Bharti Airtel?s direct-to-home venture Digital TV wants the government and the regulator to do more to help digitalisation of cable sector. Airtel DTH director & chief executive Ajai Puri said the broadcasters are missing the big picture by opposing Trai?s latest tariff order for addressable platforms including DTH. Puri tells Ashish Sinha how the DTH industry can solve the ills of cable sector if supported by regulations and tariff regime. Excerpts:

Why are broadcasters against Trai?s DTH tariff order?

Broadcasters are posturing, I feel. So far, the negotiated deals between DTH operators and broadcasters stood at 15-20% of non-CAS rates. Therefore, a ceiling of 35% does not matter. DTH has overnight started generating revenues of Rs 1,200-1,300 crore annually. Broadcasters love us. We pay them every month and DTH is a completely transparent system which gives an incremental revenue to broadcasters. So I don?t understand why they should be upset. I think its just posturing on their part. There are several broadcasters who are in favour of Trai?s order.

In their opposition to Trai?s tariff order, have broadcasters missed the big pictures?

Yes. The cable market today covers about 100 million homes from which the broadcasters generate subscription revenue of around Rs 200-250 crore per month. This comes to Rs 20-25 per month per cable home. All bouquets put together are priced at about Rs 1,400. So against Rs 1,400 for all channels, broadcasters generate Rs 20-25 per month from cable homes which is not an efficient model because against the 100 million homes, the money is accounted from only 10-12 million homes due to under declaration by cable operators.

Is under declaration the root cause of all problems for the cable industry?

We need to question the root cause for under declaration. I feel the system of current content pricing of channels is causing under declaration. An average customer pays monthly fees of Rs 150-200 to access 100 channels. This works out to be Rs 2 per channel while the retailers like cable operators are buying a channel at Rs 10 from broadcasters. You can?t buy goods at Rs 10 and sell it for Rs 2 and still hope to be in business. Cost of buying content has to be corrected as that is the root cause.

How does the content cost works for DTH?

Our biggest pack of 200 channels is priced at Rs 300. So I am charging a customer an average of Rs 1.50 per channel. If I get the channel at 75 paisa and I sell to customer at Rs 1.50, I have a business model. Therefore, price correction for us is of immense importance. If we want to get it right, we must correct the cost of content. The content pricing should reach a level when the math starts making sense?at Rs 1 per pay channel. Once that happens, everything will fall in place. There will be no incentive to under declare for the cable operators, government will get taxes and there will be complete transparency. This will also take care of carriage fees too.

What is the solution then?

Let?s assume that all channels in a bouquet gets priced at Rs 50 per month. Once that happens everyone pays. The subscription market will touch Rs 6,000 crore annually only from subscription as against Rs 2,500-3000 crore today. If that happens there won?t be any incentive for operators to under declare their subscriber base.

If the solution is so simple, where is the block?

Everybody understands the math of it. But the block is–if I am already getting money without any risk, why should the model change? Its an issue of short-term versus long-term view. Broadcasters are looking at their quarterly profit/loss statements and that is the block may be. For Trai, it could be the backlash of litigations and law suits may be.