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October 21 2012

Digital wars
Sayantani Kar / Mumbai
Copyright 2012 Business Standard.

Cable operators & DTH companies wage fierce battle to retain old clientele, win over new

Cable TV and direct-to-home, or DTH, operators are engaged in a fierce battle in the four metros of Delhi, Mumbai, Chennai and Kolkata. By October 31, the two million or so analog TV households need to upgrade to digital feed or face blackout. Their options are either digital cable or DTH. This is just the first round. The rest of the country has to move to digital TV in three phases by December 31, 2014. The outcome of the first phase, the hits and misses, will pretty much determine the result of the other phases. The stakes are huge: 140 million analog homes will be up for grabs in the next three phases. Behind the placid environs of bedrooms and living rooms, a fierce battle is being fought for television feed with all the weapons in the armory: price wars, freebies et al.

It is a battle that will bleed all in the beginning: DTH companies bear a cost of up to Rs 2,500 to acquire a customer, while the cost for digital cable TV is around Rs 1,000. But these are costs they must incur, losses they must bear, to ensure their survival in the long run. So, both the parties have begun to stock up on hardware set-top boxes, dish antennae et cetera and have beefed up their retail network, improved their customer interface and upped their installation capabilities. Anybody who runs out of stock will lose customers, perhaps forever, to rivals. "The nuts and bolts that need to get fixed on ground are the toughest," says Harit Nagpal, CEO of Tata Sky, the country's second-largest DTH operator (market share of 19 per cent, the same as Airtel Digital). "When a user who has not digitised for the last six years asks for a connection on October 31 at noon, we have to ensure that we get it to him by 2 pm. When this gets replicated by hundreds of people, you can imagine the scale of infrastructure needed to service that demand."

Of the 9.4 million TV homes in the four metros, according to a survey done by the ministry of information & broadcasting based on the 2011 census, 6.84 million, or over 72 per cent, are cable TV homes, and 2.56 million, or less than 28 per cent, are DTH homes. Of the cable TV homes, over two-thirds have already digitised, which leaves almost two million homes up for grabs. So, cable TV actually has an edge over DTH here it already has a presence in the target households. All the customer has to do is install the digital set-top box. Cable TV includes the multi-system operators, or MSOs, the large aggregators, and local operators for last-mile connectivity. With digitisation, MSOs will interface with the consumers directly through a set-top box; they will service as well as bill them directly. This puts a question mark on the neighbourhood cable operator. Some of them might reinvent themselves as the sale and service agent of MSOs.