The telecom market boomed when tariffs and handset prices started falling; so did the consumer durables market. Over the past decade, both businesses have actually seen prices either stagnate or drop as a result of competition. Although the nature of these businesses is not strictly comparable, the market for direct-to-home (DTH) services can be called contrarian. Despite being available at a premium to cable and the Conditional Access System (CAS), India's DTH reach has grown so fast that it is soon expected to overtake the US to become the world's largest market by the first quarter of next year. India now has 26 million subscribers and is expected to end the calendar year with 30 million. By March next year, the number is expected to touch 32 million, making it the world's largest market, accounting for more than a fifth of the global market.

There are two ways of looking at this growth. First, that it is "artificial" in the sense that DTH service providers are heavily subsidising market growth. It is true that the operators have sacrificed profit in the interests of market creation and the cost of customer acquisition is extremely high. For instance, Dish TV, the largest DTH operator, spends Rs.2,500 to acquire a customer, basically by supplying the set-top box and dish virtually free, so it can be assumed the cost for other, smaller players is even higher. Little wonder, then, that the half-a-dozen-odd operators in India are collectively making losses of over Rs.6,000 crore. Hong Kong-based research outfit Media Partners Asia says the Indian DTH industry is bleeding, with a negative Ebitda (earnings before interest, taxes, depreciation and amortisation) margin of 84 per cent. But here's the thing: despite these losses, no one is predicting the demise of these operators or even the business. Indeed, Media Partners Asia has forecast that most DTH operators will start making money from 2013. By that time, the DTH subscriber base will be touching 45 million, almost three times the 2009 number. By 2020, DTH will account for over a third of the pay TV market.

Second, these glowing predictions for DTH operators are being made despite a relatively high churn or subscriber attrition rates to relatively cheaper cable industry and areas mandated for CAS. Operators readily agree that churn — which can vary from 5 to 8 per cent — is a major challenge from the largely unregulated cable industry which can keep costs down by under-reporting its subscriber base and, therefore, underpaying broadcasters, and by broadcasting pirated content with impunity. DTH's success, on the other hand, is a prime example of how transparency and regulation can work to the interest of the consumer. Where the cable business grew haphazardly and is now increasingly hostage to powerful local politicians, who rake in rents from an underserved market, DTH has grown under the gaze of strict regulation. Obviously, in a market as fragmented as this, consumer experiences vary widely, but most will attest to the relative reliability of the satellite dish over the digital cable and the experience of dealing with call centres rather than elusive local repair-men. There is some obvious discomfort now that the regulator is exploring the option of regulating tariffs DTH operators charge consumers — including their jam-earning value-added services (movies-on-demand and pay-per-view) — since this is bound to squeeze margins even further and put them at an even greater disadvantage vis-à-vis cable. But perhaps this anxiety is overdone. "Unfair competition" can often force greater efficiencies, as it did in airlines and engineering — and the consumer certainly stands to gain.