BANGALORE (Dow Jones)--India's telecommunications regulator plans to give separate licenses to local cable operators and multi-system operators in a bid sustain growth in the cable television industry.
The Telecom Regulatory Authority of India, or TRAI, has also recommended that these operators digitize their networks to take on competition from the technologically-advanced distribution platforms of direct-to-home and Internet protocol television.
Analysts said that while the proposals may take a while to be accepted, they will help the industry become more organized, make subscriber addressability more transparent and attract funds.
The digitalization of networks and subscriber disclosure norms though will face a lot of resistance from local cable operators, who stand to lose revenue, they added.
"Due to the absence of any licensing and regulatory framework for the cable TV sector, the growth so far may not be sustainable," TRAI said in its draft recommendation to the government, issued Tuesday.
India had 78 million households with cable television at end of 2007, up from 410,000 in early 1992, TRAI said.
It cited a Media Partners Asia Ltd. report as saying currently there are about 128 million households with TV out of a total of 225 million households, illustrating the potential for the cable TV industry.
Currently, local cable operators and multi-system operators have to register under a single annual license as cable TV operators, although both have different functions.
Multi-system operators integrate various channels from the broadcasters and pass them on to cable operators, who in turn distribute these channels to the subscribers.
"This is just a draft recommendation and it may be a while before the government takes any action on this," said a Mumbai-based analyst, who requested anonymity.
He added that the more organized the sector, "the more funds - local and overseas - it can attract for expansion."
Currently, 49% foreign direct investment is allowed in the cable TV sector. TRAI has recommended this be increased to 74%.
TRAI has proposed a one-time entry fee of INR10,000 for a district-level license and INR100,000 for a state-level license for local cable operators.
For multi-system operators, TRAI has proposed INR100,000 as an entry fee for a district-level license, INR1 million for a state license and INR2.5 million for a country license.
In addition, the operators should also pay an administrative charge of 10% of the license fee, TRAI said.
TRAI has also proposed that new local cable operators digitize their networks in the next three years.
Digitalization Of Networks
Existing local cable operators will have to digitize their networks in five years from the date of the notification of the new licensing regime, TRAI said.
Multi-system operators will be given three years from the date of the license to digitize their networks, or within five years from the notification of the new licensing regime, whichever is earlier.
"Digitalization of networks will lead to increased network capacity, which means cable operators will not be able to charge the carriage fees," the Mumbai analyst said.
In India, TV channels pay carriage fees to local operators to ensure their channels are aired, which enhances advertisement revenue.
Currently, local operators can only show a maximum of 106 channels, compared with the 339 channels available in India.
An unregulated cable TV industry has meant that only about a fourth of the actual cable TV subscriber base gets declared, say analysts, which results in huge losses for multi-system operators and in turn, the channels.
For this, TRAI has recommended that local operators will have to maintain details of payments from subscribers, which will mean "huge revenue losses for the cable operators," the analyst added.
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