DD Direct.

He added that there was a need to compliment the regulator for playing a role in the growth of the DTH industry in the past five years. However, certain areas still need to be addressed, he said, adding that DTH operators are not allowed to have exclusive content. Kaushik also said that the technology standards used in the industry, whether MPEG-2 or MPEG-4, should not be regulated.

Srivastava of Big TV talked about the lack of sustainable revenues, saying, “We are a subsidy-driven industry," adding that DTH operators usually realise only half of their costs, and of this revenue received, two-thirds of goes to the government and broadcasters. However, he added that there is enough scope for all the players to grow, and the issues facing the industry should be manageable.

Dhupar of BBC World agreed that there is tremendous scope for growth. She hoped that digitisation also catches on with cable operators.

Arjun of Bharti Telemedia talked about the potential of interactive services on DTH. "The key is to monetise these services," he said. Arjun also agreed that regulation had helped DTH grow, compared with the cable industry, which is still disorganised.

At this point, the moderator noted that while DTH operators talk about giving subsidies to the customer, they charge carriage fees from the broadcasters.

Responding to this, Kaushik said, "The acquisition cost of every subscriber is Rs 4,000-5,000, while the revenue we get out of each is Rs 100-150 per month. You can imagine the number of years it will take for us to break even at this rate, considering that there will also be churn among the subscribers."

On the carriage fee aspect, he remarked, "It has become fashionable to talk about carriage fees nowadays, as if it's a bad thing." He cited that when he worked with Unilever, his company paid commissions to wholesalers and margins to retailers to stock a brand of soap.

"There is a remuneration to be paid for distribution, but broadcasters expect everything to come for free," he said.

Kapoor added, "Let's not refer to it as carriage fee, but as 'bandwidth charges', because we have a limited bandwidth for channels." He said that the overall amount of subsidy given to consumers and the carriage fees earned from broadcasters cannot be compared.

He also said that the low-pricing entry model has been consciously adopted by DTH operators to expand the industry.

Arjun said that there is a genuine bandwidth constraint - there are 407 channels in India and an operator can carry only about 200.

Kohli-Khandekar then asked the panel whether it was too early to expect anything from value-added services (VAS) in DTH.

Kaushik said that VAS is important for differentiation, but regulations currently don't allow DTH operators to have exclusive content or differentiated pricing. He admitted that the current business model of DTH is unsustainable, adding that the cost of content itself is between 45-55 per cent.

Arjun said, "The percentage of revenue from VAS is not very high, including pay-per-view. Even in advanced markets, very few have started monetising them."

What can be concluded from the discussion is that DTH operators still have to figure out a sustainable business model, possibly with some regulatory help.