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For many, the delay in the roll-out of the third and fourth phases of the government's digitisation drive hasn't come as a surprise. While most stakeholders agree the previous deadline of December 31 this year couldn't have been met, multi-system operators (MSOs) and direct-to-home (DTH) companies are now hoping differences related to the roll-out will be resolved until the revised deadline of December 2015.
Digitisation is the process of converting all analogue television signals to digital ones by installing set-top boxes (STBs) in subscriber homes. Subscribers can opt for digital cable services provided by MSOs such as Hathway, InCable and Den Networks, or DTH networks such as those provided by Tata Sky, Dish TV and Videocon d2h.
The first and second phases of the process were completed through 2012 and 2013, respectively.
The Ministry of Information & Broadcasting said the period until December 2015 will be used to enhance STB manufacturing in the country. Currently, India depends on imports from China for deploying STBs.
While stakeholders are glad they have added time to get things in order, they are concerned about the ministry's motive in supporting STB manufacturing. "According to industry estimates, the requirement of STBs in phases three and four is 70-100 million units. Currently, hardly any manufacturer in the country can meet that demand. How the industry will cope with the shortage is something that needs to be seen," says Tony D'silva, chief executive (media) of the Hinduja Group and managing director and chief executive of IndusInd Media and Communications.
R C Venkateish, chief executive of Dish TV, agrees. He says the most important part of the STB-the chip that has to be integrated with the hardware and encryption software-isn't manufactured in India.
As such, what the domestic market can focus on is casing, capacitors and the wires that are part of the STB, he says, adding the rest can be imported. Industry estimates show 55 per cent of the cost of an STB is accounted for by the chip.
In case of the imports from China, local cable operators and MSOs get credit for up to three years. This gives them the scope to generate revenue and repay the loan during that period.
D'silva says extending the deadline isn't enough. "There is a lot to learn from the first and second phases; unless the sector does not sit and talk about the issues and find solutions, no amount of delay will matter," he says. For instance, he adds, licensing of operators in smaller markets is a problem. Though these local cable operators are registered service providers at the state level, once they come under the ambit of digitisation, they have to secure licences from the ministry. "In case of national MSOs, one can understand the need for a licence. But when the local players are registered/licensed by the state, why make them get a licence again, when they will continue doing what they have been doing until now?" he asks.
Analysts say the impact of the delay will be the most severe on broadcasters, whose domestic subscription revenue will be hit. Also, as the monetisation of phases one and two is still picking up at a slow pace, it will be a double blow.
For digital cable operators, a lot will depend on their expansion strategies. "SITI Cable will be hurt the most, followed by Den Networks, while Hathway Cable and Datacom (Hathway) will be hurt the least. SITI Cable is betting big on phases three and four, followed by Den Networks. Hathway concentrated largely on the first and second phases and its strategy for the third and fourth phases is to cherry-pick markets," says an analysis by ICICI Securities.
The delay in rolling out the third phase of digitisation gives SITI Cable time to raise funds, while Den Networks and Hathway can concentrate on monetising the first two phases.
In case of DTH operators, Dish TV will have an advantage in that it will have another year to promote its second brand, Zing, in phase-three and phase-four markets. The Zing brand was launched keeping tier-II and III towns and villages in mind.
A DIGITAL HYPE
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Multi-system operators and direct-to-home companies hope differences related to the roll-out will be resolved until the revised deadline of December 2015
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Digitisation is the process of converting all analogue television signals to digital ones by installing set-top boxes in subscriber homes
