With the DTH market refusing to take off quite as much as the players expected, the two frontrunners?Dish TV and Tata Sky?have been given more time to consolidate their presence. Both get a chance to ramp up subscribers even while potential rival, Sun TV?s juggernaut DTH offering Sun Direct is stuck in the wireless planning and coordination wing of the department of telecom as a result of political turmoil. Sun Direct was expected to launch this month after receiving transponder space aboard Insat 4B in May but without receiving a licence, despite showing it has all the infrastructure in place, its operations are stuck in limbo.

At present DTH is leading the digital television revolution followed by CAS and IPTV. India is one of the largest media content-consuming as well as content-creating countries in the world. But revenue realisation has so far been very low. The Indian television industry loses almost $3billion in television-pay-channel revenues annually due to content leakages and piracy in the distribution chain. Under-reporting of cable and satellite (C&S) subscribers is as high as 85%, a problem made worse with Indian television distribution dominated by analog cable. The only panacea to address this is via ?digitisation?, which is then implemented through Direct To Home (DTH), Conditional Access System (CAS) or Internet Protocol television(IPTV).

While the government has initiated the process of digital delivery through mandatory CAS implementation, DTH and IPTV penetration is being driven by investments amounting to around $4 billion by players like Dish TV, Tata Sky, Reliance ADAG, Bharti Airtel, MTNL among others. Most analysts believe that by 2010, around 40 million of the expected 100 million C&S homes will go digital. Simultaneously, market forces, the need for deep pockets and other technologies gaining momentum will lead to the number of players in the DTH space staying limited to five.

The slow pick up and many shortcomings of IPTV in the country and the highly regulated CAS has led to DTH leading television?s digital revolution. The only issue slowing the growth of DTH is the acute shortage of Ku band transponders without which DTH cannot function. IPTV and CAS also have the advantage of triple play (voice, video and data).

Currently there are three players in the market- Dish TV, Tata Sky and the government-owned DD Direct. Subhash Chandra?s Essel Group promoted DTH service provider, Dish TV, was the first to launch its service and has so far garnered around 2 million subscribers. The service did not take off till it received the Star bouquet of channels in August. In the ten months that followed (upto June), the company has picked up around 8.2 lakh subscribers.

Tata Sky which is an 80:20 joint venture between the Tatas and Newscorp-owned-Star launched its service in August 2006. TataSky has garnered around 7.2 lakh subscribers so far. The third player is government-owned DD Direct, which has the lion?s share of 3 million subscribers. The service follows mainly a free-to-air (FTA) model and was initially intended to give subscribers in the last mile access to Doordarshan?s education oriented television content.

SSKI expects the total DTH subscribers to go up to 16.10 million with Dish garnering 4.4 million (32%) by 2010. Tata Sky is expected to have 5.5 million subscribers(39%) by then. They expect the market size to be around Rs 77.8 billion. Dish is expected to garner around Rs 14.6 bn revenues by 2010 with ARPUs at around Rs 400.

But there are other players waiting for the chance to take the market by storm. Apart from Sun Direct there is Reliance, Bharti and Videocon. Says Vikram Kaushik, MD and CEO of Tata Sky, ?The trends world over indicate that only one or two DTH players exist in any market – USA, UK, Australia, Japan, Italy etc. India is a very large market and hence may have space for multiple players to survive.? The Reliance Anil Dhirubhai Ambani Group?s (ADAG) entertainment vertical, is expected to launch Reliance Blue Magic by March 2008 after it gets its license by the end of this year. Blue Magic is expected to receive Ku-band transponders on Insat 4CR which will only be up by September-October. Reliance has asked for eight Ku-band transponders and ISRO is reserving the remaining four for other users like National Informatics Centre?s VSAT operations. RADAG is striving to emerge as a panmedia player with operations across the film value chain, radio, animation, television production and distribution under Adlabs and Internet broadband, gaming and DTH under other group companies.

The Bharti Airtel-owned Bharti Telemedia?s DTH services may get delayed to early 2009 when Isro?s next Ku band transponder equipped satellite?Insat 4G launches by 2008 end. Another option for Bharti is Measat-3, the feasibility of which is at present being reviewed by ISRO. Measat-3 is a foreign satellite launched by Malaysia based Astro Group and has 18 Ku-band transponders with an India footprint. Bharti already supplies set top boxes mainly for DD?s FTA service through its subsidiary Bharti Teletech. ?The coordination with Measat is not yet complete but we are at the last leg of it. We will take a decision probably after a month,? says Isro contract management and legal services director SB Iyer.

After the launch of Insat-4G, Isro will have exhausted spectrum. ?We have filed an application with the World Administration Radio Conference (WARC), which is part of the International Telecommunications Union (ITU), for orbital slot and frequency,? says Iyer. WARC determines the allocation of spectrum for various services.

Videocon is the latest conglomerate to envisage an entry into the DTH space. The consumer durables major has applied for transponder space from ISRO and according to sources will bundle its television sets with the set-top box so as to offer a bundled DTH connection.

Dish TV was the first off the block launching its service way back in 2005 giving it a significant advantage but due to low consumer awareness and other teething troubles they were not able to garner many subscribers. After the launch of Tata Sky and subsequent establishment of the segment, Dish TV re-energised its marketing and ?consumer awareness? initiatives offering its services and adding to them in order to beat its competition. The firm is heavily dependent on its regional offerings to garner more subscribers.

?We are the only DTH platform that offers customized regional channels to our subscribers with boutiques in 8 different languages,? says. Arun Kapoor, CEO, Dish TV. The company recently added 2 more transponders bringing its total to 9 aboard Netherlands-based SES Global-owned NSS6.

Tata Sky entered the market with a bang and through aggressive marketing and Newscorp?s global experience in the DTH business (DirecTV, BskyB and Sky Perfect) has been able to position itself as a potential market leader.

The nature of the DTH business is such that for the first few years (till 2009 say analysts) the players will bleed (negative cash flows). This gives Tata Sky a slight upper hand over Dish TV due to the Tata?s and Murdoch?s deep pockets. Also the company has recently sold 10% stake to Temasek which has valued the venture at Rs 25 billion. At present, regulations permit foreign investment (FII + FDI) of up to 49% in DTH (with FDI not exceeding 20%).

Dish TV has been demerged from the Zee group and listing on the bourses to raise funds. The firm also has in-principle approval from the FIPB for foreign investment in the company. Dish TV?s marketing strategy depends on its far reaching retail and customer support network and the availability of regional channels for people all over the country. The firm has the backing of Subhash Chandra?s Essel group, which is the only firm approved by the government to manufacture and run satellites.

The DTH market is ready to explode but only if there is enough spectrum from Ku band transponders and the players have pockets deep enough to survive bleeding in the initial period. The other platforms offering digitisation are liable to pick up and leverage their positives over DTH soon.

Globally, DTH has grown on the back of content exclusivity or heavy subsidies. In the UK, DTH segment proliferated mainly on con tent exclusivity while in the US, it has grown on the back of subsidies.

The TRAI has mandated interoperability on DTH platform thereby disallow- ing content exclusivity and therefore leaving subsidisation as the route for customer acquisition. This will be a costly affair leading to more losses.

Customer acquisition in the US costs DTH players like DirecTV and EchoStar $ 500-800 per customer.The competitive intensity, coupled with the simultaneous emergence of other platforms like digital cable and IPTV, would mandate heavy subsidisation by Indian DTH operators to win subscribers, leaving them a long and hard road ahead.