Disturbing signals

Written by Anushree Chandran | Updated: Jan 7 2014, 20:45pm hrs
Indian Television IndustryPoor performance of Congress party in four of states where Assembly polls were held recently.
The poor performance of the Indian National Congress party in four of the states where Assembly polls were held recently, has given many in the Rs 37,000 crore Indian television industry sleepless nights. The possibility that there could be a change in central leadership after the 2014 general elections now appears stark and very real, and the development could put into the freezer, the countrys slow and painful shift to digitally addressable systems. There is a great shadow cast over the political future of the Congress led UPA government, and it could also eclipse a years work on the switch from analogue to digitally addressable systems, says Roop Sharma, president of Cable Operators Federation of India. The digitisation process, she says, has been forced on Indian consumers despite affordability being a huge issue. Cheap set top boxes are being sourced and sold in the Indian market, via the multi system operators (MSO). The pictures freeze and there is no interoperability, which means that the consumer is captive in the hands of the provider. There are no customer redressal cells, she says.

Cartelisation by some of the broadcast groups and their cable and direct to home arms is a matter of huge concern, according to Sharma. Two of the biggest broadcast groups and their cable and direct-to-home (DTH) arms scoop out most of the market, leaving very little for anyone else, she says. Over R3000 crore have been invested in the entire digitisation process. While the first phase of digitisation saw 10 million boxes being seeded across the four metros, the second phase has seen 18 million boxes being seeded across 38 cities in 15 states, say executives from the cable and broadcast industry.

The Telecom Regulatory Authority of India (TRAI) is considering disbanding content aggregators (consortiums of broadcasters that distribute channels) in order to bring in a more level playing field. MSOs say that the regulatory body had asked for industry viewpoints on the same and that a directive is expected soon from the body.

Cartelisation is an issue, says Jagjit Singh Kohli, managing director and chief executive, Digicable Network India. The regulator needs to put some sort of a tariff framework in place. There has to be a formula worked out on the exact share of the broadcaster, the MSO and the local cable operator on the subscription money received as was the case in the conditional access system (CAS) era. But such a formula would not be acceptable to the broadcasters. They would like to negotiate on deals instead. There seems to be no co-relation between what the MSO gets from on-ground, and what he has to pay to the broadcaster. The digitisation deadline was supposed to be December 2014, but that cut-off date appears to be nothing but a mirage.

In this electric election environment, it has become difficult to get sufficient administration participation. While it is understandable, it effectively means that completing digitisation by the due date is going to be difficult, says Shailesh Shah, secretary general of Indian Broadcasting Foundation, the apex body of broadcasters.

A dystopian nightmare

The bull horn has been sounded and a bitter war has spilled out between various stakeholders. Star Sports yanked off all channels off the MSO Gujarat Telelink Pvt Ltd (GTPL) network, after which the former issued a legal notice against MSO Siticable late last year. The One Alliance has had a dispute with Hathway because the laters interconnect agreement was up for renewal. MSM Discovery (aka One Alliance) had problems with Hathway, after the former clamoured for a a higher share in subscription revenue and a decrease in carriage fees. Dish TV is in talks with two DTH companies in order to form a joint venture and monetise on carriage feesa move which has not gone down well with broadcasters. IndiaCast Media Distribution which distributes TV18 and Viacom18 channels put out an ad that cautioned television viewers of the disruption about the likely unavailability of some of its channels on Dish TV January 1 onwards. In turn, Dish TV issued a legal notice to IndiaCast. Dish TV issued a legal notice calling upon IndiaCast to cease and desist from spreading false and malafide information regarding IndiaCast channels on Dish TVs platform," Dish TV said in a statement. The matter was resolved after Dish TV agreed to sell the distributors channels on an a la carte basis and IndiaCast agreed to stop publishing such advertisements. Local cable operators (LCOs) in Kolkata have joined hands to form Bengal Broadband in a combat against the big daddy MSOs and broadcasters.

A few summers back, News Corp chief James Murdoch had made a passionate speech at the industry forum FICCI Frames on the merits of digitisation and the fact that it could turn India into a creative powerhouse. He talked about a world where broadcasters got a fair price for their product and where carriage fees were eliminated. His words went, Analogue infrastructure is proving to be a drag. Those who resist digitisation have a strong vested interest. The lack of alternatives allows them to treat customers as captives and reap large profits by supplying, in many cases, undistinguished and outdated services. The homes that embraced the digital revolution on the other hand stood to reap benefits like more channels, better programming and improvements in delivery like HD broadcast.

A year down the line and the broadcasters are still waiting for their harvest. The consumers are still captive because there is no interoperability. The homes are digital, but not necessarily addressable. There is still contrasting data on the number of subscribers. Unless the consumer forms are filled, the discrepancies will persist, says a leading media analyst of a brokerage firm.

Sunil Lulla, managing director and chief executive officer of the Times Television Network says that the inclusion of some of the smaller towns (LC1 towns or towns with population less than 1 million) in Tam Media Researchs viewership data has only increased the demand for carriage fees. Lulla says that cable is bringing in better collections of subscriptions, but a major chunk of the subscription fees is still cornered by the large players. The goal of carriage being nil is far away. For that to happen capacity needs to grow; transparent declaration of subscribers needs to be mandatory. Only then can we experience a fair and equitable share of revenues and costs, he says.

Staring into the abyss

Resolution of a lot of these disputes appears nowhere in sight. When asked about Star Sports and legal issues with GTPL and Siticable, Nitin Kukreja, business head of Star Sports said, GTPL has consistently failed to pay us the monthly subscription fees even though they have been collecting money from the subscribers. Over the past few months, we have tried all possible options to resolve the outstanding issues. Despite repeated reminders and requests for payment of our outstanding dues, GTPL did not pay heed. We were constrained to issue a disconnection notice to GTPL as well as a public notice in accordance with Trai regulations. Even thereafter, GTPL refused to budge. We were forced to switch off their signals. After the switch-off, instead of seeking our signals lawfully by resolving all outstanding issues with us, GTPL indulged in blatant piracy of our signals forcing us to initiate criminal action against them. Kukreja also says, We are still awaiting payments from Siti Cable. We are trying to work closely with Siticable to resolve the issue soon. At the time of filing the story, Star Sports had to yet resolve issues with GTPL and Siticable.

Ashok Mansukhani, president of the MSO Alliance said that digitisation was not just about grabbing eyeballs with set top boxes. It was also about customer choice. Trai regulations need a further review on tariff and interconnection to establish a level playing field. Disaggregation of media cartels is necessary. MSOs are staring at an abyss of serving 120 million homes in phase 3 and phase 4. They have borne the entire burden of digitisation of urban India but this burden was not shared by the local cable operator or broadcaster. Subscription fees have gone up. Carriage fees are down. Local cable operators are reluctant to accept a fair revenue share and want to retain billing and collection rights, he says.

Gurjeev Singh, the chief operating officer of Media Pro Enterprise (Star-Den Zee-Turner distribution) says that only 60% of the homes have been digitised in Kolkata. An external audit by the ministry of information and broadcasting is a good idea, as per him. Almost a year is through on digitisation, but we arent anywhere close to our goals. Progress in phase 2 towns is slow. Kolkata and Chennai are not yet fully digitised. My hunch is that many of the MSOs are fence-sitting on digitisation.

Singh says that there are huge changes required in cap norms and billings. The Trai has frozen the rates of channels. I strongly believe that the rates of channels should be left to market forces. Given the current market dynamics, channels cannot afford to overcharge. There is too much competition out there. We are pushing for a level playing field on pricing. We are looking to implement cost per subscriber (CPS) so there is parity in pricing. If cable operators indulge in a price war, they can do it at their peril. Media Pro has also had a dispute with Digicable on outstanding payments. They were defaulting on payments month after month and we were forced to switch off. says Singh. He added that Media Pro Enterprise has been extremely patient with most of its MSO partners but this was an exceptional case. At the time of filing this story, Media Pros issues with Digicable were resolved in five marketsDelhi, Mumbai, Kolkata, Indore and Jabalpur.

Rajesh Kaul, president of the One Alliance says that the network has issues with DTH companies attempting to charge carriage fees. The idea of moving to digitised systems was to eliminate carriage fees altogether. DTH companies charging a carriage fee is unlawful and shouldnt be allowed, he said. Market share of various MSOs, in his view, are sketchy. The entire system needed an overhaul as per him since a lot of the negotiation for the agreements between MSOs and broadcasters were happening on the basis of outdated data.

Deals are struck and renewed with them on the basis of historic data. There should be transparency in market share of MSOs, since the revenue share depends on that. The broadcasters have not got a fair share of the revenue for decades, says Kaul. When asked about the Trai directive that is expected to disband content aggregators, Kaul says, The Trai takes on any directive, only after careful consultation with all parties. We are sure they will keep our interests in mind. As per Kaul, digitisation will not work unless cable fees go up. The lacuna in the process was the throwaway price at which television content was being offered. Both the MSOs and the LCOs should work at making this business profitable, he says.

Are these more than just teething troubles An extract of a letter, sent by the National Cable & Telecommunications Association (NCTA) to governmental authorities, urges those in power to consider the interests of service providers. The letter says that honest entrepreneurs and service providers are being forced to either align with Rupert Murdoch owned businesses or to close shop. Industry regulators are hell bent on making anti-consumer policies that only suits the business interest of the Murdoch Family and their agents operating here in India, the letter says.

The amount of bitterness that has set in between the various stakeholdersbroadcasters, MSOs and LCOs is unprecedented. And it was never a smooth ride to begin with, said a broadcaster who did not want to be named. Shah from the IBF points out that most countries have taken a decade to digitise comprehensively. In contrast, India converted most of its cities into digital display in the shortest time frame. But the devil is in the detail. Chennai, Coimbatore, Hyderabad and Kolkata must digitise. Billing needs to become transparent. The under-declaration of subscribers needs to vanish. Analogue signal transmission in digital-only areas needs to stop. Encrypted signal piracy needs to stop. The list is far from complete, he adds.

On DTH companies extracting carriage fees, Shah remarks, Every opportunity creates strange bed fellows. As they learn to deal with the realities of the law...as they start to understand the nuances of how business ought to be managed...as they start to see the impact the Competition Commission will have on wrongful behavior... strange bedfellows show up at the local divorce courts. Having said this, broadcasters see consolidation becoming important to create sustainable economic engines that provide quality content to viewers, Sharma from the Cable Operators Federation of India said that digitisation was being heaped upon consumers in smaller towns. The reality of our country differs vastly from the reality of USA, or the advanced European countries. Technology shouldnt be forced upon people. It should evolve naturally. If there is ambiguity in the pricing and complicated terms and conditions on consumer forms, can you really blame the consumers for not filling them She also noted that if the 60,000-plus cable operators had their way, the Congress may not return into power.