Abstract: Digital Cable TV - Changing the Way of Entertainment Gaurav, Ph.D Research Scholar Dept. of Business Administration Chaudhary Devi Lal University, Sirsa Digitization of cable TV networks doing rounds in the Indian broadcasting arena, it is imperative for consumers to know and understand how this latest technology is capable to create a significant difference in their TV-viewing experience with a number of additional benefits Keywords: Digitization, Cable TV, Television 1. Introduction The Government's decision to declare a sunset date for analog cable television is a huge step forward as the move is set to usher in a whole new era of media consumption in the country. Digitization will redefine the TV-viewing experience for subscribers in India, as it has the world over. Globally, as television platforms have moved toward a digital format, the industry has witnessed huge surge in revenues as the customers have shown enormous affinity for quality content and value-added services, thereby pushing demand for these offerings. In our experience, the biggest winner in digitization is the consumer or the viewer. The aggressive growth of the DTH sector is a good example of how digitization changes the way people are entertained. It is the world-class viewing experience and numerous value additions possible only on a digital network that has fueled the growth of DTH in India. Digital cable TV has the same potential. Some of the benefits to the subscribers migrating to a digital cable platform are enumerated below: 1. Choice of Content A digital network is able to carry more channels and other interactive and value-added services that subscribers can choose from. Digital pay-tv operators today offer a bouquet of services to provide flexibility as well as choice of content that the consumers desire. From 80 to 100 channels offered by analog cable network to over 250 channels offered by digital pay-tv operators, a la carte services with the freedom to choose their own channels, attractive VAS, and round the clock customer service, Indian audiences today have a plethora of options. Available online on www.easynotes4u.com Page 46
In addition to the choice of channels, the digital platform also makes it possible to select the language of choice in case of multilingual content. The control is in the viewer's hand unlike in the analog system where the broadcaster or the cable operator decides what language viewers would watch. Digital cable technology allows multisystem operators (MSOs) such as Hathway and DEN the freedom to offer several on-demand channels, interactive games, pay-per-view content, educational programs and much more. 2. Choice of subscription In a typical digital scenario, subscribers pay only for what they watch at home. Operators can actually allow subscribers to create their own packages, thereby controlling their subscription as per their budget. In the last couple of years, even the cost of set-top boxes has come down drastically. The basic subscription fee is very comparable to what consumers pay for analog TV. The technology platform empowers the viewer to make their choice of content, review and revise it, monitor delivery, add or subtract channels - all of this at the push of a button. A digital cable service offers significant value for money as it empowers the consumer to make a choice and pay for that choice. Typically, a digital cable service, with the help of smart electronic program guides (EPGs), divides channels in genres and a consumer can select the genre based on their viewing habits and preferences. At the same time, the technology enables the viewer to change the mix or order event-based short-term packages and pay as per use. 3. Quality of content Digital cable or DTH services enable broadcast of very-high quality images significantly enhancing the TV-viewing experience. Now, with the slow but sure proliferation of HD televisions available in the country, a number of broadcasters and content developers are creating content in high definition (HD), all of which can best be enjoyed on a digital platform. The highquality sound that digital cable or DTH provides makes full use of the home theater systems that people install for a better experience. Another important technology that will rise with digitization is 3D. With leading DTH companies advancing to 3D, TV viewing has become increasingly interesting as it provides a new dimension to the customer's viewing experience. However, it needs to be noted that as 3D content is currently very scarce, this technology is still at a nascent stage of adoption. 4. Value-added services and user interface Available online on www.easynotes4u.com Page 47
With the transition to digital cable platform, the viewer truly becomes the king as the service providers try to gain loyalty with numerous value-added services. Subscribers also get access to an enhanced user interface which typically includes an electronic program guide (EPG) on the TV screen for easy navigation of channels, episode summaries, background information on the programs, and the ability to change the language of the EPG to suit their preference along with a vast range of interactive games and applications to choose from. A digital platform allows subscribers to watch premium content which an analog cable user can never have access to. Features like video-on-demand and pay-per-view, where movies and documentaries can be enjoyed on special requests and can be seen a number of times by paying a nominal price, are exclusive to digital pay-tv platforms. These movies and documentaries are made available usually much more in advance than to regular entertainment/movie channels. Most operators such as Airtel Digital TV, Tata Sky, DEN, and Hathway offer on-demand content such as music, movies, games, educational services, e-commerce, mobile and internet recording, and other Internet-based services. For example, Tata Sky's Actve Wizkids, an interactive application, offers fun-learning exercises specially targeted at young kids. Another interesting application is Airtel Digital TV's mobile recording feature in which a subscriber can set recording of their favorite TV show even while away from their TV set or while traveling. Apart from all this, there are applications that enable viewers to play interactive games, vote, enter quizzes, win prizes, or request information on the selected products and shows. The result is that subscribers are becoming more used to interacting with TV programming. Viewers can additionally opt for digital video recorder (DVR) and HD DVR that allow subscribers to pause and record live TV content and even rewind and fast-forward their recorded TV programs while watching at leisure, offering consumers real freedom and flexibility. In fact, reports indicate that those who have used their DVRs consider it to be the second most influential gadget in their household after mobile phones. A number of digital pay-tv subscribers worldwide are moving toward triple-play operators to enjoy the convenience of accessing multiple networks through a single service provider. This will also give rise to a plethora of bundled services such as entertainment, information sharing, educational services, and advanced applications all on the same platform. All this and more would be possible in the foreseeable future once the digitization rollout commences in India - to bring tremendous benefits to the consumer. Available online on www.easynotes4u.com Page 48
2. Digitization of cable TV systems The Information and Broadcasting (I&B) Ministry has accepted the recommendations of the Telecom Regulatory Authority of India (TRAI) for implementation of digital addressable cable television systems in India, to transition from the existing analog cable network. Although the I&B Ministry has deferred the timelines proposed by TRAI and pushed the proposed sunset date for analog cable distribution from December 2013 to March 2015, in ICRA's view, the approval of TRAI's other recommendations by the ministry is a significant positive development for the Indian TV distribution. In addition, other stakeholders in the value chain would also potentially benefit - broadcasters by way of increase in subscription revenues, government via increase in service tax collections, and customers from an enhanced television viewing experience. In August 2010, TRAI had worked out a framework for implementation of digitization enumerating several measures such as fiscal incentives and right of way, and had given its recommendations to implement digitization of cable systems pan-india by December 2013 in a phased manner. Even as TRAI's proposed timelines were considered to be ambitious, in view of various sensitive issues involved such as eventual displacement of small multi system operators (MSOs) and marginalization of a vast majority of local cable operators (LCOs), besides the enormity of grassroot preparation and investments required for putting in place digital infrastructure, the recommendations were a pointer to the strengthening regulatory push for digitization of cable distribution network in India. The recent approval of TRAI's recommendations by I&B Ministry is expected to reinforce the cable digitization process. Having accorded its approval, the ministry has now sent back its proposal containing revised timelines to TRAI for comments before it could table the same before the Union Cabinet for final approval. The legacy analog cable distribution in India is currently replete with several maladies such as the practice of under-reporting of true subscriber base by LCOs which results in inequitable distribution of value amongst the key participants in the media value chain; near monopoly status of LCOs, and MSOs in various regions depriving the customers of alternatives; lack of standardization on pricing and capacity constraints curtailing the number of channels that could be carried. The onset of digitization would mark a paradigm shift in the cable distribution landscape overcoming the limitations in the analog cable systems. While digitization would structurally shift the balance of power away from LCOs and reduce industry fragmentation Available online on www.easynotes4u.com Page 49
(which has already witnessed substantial consolidation over the last two years), the process would involve large investments across distribution platforms including cable, DTH and IPTV. Already, aggregate investments worth around Rs. 2,000 crore have been incurred by large national MSOs toward acquisition of smaller regional MSOs and LCOs; and investments worth Rs. 13,000 crore have been incurred by DTH players toward customer acquisition. As per ICRA's estimates, to achieve complete digitization by March 2015, additional investments of around Rs. 15,000 crore would be required. While from the industry standpoint, this would imply the need for large fresh capital mobilization; from customers' perspective, this could lead to gradual increase in subscriptions costs over the medium term although in exchange for better service value. Considering the capital intensive nature of the industry, ICRA believes further consolidation would become imperative for the industry players to remain viable given the compelling need to achieve scale. Assuming the Ministry's proposed timeline for transition to digital cable by March 2015 gets final approval, the key risks to the pace of digitization process could be (a) The ability of distribution players to successfully raise incremental funds; (b) Customers' response and acceptability of the value proposition offered by digitization; and (c) the level of competitive intensity in the industry which may impair industry profitability. 3. TRAI's recommendations on implementation of Digital Addressable Cable TV Systems In August 2010, TRAI had come out with its recommendations giving the roadmap for implementation of digital cable systems in India. Some of the key recommendations are enumerated below: Migration to a digital addressable cable TV system to be implemented in four phases with sunset date as proposed: Phase-I. In four metros by Oct. 31, 2012 Phase-II. In all cities having a population of over one million, by March 31, 2013 Phase-III. In all other urban areas (municipal corporations/ municipalities) by Dec. 31, 2015 Phase-IV. In the rest of India by Dec. 31, 2016 Basic custom duty on digital head-end equipment and STBs to be reduced to NIL for three years (from 5 percent currently) Available online on www.easynotes4u.com Page 50
MSOs/LCOs to be eligible for seeking Right of Way on non-exclusive basis for laying optical fibre/cable network Recently, the I&B Ministry has approved the recommendations given by TRAI, except the one related to the phased implementation roadmap for digitization. As per the Ministry, the timeline proposed by TRAI was optimistic considering (a) the paucity of set-top-boxes (STBs) required to be seeded at customer premises - a tall order in view of the large volumes of around 75 million involved1; (b) inadequate local manufacturing capacity of STBs at present; and (c) investments required to be made by MSOs toward setting-up of other digital infrastructure such as head-ends and related network equipment. ICRA's interaction with industry players suggests that even though the timelines have been pushed back by a period of more than a year, the revised timelines proposed by the Ministry seem realistic and would stimulate the cable digitization drive in India. With this, the digital addressable distribution system in India, which at present is being spearheaded by the seven DTH players, would see a far greater participation from the cable MSOs who are expected to have relatively better revenue and profit growth opportunities. 4. Industry structure The distribution side of the value chain remains highly fragmented - though market structure changing rapidly with a thrust on consolidation. The cable and satellite television market in India had emerged in the 1990s and has since then experienced a strong growth in terms of number of subscribers having grown from mere 400,000 in 1992 to around 90 million today, representing a CAGR of 35 percent for the last 18 years. The channels seen on TV (pay channels or free to air, FTA, channels) are created by different broadcasters and transmitted from satellite to receiving stations (head-ends) owned by MSOs. The MSOs in turn re-transmit these signals through cables to the LCOs, who have their own last mile cable network to individual homes. 5. Industry challenges 1. Under-reporting of subscriber base by LCOs leading to inequitable distribution of value In the absence of an addressable system, the subscription revenue transaction among the broadcasters, MSOs, and LCOs is currently undertaken either on a fixed-fee basis or on the basis of a negotiated subscriber base. Considering the strong bargaining power enjoyed by LCOs who own the last mile, the distribution of subscription revenue in effect remains heavily skewed in Available online on www.easynotes4u.com Page 51
their favour. As per the industry estimates, LCOs declare only around 15 percent of their paid connectivity to MSOs and broadcasters. This not only deprives the MSOs and broadcasters of their fair share of value, but also results in service tax leakage for the government. The lack of trust and transparency in the business models of the industry has also led to frequent disputes between stakeholders and increased litigation incidences. 2. Non-standard pricing and local monopoly status of LCOs leading to sub-optimal customer service In a market survey commissioned by TRAI, it had observed that the average monthly cable bill for a subscriber varied widely from Rs. 149 in Kochi to Rs. 322 in Shillong, even though services are being provided did not warrant such variation.this apart, there are instances where the cable charges are increased by LCOs for a locality arbitrarily. These shortcomings are the natural fallout of the local monopoly status enjoyed by most LCOs and small MSOs who are able to avert competition and thus prevent free market forces to keep prices under check. 3. Capacity constraints in analog cable stifling growth of new channels and introduction of technologically advanced content The number of television channels in India has grown at a rapid pace from two in 1992 to 120 in 2003 to around 600 at present. Arrival of a plethora of new channels in the Indian television space in the backdrop of limited bandwidth of the analog cable system, results in allocation of prime frequencies by MSOs to channels offering higher carriage (or placement) fee. Limited capacity, coupled with the absence of an addressable system, has also resulted in limited availability of subscription-driven niche content such as science, golf as well as technologically advanced content like high-definition (HD) channels. This trend is further fed by the inordinate dependence of broadcasters' revenues on advertising(less on subscription) impacting niche content offerings since focus tends to shift on advertisement friendly genres. 6. Conclusion The overall objective of digitization is to expose TV viewers to a television experience that is imaginative. The recommended switch over from analog to digital transmission is the need of the hour, which will not only improve the quality of TV viewing but will also enable the viewers across the country to enjoy the benefits of watching movies and TV shows, surfing the Internet, and making telephone calls without leaving the comfort of their sofas and television screens. Available online on www.easynotes4u.com Page 52
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