Ind-Ra: Cable Companies Lure Local Operators with Higher Revenue Share

Cable companies have started investing significantly in technology to enable efficient billing and collections from local cable operators (LCOs) and are incentivising the LCOs to adopt this shift, by offering them a higher revenue share, says India Ratings and Research (Ind-Ra. Ind-Ra notes that most multiple-system operators (MSOs) with pan-India presence have commenced a shift in their business model to the fixed billing B2B model as an attempt to improve collections.

Ind-Ra had highlighted that 'Fixed B2B Billing the Way Forward for Cable Companies' on 04 March 2016 indicating that the a way forward for MSOs will be to agree on a certain fixed amount with the LCO (B2B billing) so that cash collections are delinked from actual collections by LCO's from their respective subscribers. Further, this also enables billing on a pre-paid basis as the revenue share is pre-decided.

One of the large cable companies, has invested in an online portal for the LCOs, which improves transparency levels and also helps in the activation and managing of packages. The way the collection mechanism works, is that the customer pays the gross amount to the LCO and the LCO maintains a pre-paid balance in his account with the MSO. Once the package is activated/ renewed in the system; the MSO's share would be directly debited from the pre-paid balance of the LCO. This online platform follows an automated dunning process, where each pack has an expiry date and if not recharged before the due date the system will automatically disconnect the signal. In case LCO's want to provide credit to certain customers, the LCO will need to make the payment on behalf of them before the expiry date and collect the same from the subscriber later.

The above concept is well formulated in-principal; however the acceptance from the LCOs may need incentives, namely higher revenue share and some basic level of training on day-to-day operations.

Ind-Ra notes that the acceptance by LCOs will vary, based on the local dynamics, given the different degrees of resistance to change, and transparency. In the long run Ind-Ra believes the business profile of MSOs will benefit from a transparent and more effective collection system.

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