More than 45 days ago, IndusInd Media and Communications (IMC) commissioned a survey across 1,600 cable operators in eight states. It discovered that most cable operators wanted the multiple-system operators or MSOs (firms like IndusInd that wholesale TV signals) to help them understand pricing and packaging. "They are saying, help us compete with direct-to-home (DTH) services," says Tony D'Silva, MD and CEO, IMC. This goes against every popular notion of the money-grabbing, transparency-hating cable operator. He is changing, says the survey.
This then is the first thing to consider before sounding any judgement on digitisation's success or failure. There are four others. But first a quick backgrounder.
In 2011, when it was mandated, the hope was digitisation would usher structural changes to kick-start the Rs 43,000 crore Indian TV industry. It would add a couple of billion dollars in pay revenues over the long term, bring complete transparency, more tax revenues and more variety for consumers. Besides putting digital boxes into homes and increasing the number of channels on offer, it hasn't done much (see "Has another attempt at cable TV digitisation failed?", Business Standard, February 1, 2015). More than three years after it was mandated, only 25 million cable homes have been digitised, an estimated Rs 8,000 crore has been spent and carriage fees remain where they were. That is a hard number analysis.
But just like the changing cable operator, there are other factors or a sub-text that points to a market ripe for digitisation.
One, India has achieved a lot. At 160 million TV homes, it is the world's second-largest TV market after China. It is, however, a structural nightmare that makes it the least profitable of the most developing economy markets. The fact that more than 95 per cent of the homes in phase 1 (metros) and 2 (38 towns) have a box is a big achievement. And these are just cable homes. If you add DTH, then digital is already at roughly half the total TV homes. Remember that the UK, the US and other markets took years of effort and lots of government support to digitise. In India, except for amending a law, the government hasn't done much to push digitisation.
Two, even with this half-done digitisation, the MSO's share of revenues has risen. Though it is still less than 40 per cent of the revenue collected, analysts see the Rs 55-90 per subscriber - that MSOs like Hathway are now getting - as a good sign. Eventually, it should be Rs 120-150 per subscriber (at higher retail prices) if the investments into boxes and so on have to start paying off.
Three, and most importantly, there is the growth in cable broadband with its higher average revenues per user (ARPUs). Almost every MSO says that in markets where they sell cable broadband (and, therefore, get more money per subscriber) cable operators are happy to share and declare. And the MSO makes more money. According to a Kotak Securities' analysis, Hathway's operating profit per subscriber (including carriage fee) on cable TV is Rs 10, but on cable broadband it averages Rs 200 per subscriber.
There couldn't be a better case for letting go of price control in cable. It first came in 2004 soon after the Telecom Regulatory Authority of India (Trai) became the broadcast regulator. While the price control operates at a wholesale level, it is benchmarked to analogue rates. Its complicated nature and the litigation around had a devastating effect on TV's growth and everyone's view of digitisation. Now, in a market where several options - DTH, cable, internet protocol television, terrestrial - are available it seems archaic.
To make it even more competitive, the Trai could help relax licensing conditions for cable operators to offer internet services. Currently, it costs upwards of Rs 20 lakh and requires several levels of permissions, making the whole thing a nightmare for small cable operators. By making it easier for them to become internet service providers the Trai could genuinely give digitisation and broadband penetration a huge fillip.
If nurtured well, these green shoots could well become sturdy trees on which the edifice of India's broadband infrastructure rests. Remember, more than two-thirds of the broadband homes in the US are served by cable. In Singapore, the figure is just over 31 per cent, Korea over 22 per cent and so on.
Maybe, aiming for a healthy mix of broadband options - cable, fibre, wireless - could end up giving digitisation as a by-product.