Nosy Govt Gets Into The Cable Act

Updated: May 24 2002, 05:30am hrs
It took the government more than 50 years to wire up about 30 million homes with telephone connections. And more than a third of these connections were accomplished in the last 10 years alone. By contrast, it took the anarchical, unregulated and entrepreneurial cablewallahs only 10-odd years to wire up almost 40 million households. These two statistics are comparable become they involve essentially the same kind of activity.

The cable industry, which now covers 40 of the estimated 75 mn TV sets in India, is under the spotlight due to the recent passage of the bill in Lok Sabha which makes conditional access, or a set-top box mandatory. It is as if the government wants to put a marker on every TV set that has a cable connection. A cable TV viewer can now pay and receive the desired pay channels through a set-top box. The free-to-air channels will, however, be made available without a set-top box on the usual monthly charge.

The cable TV industry became regulated with the original 1995 Act. Cable service provision is obviously an important part of the growing services sector, and hence, potentially interesting to the taxman. Current annual cable subscriptions collection is estimated to be between Rs 4,000 to 5,000 crore. The amended Cable Act will also create business worth Rs 10,000 crore for the set-top boxes. It will allow for more regulation, more choice, an accurate measure of viewership, and hopefully higher tax collection.

If this bill passes in the Rajya Sabha as well, the government would have increased its control on cable operators significantly. It will be able to scrutinise whats being offered on every channel, the prices being charged and programmes being shown. It will also make the operators carry many more free-to-air DD and Prasar Bharti channels. The nosy government seeking additional service taxes from cable TV, but then going after content regulation also, seems to be like the proverbial camel who poked his nose into the tent and ended up taking over the tent! Hence the different parties affected by this amendment are concerned.

In this context, it is worth visiting a basic question. What is the fundamental business of TV channels What is it that they sell This is a favourite trick question of economics teachers, and invariably students fumble. Most say that it is selling programmes or content. The correct answer of course, is time slots. Or more accurately, TV broadcasters are in the business of selling audiences. Like sheep! I would imagine that a large proportion of the viewers of the 75 mn-odd TV sets in the country dont quite know that it is they that are being sold. And who are the buyers The advertisers, of course. So TV broadcasting is simply business conducted between broadcasters and advertisers, and viewers are incidental.

Broadcasters embellish the time slots with content which they source from production companies. And some time slots are more desirable than others. The so-called prime time slots can be priced at 10 times that of non-prime time slots. Time slots, like seats in a cinema hall or on an airliner, are perishable and non-storable. Similar to the air-time sold by cellular service companies.

This view of audience-as-product is a bit simplistic. In the current cable TV era in India, the broadcasters have a bouquet of free and pay channels, for which they charge the cable operator a fee for relaying their programmes to the end user. The bouquets pay channels cross subsidise the free-to-air channels. The cable operator recovers his costs by collecting a fee from his subscribers. The viewer typically has a monopoly cable service provider, and till now had an all or nothing choice. With the amended Cable Act, the end user will have some bargaining power. It would have been much better if the onus of supplying the set-top box was also with the cable operator, rather than on the viewer.

Technology, however, may soon change the economics of cable TV. The set-top box or decoder is already a first step in making the cable connection a two way affair. Thus the flow one way is of content, and the other way is of viewer preferences and instructions. This feedback info about viewer preferences is of vital importance to advertisers. But advertisers risk being eliminated by technology! Technology is making it possible to store and replay content, even automatically eliminating all advertisement. Some latest gizmos make it possible to pause live programmes with this store and replay method. It is just an extension of the logic of the old VCR, only that now it is live and dynamic. Thus prime time doesnt mean much, if you can time shift a live programme to a time slot of your convenience. In that case, broadcasters and advertisers might want to renegotiate the price of time slots. Advertisers might want to move away from air time of broadcasters, to the store and replay servers of households. In such a scenario, news might be the only programme worth watching live!

One final word on cable TV in India. Since TV sets outnumber fixed line telephones by almost 3 to 1, internet use in India will spread more rapidly via TV rather than the telephone line. In that case, the set-top box may be a boon, since once it sits on top of your TV, theres no limit to what you can ask it to do!

Ajit Ranade is Chief Economist, ABN Amro Bank, India