The rise of video and decline of cable

Will the decline of cable TV help catalyse the video ecosystem in India?

Going by Broadcast Audience Research Council data, in 2016, India had 183 million TV homes. This rose to 210 million homes in 2020. Much of this growth, however, has gone to other distribution technologies — DTH, DD Freedish or to broadband providers such as Airtel and Jio. The number of cable homes fell from 115 million to under 100 million; the figure is closer to 70 million, say analysts. Its share in overall revenue has fallen by half, even as the TV business grew from Rs 29,700 crore to Rs 68,500 crore.

To the 892 million TV viewers, add 468 million OTT viewers. Of course, there is plenty of duplication in those numbers. The point is that the video universe is huge — across, TV, mobile, and other devices. And it continues to expand, pushing up the demand for good quality broadband internet. However, only a handful of firms seem to be gaining from it — primarily Airtel and Jio.

Globally, cable remains one of the best pipes to carry two-way, internet broadband. The $104-billion Comcast, a cable company, is one of the largest broadband providers in the US. It is on a Comcast connection that many Americans watch Netflix, Amazon Prime Video et al. In India, cable internet homes are estimated at 21 million; that is 80-90 million people. As video consumption changes, offering internet is the best way of keeping cable both relevant and profitable. It offers average revenues that are 2-3 times those of only cable. Why then has cable not been able to ride the digital video boom?

Largely because of regulatory overload and a warped industry structure. More than 95 per cent of cable homes are reached through 155,000 local cable operators. For decades, if an operator had 1,000 homes, he would pay for, say, 500 one year and the figure would increase every year based on negotiation. Broadcasters didn’t care how many homes were reached as long as subscription revenues kept going up. Multi system operators (MSOs) wanted their revenue share. And local operators made their money from the taxes they saved by under-declaring. The regulator, Telecom Regulatory Authority of India (Trai), added to this by introducing price-control very early on, in 2004. This incentivised the whole “let me get my share mentality”. Everyone, therefore, was guilty of perpetuating a structural defect — the lack of an addressable, transparent last mile. It has meant that nobody wanted to invest in cable even when 100 per cent foreign capital was allowed.

Then came the convoluted New Tariff Order in 2019. It forced cable to shift to a pre-paid system a la DTH. However, unlike DTH, there were no call centres, no software that could help with choosing single channels or dropping them and with collecting money in advance. Soon, subscribers moved to DD Freedish at the lower end or DTH/OTT at the higher end. The few MSOs that had ventured into internet access were stopped in their tracks by a Department of Telecommunications Order (later backed by the Supreme Court) on licence fees charged on total revenue, not just internet revenue. This was changed in October this year. There is hope that this may act as a trigger for investment. Analysts dismiss it.

The decline in cable owes as much to a greedy ecosystem where no one invested in the technology as it does to a regulator that believes that price control is the only lever to use. Over almost 16 years, except for digitisation, the one issue Trai has been very active on, is price control. This for a service that is not an essential commodity. This tendency has continued long after competing technologies (DTH, fibre and the state’s own DD Freedish) came in to eat away at cable’s share.

If cable’s decline pushes Trai to do impact analysis before coming up with recommendations, there may be hope. Strangely, it has just released a paper on the Market Structure/Competition in Cable Services. One of the questions it raises is, is there a need to regulate monopoly or market dominance in cable TV service? What triggered this thought about a fragmented sector in decline is not clear.

The British communications regulator, Ofcom, analyses in great detail the costs of taking or not taking, a particular decision. A simple impact analysis before the New Tariff Order might have saved crores worth of revenues for cable and pain for consumers. Maybe Trai could use this opportunity to do this for the Cable TV paper.

Will this experience make broadcasters better partners as they ride on other distribution technologies for their linear and OTT businesses? It will. Not because they have become more responsible but because the distributors they deal with, Tata-Sky, Airtel, Jio or DD Freedish are huge. There are over 1,700 MSOs to deal with. But there are barely a handful of companies that now control the pipe that Indians access to get their short video, long video, film, web series et al. Broadcasters have little negotiating power in this game. One conflict and they are out of 15-20 million homes at one go, hitting both ad and pay revenues.

Maybe they are regretting not pushing for the transformation of cable into an internet access tool.
 

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