10 March 2006

NEW DELHI, March 10 (Reuters) - An Indian court on Friday ordered the rollout of a long-delayed pay television system in the country's top three cities, cheering broadcasters and cable distributors in the world's third-biggest cable TV market.

The Delhi High Court on Friday quashed a government order of February 2004, which had scrapped the implementation of the conditional access system (CAS) in New Delhi, Kolkata and Mumbai. The court said the system must be rolled out in four weeks' time.

The court also ordered the federal government to pay a penalty of 100,000 rupees ($2,247) to the three petitioners -- Hathway, INCableNet and Siticable -- who had ramped up their facilities in anticipation of the rollout of CAS.

Cable distributors had invested over 8 billion rupees ($180 million), according to some industry estimates.

"Today's judgement is in the interest of consumers, as they will now pay per channel," said Roop Sharma, president of the Cable Operators' Federation of India.

At present cable users pay a flat fee for all the channels they receive -- except in the southern city of Chennai, where CAS was implemented in 2004.

The government had shelved plans for CAS in Feb. 2004 after opposition from cable operators, consumer groups and some state governments.

They said users would end up paying more and that thousands of cable operators would lose their jobs as set-top boxes received their programming direct from cable companies rather than from local, so-called "last-mile", providers.

Broadcasters have pushed for the system, as operators have tended to under-declare the number of subscribers they have, thereby saving on the fees they are supposed to pass up the chain.

Shares in Hinduja TMT , which owns a part of INCableNet, ended up more than 7 percent at 438.35 rupees in a firm market, while Zee Telefilms Ltd. , which owns Siticable, gained 3.7 percent to 185.05 rupees.

News Corp.'s Star group has a stake in Hathway.

India is set to become Asia's leading cable market by 2010 in terms of the number of viewers, the largest satellite market by 2008 and the most lucrative pay TV market by 2015, according to estimates by research firm Media Partners Asia.

Broadcasters get the bulk of their revenues from advertising now, but are looking to boost their subscription revenues.

Zee has already launched its direct-to-home satellite service, while Star's network, a joint venture with the Tata group, will launch later this year.

Firms like Hathway and INCableNet have also been launching technologies such as broadband Internet access to boost revenues.

"Convergence is inevitable: The faster it happens, the better," said Ashok Mansukhani, executive director of INCableNet. ($1=44.5 rupees) (Additional reporting by Rina Chandran in Mumbai)