DTH needs a level playing field in terms of regulatory touch to compete with OTT
The DTH industry is engaged in the uphill task of coping with the customer’s growing appetite for fresh content.
FY20 has been a whirlwind for the Direct-to-Home (DTH) broadcasting industry in India. As per a December 2020 report by the Confederation of Indian Industry (CII), in association with the Boston Consulting Group, the lockdown initially saw a surge in the number of DTH subscriptions. However, the CII report estimates that the growth rates of the DTH segment were dwarfed by SVoD (subscription video-on-demand)/OTT (over-the-top) services, which registered a 55-60% year-on-year growth. This is largely because, currently, internet penetration that is key to OTT penetration is low in comparison with that of the DTH industry.
As the year ended, the Cabinet approval of a long-pending proposal to revise the guidelines for providing DTH services in India has brought cheer for the industry. The Cabinet’s decision was quickly followed by the announcement of the revised guidelines for obtaining a licence to provide DTH services, which were notified on December 30, 2020. Further, the government has withdrawn the cap on FDI, the intention being to attract more investments to the sector.
While the new guidelines have been welcomed by the market, they can hardly be considered a panacea for the industry. A key reason for this is the conspicuous absence in the revised guidelines of a grandfathering provision for existing licensees, requiring them to apply afresh for obtaining a licence to provide DTH services. The problem is exacerbated by the provision that states that the issue of a fresh licence to existing licensees will be subject to the licensees clearing their existing dues. To put this in perspective, the combined dues of the DTH market are estimated at Rs 9,000 crore.
A case pertaining to the payment of licence fee dues by DTH operators, currently pending before the apex court and marked for hearing in the last week of February 2021, hinges on the difference of opinion between the DTH operators and the government on the interpretation of the DTH guidelines and the amendments thereto. Such long-drawn-out litigations and the ensuing tangle for the DTH operators underscore the urgent need for a stable regulatory framework. Another onerous provision in the guidelines, observed by the Indian Broadcasting Foundation, is the cross-media ownership restrictions on the sector.
On the positive side, the new guidelines have permitted sharing of infrastructure, such as satellite transponder space and earth stations, on a voluntary basis. Further, distributors of TV channels will be allowed to share the common hardware for the Subscriber Management System (SMS) and Conditional Access System (CAS) applications. Such sharing of infrastructure by DTH operators, recommended by the Telecom Regulatory Authority of India (TRAI) as far back as March 2017, could potentially lead to significant savings for end-consumers.
In 2019, TRAI had also recommended set-top box inter-portability, facilitating DTH subscribers in switching over to a new service provider without having to change the user-end infrastructure. The guidelines are, however, silent on this aspect. Such measures, along with the easing of FDI norms, could attract more service providers to the DTH industry as they would significantly reduce the initial costs in setting up the service.
The DTH industry is engaged in the uphill task of coping with the customer’s growing appetite for fresh content. A key difference between the DTH service and its competitors is the use of the existing infrastructure of the Telecom Service Providers (TSPs) to reach customers, which does not require any licensing under the Indian Telegraph Act, 1885 (as opposed to the DTH industry).
This is a clear regulatory arbitrage, enabling the competitors of the DTH industry to offer products/services at competitive rates. Further, since their service standards are on a par with the DTH industry, riding on the back of technological innovations and increasing internet penetration gives them a clear edge. In such an environment, it is imperative that a level-playing field, based on market dynamics, be created for the DTH service vis-à-vis other entertainment platforms.