Cabinet approves ordinance on digitisation

By Anindita Sarkar and Anushree Bhattacharyya , afaqs!, Mumbai and New Delhi | In Media Publishing
Last updated : September 25, 2014 04:04 PM
As per the ordinance, March 31, 2012 has been set as the sunset date to abandon analog in the four metros, while cities with a population of one million will be covered by March 31, 2013. Overall, December 31, 2014 has been set as the sunset date for transferring the analog system to digital for the entire country.

The proposal recommended by the Information and Broadcasting (I&B) Ministry for making digitisation mandatory across India has been approved by the Cabinet Committee of Economic Affairs (CCEA).

In the cabinet meeting held today, the CCEA agreed to forward the approved ordinance to President Pratibha Patil for consideration. Within the next six months, it will be authorised by the Parliament.

The ordinance seeks to amend Section 4A of the Cable Television Networks (Regulation) Act 1995 in a bid to bring in complete digitisation to the television and broadcast industry.

As per the ordinance, March 31, 2012 has been set as the sunset date to abandon analog in the four metros, while cities with a population of one million will be covered by March 31, 2013. Overall, December 31, 2014 has been set as the sunset date for transferring the analog system to digital for the entire country.

Dinyar Contractor, editor and executive publisher, Satellite & Cable TV notes that while the approval of the ordinance is "good news", the government will have to give a big push to voluntary digitisation.

"This came to a standstill when broadcasters restricted the growth of voluntary digitisation by refusing to pay digital rates to the MSOs and cable operators, who voluntarily opted for digitisation. In fact, TDSAT (Telecom Disputes Settlement & Appellate Tribunal) guarded the interest of the broadcasters by passing a judgment in their favour."

Impact of the approved ordinance on the key industry stakeholders

Digitisation is a great step forward for all industry stakeholders, wherein the benefits will be shared by cable operators, programmers and consumers, notes Sunder Aaron, business head, PIX. "It will help rationalise the economics of the broadcast industry by providing widespread 'addressability'," he says.

And, therefore, for broadcasters, the complete shift to digitisation and addressability would mean a reduction (if not complete elimination) in the under-reporting of subscribers by the LCOs. This, in turn, will lead to an increase in subscription revenues of the channels and their networks. Meanwhile, the high carriage costs paid to the distributors as a result of limited analog bandwidth could also be curtailed with digitisation. This will allow broadcasters to make higher investments in programming and marketing, thus improving the customer experience.

Tarun Katial, chief executive officer, Reliance Broadcast Network, says, "Current capacity constraints in analog cable have led to stifling the growth of new channels and introduction of technologically advanced content. The increased capacity of digital distribution will drive greater investments by broadcasters toward focused, targeted and HD content."

Meanwhile, for MSOs, the cabinet approval could mean more power vested on them instead of the LCOs. With significant investments in digitisation, MSOs could gain a direct access to the end-consumer, which in turn will vest the bargaining power on the MSOs instead of the LCOs. This will also lead to better quality service and greater transparency in subscriber base.

Jagjit Singh Kohli, managing director and chief executive officer, Digicable, says, "While this is good news for the industry and we welcome the move, we expect the ministry to take the initiative in resolving the tariff issue in case of MSOs and subscribers. As per the present tariff norm, in areas where Conditional Access System (CAS) has been approved, subscribers need to pay a rate of 35 per cent of non-CAS areas. In such a situation, while the subscriber enjoys the benefit, the MSO revenue gets heavily marginalised."

With the ordinance passed, the DTH (direct to home) players are also optimistic that the move will help them capitalise on the potential consumer traction. According to market estimates, there are 35 million DTH subscribers in this country. Of this, only 9 million are from cities, demonstrating that the rest of the customers belong to the rural districts. Therefore, with the ordinance targeting the metros in its first phase for complete digitisation, DTH players are expected to add significant customers to their subscriber base.

Harit Nagpal, chief executive officer, Tata Sky, says, "This development from the CCEA is very encouraging to us as DTH service providers. Digitisation of Indian TV services will aid the organisation of the industry and result in clearer subscription figures for broadcasters. We would like to see digitisation within the said time frame and feel that the acceptance of TRAI's recommendations on short term taxation relief for DTH operators would immensely boost this process."

Without digitisation, challenges that the industry faces

Under-reporting of subscriber base:

Today, it's the LCOs who own the last mile and therefore, without "addressability", the LCOs take away the largest pie of the subscription revenue generated. Market players state that LCOs declare an approximate 15 per cent of the total earnings from their paid subscribers. This in turn keeps the channels and the MSOs away from their deserved earnings, as well as tax evasion.

Local monopoly status affects fixed pricing:

Many times, LCOs who exercise monopoly status in any given region are found to randomly increase the price of the services provided since there is no upper body to keep a check on the market prices.

Capacity constraints in analog cable:

With limited bandwidth of the analog cable system, coupled with the ever-rising number of TV channel launches, there is a constant fight amongst broadcasters on placement allocations. This leads to an increased demand in prime frequencies, thereby hinting at higher carriage fees.

Meanwhile, the growth of subscription revenue-led channels in the niche segment also witnesses viewership stagnation, thereby making networks completely dependent on advertising for revenue generation.

Smita Jha, consulting head, media and entertainment, PwC believes that the Cabinet clearance is a step in the right direction, a decision long-awaited by the industry.

"Once the formal approval is received, the industry will await the detailed implementation plan. The government's decision to set up a task force, with representatives from both industry bodies and various arms of the government, to monitor the implementation will hopefully ensure that the sunset dates as prescribed are met. It's a win-win situation for all the value chain players in the television industry," she says.

First Published : September 25, 2014 04:04 PM
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