12 August 2006

Freedom from the cablewallah!
Surajeet Das Gupta
Business Standard
(c) 2006 Business Standard Ltd.

You love them, and you hate them, and now you can do without them. Which gives you the choice to sit back and look at their offerings _ which aren't too pretty _ to decide whether you want to live with your cablewallah, or start a dalliance with any of a slew of new services, all of it guaranteed to give you hundreds of channels, 24x7, with clear transmission quality, pay-per-view films and programmes, and a whole set of choices hitherto unknown to the Indian television viewer.

Better than cable? Apparently so. Even better: you won't have to deal with your grouchy cablewallah and his lousy customer service because he's changing his set-up too. Already, select cable operators have begun to shift from the analog format (which is what you watch) to the digital in a bid to protect their turf. But the big news is the direct to home (DTH) format to leverage its superior technology and woo away discerning customers from cable. DTH isn't new (see box) but it's the biggest thing that's happening to television viewing.And on Tuesday, television viewers will get another taste of independence as Tata-Sky (a joint venture between Tata and Star TV) hits the markets with its DTH platform, ending the two-year monopoly of Subhash Chandra's Dish TV (which has 1.3 million subscribers in the private DTH platform space, so far restricted to non-metros).

At an introductory price of Rs 2,999 as upfront charges, and Rs 200 a month for 55 channels, Tata-Sky has already brought the battle straight into the cable operators' court. Says Vikram Kaushik, managing director of the new company, "We are already cheaper than what customers pay monthly, which is an average of Rs 220 for cable. We will be disappointed if we don't become the leader in DTH in the first year. What we will offer customers is service, which they have never enjoyed before."

Not that Dish TV is willing to relinquish its first-mover advantage. So far, it had concentrated its spread in regions where cable was not available, but is now correcting that to make a grab for the larger metro and city markets. Says Dish TV boss Jawahar Goel, "We estimate that 60 per cent of the incremental subscriber base will come from urban markets which were only 15 per cent of our business till now. But now we have both the Star and Sony bouquets on our platform (which have been made available only a week or two ago), so it makes sense to tap the metros."

Tata-Sky has already tied up with 15,000 apartments and housing societies in Mumbai and around Delhi by installing a single dish antenna (instead of separate antennas for every connection, which can be cumbersome in a condominium). But that's a move that has met with stiff opposition from cable operators who are crying hoarse and have already complained to the regulator (Telecom Regulatory Authority of India, or TRAI) that the move is anti-competitive as it deprives them entry into these societies. (Tata-Sky ripostes that it is for each housing society to make its choice, and individual flat-owners can say no, so how is it monopolistic?)

The cable operators haven't simply rolled over to allow DTH access to their traditional turf. Big cable operators like IN Cable or Hathway have begun investments to move from analog to digital, and are putting up a fibre optic cable backbone in the major metros to offer value-adds like broadband (and perhaps also telephony) at a bundled pricing.

Their expectation is that at least 30 per cent of the existing cable customers (around 2 million) will choose digital cable (with a set top box) in the metros once conditional access system (CAS) gets implemented. Come Diwali then, IN Cable will launch pay TV with both Hindi and English movies on demand. Says Mansukhani, "We will all offer triple play in the next two to three years; our technology allows us to offer more channels, broadband and even telephony. And the digital boxes will make it possible to beam 500 channels. So why should customers shift?"

So, what's at stake? The numbers supporting the fight is 65 million cable homes across the country, and 50 million other TV homes that don't have a cable connection yet. Still, the immediate battle is being fought in the 6 million relatively affluent cable homes (like south Delhi) in the four key metros (Delhi, Kolkata, Chennai and Mumbai). The reason is simple: by December end, cable customers who live in certain notified areas in these cities will have to fork out the cash to buy a set-top box if they want uninterrupted TV viewing of pay channels. This has been mandated by the government, which has decided to roll out its controversial CAS in a phased manner.

You don't have to buy a set top box, of course, but then you'll only get to view free-to-air channels _ and where's the interest in that?

But cable customers also have the choice of taking DTH at an upfront cost, followed by monthly rentals more or less similar to that of digital cable. Agrees Ashok Mansukhani, executive director in cable major Indusind Media, and president of MSO (Multi-System Operators) Alliance, the association for the big cable boys, "It's a life and death battle for us." The spoils, he points out, will go to the player who controls the customers.

If cable operators are going digital and offering more choices, why should customers shift to DTH? Nor does the government policy offer any exclusivity _ broadcasters have to offer the same channel at the same price to both cable as well as all DTH platforms. Unlike DTH's 170-200 channels, digital cable can take in over 500 channels besides broadband and two-way interactivity. Says Peter Mukherjea, CEO of Star Group India, "What we haven't seen is the retailing of entertainment. No one has reached the customers before, but now that will change."

That is what DTH operators are banking on. As far as pricing goes, with CAS being implemented, the upfront costs between a cable and a DTH box might not be very different. Nor would rentals vary sharply. Undoubtedly, the key differentiator will be service and meeting customer expectation. Tata-Sky, for instance, will have a 24x7 call centre with a guaranteed rectification target of four days on complaints. A force of 3,000 engineers will not only install the system but ensure that you know how it works.

To avoid the cumbersome billing cycle, Tata-Sky is tying up with companies as diverse as Indian Oil and LG to offer recharge vouchers across various locations. It has already planned to double its distribution network to 20,000 in the next phase of action. Says Kaushik, "What we will bring in is a customer service culture that does not exist in this industry, and that will be the key differentiator."

Based on its research (that most homes do not view more than 15 channels), Tata-Sky has decided against the numbers game, limiting itself to 55 channels that include Star and Sony. Adds Kaushik, "KU band transponders, on which DTH works, are in short supply, and while we have 12 of them, our aim is to use them judiciously for value-added services."

Others are creating newer niche markets which, though small, consist of customers ready to pay more for increased conveniences. Dish TV, for instance, has introduced a set top box to offer 100 hours of recording time at Rs 16,000. Goel claims they have sold a few thousand boxes, but it is a market in its infancy. Dish is determined to add value by offering packages which will take cable a long time to get there. So it has introduced gaming to offer customers six games at no additional cost and pay-per-view TV.

Come September, Zee Sports will beam the cricket tri-series in Singapore (where India is playing) with an array of choices. The viewer can choose the camera angle to see his favourite batsman or bowler, get player statistics at a press of a button, or listen to commentary in a choice of six languages. All this at no extra cost to Dish TV customers _ which could become a major selling point.To add to its distribution prowess, Dish has tied up with HCL to distribute the DTH product. But unlike Tata-Sky, it plans to offer 200 channels on the DTH platform.

Cablewallahs agree that there will be a churn from cable to DTH, but that will be limited to a mere 10-15 per cent over the next few years. But the market will also grow (each TV in multiple homes will needs its own set-top box). Says Vivek Couto, executive director of Media Partners Asia in Hong Kong, "We assume a gradual deceleration in cable subscriber growth over the next decade, and greater migration from analog to digital. Driven by DTH competition and potential deregulation (tariffs rates will not be fixed by the regulator), we expect cable to gradually consolidate to offer bundled digital video and Net services."

His company clearly sees DTH as the winner in the long run and is projecting 20 million DTH subscribers by 2015 compared to around 4.5 million digital cable subscribers (who will have set top boxes). But analog subscribers will still dominate the scene with over 100 million analog cable users.

Are cable operators ready for the challenge? Independent cable operators say their days could well be numbered. Laments Roop Sharma, president of the Cable Operators Federation of India, "The cable operators will die with DTH which will initially price their service cheap to kill us, and then raise it once you have bought the set top box." Even leading broadcasters say they are unprepared for the change. Says one senior executive, "Cable operators have their strengths. They had a year-and-a-half to prepare for DTH but have done nothing _ no marketing, no reaching out to the customers, nothing."

But Mansukhani and the MSOs aren't perturbed. Mansukhani points out that the big cable boys are working overtime with the government to push digitilisation of cable faster, with the Commonwealth Games as the peg. The target is to offer digital cable in all cities with a population of 1 million. Points out Mansukhani, "We are waiting for the government's direction to the TRAI proposal on reducing the cost of universal license fee so that we can offer triple play, which includes telephony." Whichever way the battle goes, one thing's for sure. TV viewers are in for some seriously good times (and offers) ahead.