BroadcastingJuly27,2006 Cable TV Industry In India: Where Is It Heading?

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Media Partners Asia (MPA) has estimated India to become Asias leading cable TV market by 2010; There are over 7,000 headends and 30,000 cable operators serving 53 million subscribers; The cable operators declare only 15 to 20 percent of their paid connectivity to MSOs and broadcasters; The cable industry has witnessed an entry of the organised sector MSOs such as Siti Cable, InCable, and Hathway; The C&S penetration in India is still much lower than some of the other developed nations; Cable TV industry in India lacks dynamic leadership and government support.

NEW DELHI -- According to market estimates, India was rated as Asias second largest pay-TV market in 2005, with revenue of about US $3.6 billion, roughly the same as China. However, the country is expected to grow to US $10.5 billion by 2015. Media Partners Asia (MPA) has estimated India to become Asias leading cable market by 2010, the largest satellite market by 2008, and the most lucrative pay television market by 2015. Turnover for multi-channel video, including cable, satellite and Internet protocol television (IPTV), will jump to $7.2 billion from $3.6 billion by the end of the decade, the study showed. The role of newer technologies coupled with the booming economy will help further the revenue growth in India's cable television industry by 2010. However, industry experts suspect regulatory barriers to impact growth. According to published data, in 2005, 53 percent of the Indian households owned televisions, and 57 percent of these had cable TV. Advertising revenue for cable television was US $1.02 billion in 2005, and is expected to grow to US $1.8 billion by 2010. Current Market Scenario The Indian cable industry is highly fragmented. There are over 7,000 headends and 30,000 cable operators serving 53 million subscribers. MSOs operate on a similar model of franchising of cable TV feed to cable operators, who in turn provide last mile connectivity to the subscribers. Due to tough competition in this highly unorganized, non-regulated industry, cable TV pricing dropped to as low as Rs. 50 - 100 per month in the initial years of operation. The existing average price per subscriber per month is Rs. 150 on an all India basis. In the initial period, the main reason for this low price was to achieve higher penetration in the large middle class population by broadcasting free to air channels. Once channels achieved a critical mass, they turned to the subscription mode. The subscribers resisted the increase in price due to pay channel mode of operation and lack of transparency in the system. Lower prices from households have resulted in under-declaration in the value chain. The cable operators declare only 15 to 20 percent of their paid connectivity to MSOs and broadcasters. Its worth mentioning that the present pay-channel pricing is not addressed to the consumer, but is being charged from cable operators, without leaving distribution margins to them. Presently, there are about 250 channels beamed over the Indian skies with over 100 channels covering the Indian sub-continent. Major Broadcasters include: Discovery, Doordarshan, ESPN - Star Sports, Sony, Star, Sun TV, Zee, etc. All of these broadcasters have the same business model, which is revenues from advertisements and subscription. The cable TV industry is running on the dictates of pay-TV broadcasters and headend operators, MSOs or independent cable operators. The industry is clearly divided into CAS-ready networks, non CAS-ready networks, semi-urban networks, urbanised rural networks and rural networks. With the ingenuity of cable operators, new networks taking the feed from KU-band DTH through multiple receivers and feeding 50 to 100 homes is the new crop in cable TV networking. Some of the growth resides in the new KU-band downlink and C-Band distribution systems.

According to another report by In-Stat/MDR, most of the new growth in cable TV is coming from Asia, particularly from China and India that have been accounting for up to 60 percent of all annual subscriber additions over the past three years. It expects total cable TV subscribers to reach 395 million by 2007. The report also indicated that the growth in cable TV subscribers will be fuelled not only by the cable TV operators ability to attract new subscribers to their traditional analog video services, but also migration to the recently deployed digital video, voice, and data services. A look back In India, the seeds of the cable TV wave were sown when CNN broadcasted the Gulf War. Later, in early 90s, some other broadcasters such as Zee TV initiated the growth of cable TV services. From just 410,000 Cable TV subscriber households in early 1992, the number of cable homes went up to 1.2 million by the end of the year. The Indian cable and satellite industry is one of the fastest growing industries in the world. The cable and satellite broadcast business has undergone a continuous transformation. In the beginning, it was driven by small cable operators. According to industry estimates, there were about 60,000 cable operators in India in 1995. The increasing costs of operations and need for fresh investments to upgrade cable plants in order to accommodate more channels has led to a consolidation amongst smaller operators. With time, the number of operators reduced to half and several of them joined hands to set up headends of 40 to 50 channels. The cable industry has witnessed the entry of organised sector MSOs such as Siti Cable, InCable, and Hathway. These MSOs have established about 200 headends in metros and major towns to cater their services to cable operators. Independent operators have consolidated their networks and are providing services in mostly semi-urban and rural areas. DTH: A threat? According to industry sources, the biggest threat to the long-term growth of cable TV will come from DTH satellite services, apart from the regional economic recessions. However, the good news for cable operators is that the digital revolution is bringing both new services to cable customers and new sources of revenue to cable operators. The digital cable offerings cover services such as expanded channel lineups, video-on-demand, HDTV services, and highspeed data services. However, Dr. A. K. Rastogi, president of All India Aavishkar Dish Antenna Sangh, is of the view that DTH can succeed only in areas where cable is non-existent or the service is poor. "There are 60 million cable homes in India and about 50 million cable dark homes. DTH can hope to penetrate, at best, 25 percent of cable dark homes in the next 5 years, i.e. a potential of 15 million homes. Out of which, five million are divided between DD and Dish TV. For penetration in the cable TV arena, both DTH and broadband require fresh cabling, which is prohibitive. Further, cable TV subscription rates will always remain lower than DTH or Broadband. Hence DTH, at least for the next five years, is not a threat to Cable TV," he said. A key challenge for cable operators is that the cost to upgrade cable plants to provide these digital transmissions is substantial. This high cost, in turn, has slowed the overall pace of digital upgrades and has limited digital cable TV service to a few of the wealthier countries in the world. Commenting on the challenges faced by the Indian cable TV industry, Dr. Rastogi, added: "The cable TV industry in Asia lacks financial muscle. Cable operators have reached the limit of their investment capacity. With digitalisation and broadband proliferation, telcos with stronger financial muscle will enter the arena, but that may sound the death knell for LCOs as they operate today." Cable TV networks' channel handling capacity depends upon the amplifier bandwidth and spacing between amplifiers. Most of the last mile segments, i.e. LCO to subscriber, have 47-550MHz amplifiers whose channel capacity is confined to 62 channels in un-encrypted analog mode. MSOs networks upto the distributor have 47862MHz amplifiers, which can distribute 90 channels. Headends are with the MSOs or independent distributors. To increase channel capacity, digital compression is a solution wherein 12 programs are compressed into the spectrum width of one analog channel.

Thus, it is theoretically possible to deliver 620 channels in the present LCO segment and 1,080 channels in MSO/distributor segment. But with such capacity enhancement, the viewer will require a set-top box to convert digitally compressed channels to analog for viewing. Digitally compressed channels can be seen without CAS as well. The million dollar question, Who pays for the Set Top Box (STB)? holds the key to the solution. The industry has to decide, for once, about provisioning of the STB in order for the distribution to get addressed. In fact, reception quality will improve with the use of STBs. The road ahead "India has emerged as among the Top Four cable TV markets in the world with its close to 60 million CATV subscriber base," revealed US-based research firm In-Stat/MDR. Should we take this as a slap in the face of those who have been critical of India's buoyant cable TV sector, which has grown by stealth and without any regulatory framework? Digitalisation of cable networks, entry of FDI, as well as professional cable TV companies, competition from HITS and DTH and broadband penetration in consumer homes, are said to be the growth drivers for the Indian cable industry. Despite this heady growth, the C&S penetration in India is still much lower than some of the other developed nations. An increase in affordability, fall in the prices of TV sets, and regional language channels will increase the penetration of cable TV in semi-urban and rural areas. The size of the market is expected to increase many fold, due to the incremental number of subscribers and improvement in service fee in value terms. According to a report by Reuters, new technologies and a booming economy will help double revenues in Indias television industry by 2010, but regulatory barriers could impact growth in the worlds third-largest cable TV market, India remains the most significant and accessible C&S opportunity in the Asia Pacific region. However, the regulatory framework, especially with respect to retail and wholesale cable TV rates, foreign investment, broadband competition, and program distribution has become increasingly uneven. New channels for niche segments with focused contents will enter the market. The price of the complete bouquet will increase due to slew of new channels and choices available to the subscriber to pay for channels they watch. Dr. Rastogi summed it up as: " The cable TV industry in India lacks dynamic leadership and government support. Yet cable TV connectivity in India is more than the total connectivity in the rest of Asia. The number of channels delivered through cable networks in India is more than elsewhere in Asia. But, EOL (end of line) signal quality is inferior to the rest of Asia."