The pay TV debate is seriously hotting up in India. Even as channels slug it out over subscriber bases and rate hikes, the cable industry is irked at the broadcasters‘ apathy to its woes.

indiantelevision.com proposes to initiate a healthy debate on the issue and possibly throw up a few viable solutions to the impasse.

In this piece, Hinduja TMT executive vice president Ashok Mansukhani holds forth on the side of the cable industry.

The National Readership Survey 2001 reveals that television through cable is currently available in 38 million homes. The reach of television in urban areas is 84.7 per cent in urban areas/towns with population of one million and above and 32.7 per cent in rural areas. The Survey further reveals that in urban areas, a saturation point has almost been reached. Most of the growth in the last one year has been in semi-urban and rural areas.

POTENTIAL FOR GROWTH :

A key factor to note is that while the growth in cable industry has been only 7.1% in the last one year, the potential for growth remains high. The total number of television homes is currently estimated at 70 million while the total number of cable homes is 38 million. This means that there are another 32 million homes in the target reach of the cable industry in terms of current estimates. Viewers in metropolitan cities have the potential to receive approximately 150 TV channels from at least 75 satellites. The importance of television to inform, educate and entertain cannot be overstressed in these troubled times.

CABLE ACT 1995 :

For the first five years of the last decade, the cable industry mushroomed and indeed thrived in a non- regulatory atmosphere. In 1995,the Cable Network Regulation Act was brought in to regulate the industry. One immediate impact was the entry of large companies, which consolidated the small operators into becoming franchisees/associates of the multi system operators (MSOs). This led to closure of many customer service centers known as head-ends as small operators began to take service from the MSOs. Even so, today there are an estimated 40000 cable operators.

A cable headend - heading for trouble?

CABLE OPERATORS :
The present size of the Indian cable industry at 38 million homes is largely due to the entrepreneurial efforts of these local cable operators who have built the industry from scratch spending hundreds of crores without any financial support from banks and financial institutions to create a massive cable infrastructure enabling more than 90 channels including 20 Doordarshan channels to be made available to the viewers at an average price of approximately Rs. 100/ a month.99% of all satellite TV programmes are brought to the homes of the rich and poor through these cable operators. The cable industry is today upgrading its infrastructure to provide return path capability for broadband and Internet access and ultimately cable telephony.

FOREIGN PAY CHANNELS :

Apart from 20 Doordarshan channels, the balance channels are being beamed from foreign uplinks at Singapore, Hong Kong and Bangkok. The foreign channels entered the Indian skies a decade ago in a free- to- air mode. Over passage of time under the guise of digitalizing feeds they began to encrypt the signals by forcing operators to buy decoders at exorbitant prices. Ultimately they began to convert the free-to-air channels to pay channels. Here too there was a gradual increase in the pay-channel subscription rates from a couple of Rs 2.85 to an average of Rs. 40 at present for the Star package, Rs. 42 for the Zee Turner package and Rs 24 for the ESPN-Star Sports package. The net rise in pay channel cost for cable subscribers has been as high as 400% in the past five years.

PROBLEMS OF CABLE INDUSTRY :

The ostensible cause for the steep increase in pay channel rates has been the alleged steep increase in the cost of sourcing content and alleged under -declaration of subscriber base by cable operators. The cable industry has brought out many irregularities being committed by the pay channels but government has failed to act leading to frequent disputes which frequently result in switching off of signals by pay channels and consequent dissatisfaction with cable operators by subscribers.

KEY ISSUES : The cable industry perspectives on some key issues are :

BUNDLING OF CHANNELS : The pay channels bundle weak channels with little or no viewer-ship with popular channels and demand to be paid on a package basis for channels not desired by the subscribers. They refuse to provide an ala carte price nor is there any means at present to restrict channels to only interested subscribers by providing pay channels through a set-top box. Globally, pay channels are subscribed on the basis of pay-for-what-you-view. In India due to absence of regulations for mandatory conditional access, the cable operators are forced to subscribe to the entire bouquet and also absorb the entire cost of pay subscription demanded by the pay channels even if the subscriber does not pay. This is seriously affecting the financials of major MSOs like Incablenet, Hathway and Siticable.

DOUBLE BENEFIT : Globally pay channels charge either sufficient subscriber rates or charge adequate advertiser rates to cover cost of content and operating costs including satellite transponder costs. In India in the absence of regulation the pay channels are enjoying best of both the worlds by collecting both subscriber revenue for viewers and advertiser revenue from advertisers and are frequently increasing both subscriber and advertiser rates on so called popularity based on television ratings points which themselves are known to be cooked up and fraudulent and have now been discarded by major broadcasters like Zee and Sony.

UNJUSTIFIED PAY RISES : Barring specific prime time programmes, audience research data shows that most channels do not have regular viewers. The fact is that viewers watch programmes not channels. This is so even for sports channels. When India plays a cricket match then viewer ratings soar whether it is on Doordarshan or ESPN. When golf/baseball and basketball are telecast the viewer-ship is so insignificant that it does not appear in the audience ratings. Yet every 3-4 months pay channels specially sports channels are raising rates arbitrarily and want to be paid for all 365 days and entire 24/7day environment without any justification.

ILLEGAL SWITCHING OFF :

In the absence of agreement with the cable industry or acceptance by the subscribers the pay channels resort to illegal switching off of signals causing great economic hardship to the cable industry and irritation to the viewers who on the one hand blame the cable industry for non-provision of channels and on the other are not willing to pay the substantial hike in the subscription cost.

REIMBURSEMENT OF CABLE INFRASTRUCTURE COSTS :

Over the past decade the cable industry specially the multi system operators have spent hundreds of crores to set up the 35 million home cable industry without which Doordarshan and satellite channels will not be able to even reach the viewers. Globally cable systems are compensated for their infrastructure costs by payment of carriage fees or by allowing affiliate advertising for fixed time slots.

CRIPPLING OF CABLE INDUSTRY :

In India the pay channels are not willing to help the cable industry to survive by any means of helping them to recoup the costs. The cable industry is turning sick due to a conscious campaign by the pay channels to make cable service so costly that the viewers do not mind the introduction of direct-to-home service by a leading pay channel provider, which will lead to the death of the cable industry and the loss of employment to lacs of people connected with the cable industry. This is the primary cause of under- declaration and non- payment of pay channel dues by operators leading to the vicious cycle of signals being switched off, litigation and discontentment of the viewers.

BOGEY OF UNDERDECLARATION :

The pay channels are now demanding to be paid for enhanced number of subscribers on the plea of so- called popularity of their channels without being able to justify viewer-ship numbers or frequency and without regard to television rating points, which show pathetically poor viewer-ship trends even in prime time slots.

MANDATORY CONDITIONAL ACCESS :

In the absence of mandatory conditional access it is impossible for the cable operator to restrict provision of channels to viewers who actually want to watch those channels or pay for them. Further the demand for full declaration is a non-starter because not a single television rating supports the plea of the pay channels that people are watching their programmes on a 24/7 or a 365 day basis.

The cable industry has no dispute with the desire of broadcasters to charge for their content or for viewers to pay for these channels. The problem arises when the pay channels continuously want increase in declaration and per subscriber rates and the cable operator is unable to restrict provision of pay channels to the paying subscribers.

PAY AS YOU WATCH :

The pay channels are not interested in supporting the demand of the cable industry for mandatory conditional access because they are aware that given the choice both cable operators and subscribers would choose not to watch a majority of the pay channels and would only be willing to pay for the actual period of viewing instead of the flat 24/7/365 day rate as demanded as present.

ACQUISITION OF SMALL CABLE NETWORKS BY PAY CHANNELS TO FORCE ARBITRARY PAY RISES :

Leading pay channels have begun to acquire small cable networks and are consolidating them into multi -system operations to create a monopoly for their bouquet of channels. This is more pronounced for Hindi entertainment channels and sports channels. Their objective is to control the distribution of content to Indian homes through digital decoders, which are authorized or deauthorised from foreign locations.

DTH - A revolution in the air?

PLOY TO HASTEN DTH REGIME :
Their ultimate objective is to make the cable industry financially unviable so as
to enable introduction of direct to home telecasts at exorbitant rates which
will create a situation by which the mass public will not be able to afford television, thereby denying governments right to inform, educate and entertain the public through Doordarshan.

CARTELISATION BY FOREIGN CHANNELS :

A new and alarming development for the cable industry is the effort through the formation of the Indian Broadcasting Federation for cartelisation on rates and joint broadcast industry actions like switching off of signals by foreign pay channels. Recently the Zee group has entered into a distribution alliance with Turner-AOL group, which in turn is talking to Sony group for a joint distribution effort. Star is also talking to both these pay channel groups for a similar distribution effort.

The net result is that a foreign pay channel cartel has already been formed which has immense power to influence the supply of content not merely on commercial terms but in terms of the information provided to the normal viewer which is very dangerous in the present day disturbed environment. This also results in Doordarshan being marginalized. This has serious potential socio-political implications as decoders from abroad control the content.

CONVERGENCE BILL : There is no fixed time schedule for the passage of the historic Convergence Bill. The problems raised above of the cable industry would be largely resolved when the Convergence Bill becomes law. In the absence of the passage the pay channels are making merry at the expense of the cable industry.

PRAYER :

• Till pay channels are compulsorily mandated to be available only through conditional access systems on an open architecture system, the pay channels should be directed by the government to freeze the connectivity declared by the cable industry as on 31/12/2001 and the subscriber rate on the same date.
   
• To enable provision of set-top boxes at affordable price to the subscribers, the government should reduce the duty on these boxes to zero for a period of five years.
   
• The cable industry should be compensated for the cost of servicing the up gradation of network and collection of pay channel subscription by a 15% markup as availed of by the advertising industry in India.
   
• The passage of the Convergence Bill should be expedited so that the control of airwaves passes into public hands as mandated by Supreme Court in the historic Cricket Association of Bengal 1995 judgment.