ROADCASTING

The cable conundrum

Even as the conditional access system for cable television viewing is all set to be made a statutory requirement, the potential impact of the proposed changes on the industry and on consumers is the subject of an intense debate.

AMULYA GOPALAKRISHNAN
in New Delhi
DIONNE BUNSHA
in Mumbai

MOVING from the back alleys to the corridors of Parliament, cable wars are now being fought in the national arena. This battle is likely to change the face of the cable and satellite TV industry in India.

The Lok Sabha unanimously passed the Cable Television Networks (Regulation) Amendment Bill in May. But by the time the Bill reached the Rajya Sabha, it was enveloped in an intense debate on its viability and its potential impact on the industry and consumers. With the debate yet to be resolved, the proposed law may now be introduced through an ordinance. While it is strongly resisted by broadcasters, the Information and Broadcasting Ministry sees the amendment as being vital to bringing transparency and regulation to the chaotic Indian cable television market. This piece of legislation introduces, for the first time, a Conditional Access System (CAS) that enables consumers to buy their cable channels a la carte, rather than having to pay for the entire slew foisted on them by cable operators.

Large cable distributors like the Hindujas' Incable have been lobbying hard and long to get the Bill passed. If passed, subscribers to cable television would only be able to view pay channels through special set-top boxes. They would be billed on the basis of the number of pay channels they select, rather than being held liable for a monthly lump sum in accordance with the cable operators' own choice of channels.

The consumers' right to choose is the logic put forward by the Union Ministry of Information and Broadcasting in introducing the law. Pay channels are transmitted in an encrypted or scrambled form, and with CAS, those who do not wish to view them would receive a basic tier of Free To Air (FTA) channels at a reduced price. In order to protect public access to major entertainment and information content, the government plans to include a 'must-carry' clause in the FTA category. This means a genre-wise breakup, ensuring that people who opt to settle for the basic tier are not deprived of a staple diet including general entertainment, news, film, music channels and the like.

Satellite broadcasters who now offer a bouquet of channels - some FTA and some pay - have reportedly been working behind the scenes to stall the Bill in Parliament. They fear that they will lose advertising revenue with the introduction of CAS. Less popular channels, which are now aired with other pay channels, may get less advertising support. They may even have to transform themselves into FTA to remain relevant, making them even more dependent on advertising.

Anil Baijal, a senior official at the I&B Ministry who was involved in drafting the Bill, says that the CAS will put people in control: "They can pay minimal rates for the FTA basic tier, and select pay channels depending on their interest." Also, set-top boxes would bring in far greater transparency. They would provide a real picture of media consumption habits, and eliminate problems such as under-reporting of the number of subscribers by cable operators and inflated ratings by broadcasters. The system will also help the government plan for entertainment tax accruals in a realistic fashion. Cable operators are required to announce the prices of FTA and pay channels.

The pricing and regulation of the basic tier and the cost of the new technology, as well as the practical issues involved in implementing CAS, have been thrashed out by a consultative process involving the government, broadcasters, cable associations and consumer groups. A Task Force was set up in July 2001 to identify ways to implement addressable cable systems, and evolve standards for the new technology required. According to the latest NRS (National Readership Survey) figures, there are around 45 million cabled homes in India. Of these, set-top box manufacturers estimate, about 10 per cent would choose pay channels. They calculate an average cost of Rs.1,500 to Rs.2,000 for an analog set-top box and about Rs 5,000 for a digital one, says the Ministry.

Some of the fiercest opposition to CAS has come from the usual suspects - Star, Sony and Zee, the three big broadcasters whose audiences will now be splintered. If they remain pay-channels, their subscription as well as advertising revenue could take a beating if people do not take to the new technology. Also, with the ratings game becoming more transparent, their advertisement earnings will be directly affected. This means that special interest channels cannot ride piggyback on the popularity of other channels in the same bouquet. Someone in rural India, for instance, could choose the widely-watched Star Plus without having to pay for Star World, which remains popular only with urban upper-class audiences.

Naturally, this could radically disrupt the marketing strategy of broadcasters, who stand to lose both advertising and distribution revenues if people do not opt for set-top boxes. Broadcast networks now have to decide whether to rely more on advertising or subscription for their revenue, and cannot straddle both as they have been doing all this while. Analysts feel that this may put pressure on many current pay-channels to go FTA, in order to maintain their reach and ratings.

However, Shantonu Aditya, who heads Sony Entertainment, denied this possibility. "We believe that the One Alliance bouquet consisting of SET, MAX, AXN, Discovery, CNBC and Animal Planet is a robust bouquet and all the channels have dedicated viewers and each channel can stand by itself as well. There is no question of going Free to Air."

CAS has definitely ensured a more competitive era for big broadcasters, when channels that opt to remain pay-channels will have to make every effort to woo audiences with quality programming. "Content is King," says Aditya. This claim is echoed by Ankan Biswas of the Consumer Electronics and Television Manufacturers Association (CETMA), which is aggressively lobbying for the speedy passage of the Bill. Biswas invoked the Darwinian efficiency of the technological marketplace: "Me-too channels will wither away. Good channels will thrive."

However, in the absence of a two-way addressable digital CAS systems broadcasters gripe that cable operators can still deflate figures. According to Shantonu Aditya, "while we support conditional access, the bill in its present form does not address the under-reporting issue fully. The receiver box is an analog one, which can be easily tampered with. Also, the subscriber management system continues to stay with the operator and not with the broadcasters or an independent authority. Thus the scope for under reporting continues." Biswas admitted that analog systems can easily be twisted, both by cable operators and by hackers, and can create major piracy problems. "The entire concept will work on systems being strong enough to resist piracy and hacking. Otherwise cable operators and channels will not make money and CAS will not work," said Biswas.

BROADCASTERS deflect the issue by advocating DTH, a direct-to-home system, that eliminates cable operators and brings the entire array of choices into individual homes. However, this seems rather unworkable as a mass proposition considering the enormous investments DTH will require, in terms of equipment and service charges. As of now, only a small minority of viewers can possibly spend that much money for television entertainment.

Meanwhile, CAS brings some level of addressability and choice to the Indian market, says Biswas. "CAS is actually DTH on cable. So when DTH hits the Indian market the concept will be more acceptable. Internationally, DTH and addressable cable complement each other."

Although the Rupert Murdoch-owned Star Network has a stake in Hathway, one of the big cable distribution networks in Mumbai, its main priority is to introduce DTH. Star's chairman and chief executive, James Murdoch, is pushing the government to relax DTH guidelines, which restrict foreign equity holding to 20 per cent. But the prices of DTH equipment and programming are likely to be far higher - Rs.12,000 to Rs.15,000 for a set-top box and around Rs.400 towards monthly subscription - putting it out of reach of most people.

Cable operators are keen to head off the DTH threat by bringing their services under a formal regulatory system. They feel that CAS will eliminate the tug-of-war situation between them and the broadcast networks.

Cable operators routinely under-report the number of subscribers, which cuts into the subscription revenues legitimately due to the broadcaster, who in turn responds with aggressive prices. According to Vikki Choudhry, president of the Delhi-based National Cable and Telecommunications Association, this practice cushions operators from the arbitrary price-hikes levied by broadcasters, since it is not feasible to deflect these prices into the consumer's cable bill. Roop Sharma, who heads the Cable Operators Federation of India, asserted that the amendment will prove beneficial for the entire industry: "Broadcasters arm-twist the operators who are forced to under-report subscribers and cut down on service expenses - the entire cycle has gone bad." However, the addressable cable system envisaged by CAS will create a more regulated, responsible system.

In the short run, however, this move radically overhauls existing patterns of the cable industry. Colonel K.K. Sharma, who publishes Cable Quest magazine, punctured the official argument of increased choices. "If you think about it, all three sections - broadcasters, cable operators and consumers - are going to have their choices narrowed." For starters, it will strip the public of access to the 70 channel smorgasbord they have been accustomed to. Estimates of the basic tier rates veer between Rs.45 to Rs.150, and the size of this basic tier is tentatively pegged at 30-35 channels, though there could be more. Even so, "empowerment and choice" sounds pretty hollow, considering that the Indian viewer pays much less for media content compared to other parts of the world. The subscription rate is currently Rs.150 to Rs.250 a month in the urban areas and Rs.75 to Rs.125 in the rural areas. Also, the consumer gets the best of both worlds - watching FTA channels as well as unlimited popular pay channels such as Sony, Star and Zee.

While this situation is artificial and is bound to give way to a more accountable one, analysts question the motives of the Bill. Paranjoy Guha Thakurta, who currently heads the Delhi-based School of Convergence, called it "a cure far worse than the ailment." He quoted Section 4A (1) of the Amendment Bill as an example of unwelcome and intrusive regulation: "Where the Central government is satisfied that it is necessary in the public interest to do so, it may, by notification in the Official Gazette, make it obligatory for every cable operator to transmit or retransmit programme of any pay channel through an addressable system with effect from such date as may be specified in the notification. Different dates may be specified for different States, cities, towns or areas, as the case may be." Guha Thakurta expresses the fear that this 'draconian legislation' would vest dangerous power in the government, and perhaps even enable it to muzzle a free dissenting media in the name of 'public interest'.

While broadcasters also voiced the fear of clumsy if not stifling government intervention, Ministry officials dismissed these accusations. "We only suggest a basic category of genres that have to be included in the FTA channels. Beyond that, it is left to the play of market forces," said Baijal. The Ministry has kept clear of any role in the pricing of pay channels. It plans to introduce CAS in a phased manner, starting with the four metros. Also, they are considering a district-level panel to fix the price and channel package for each specific area.

Consumer activists like Pushpa Girimaji resent the fact that the government holds "the power to decide on behalf of consumers, which channels and how many channels in the basic tier would make a good mix of entertainment, information, education and such other programmes." "The bill curtails the consumers' freedom of choice and this is unacceptable," she says.

Meanwhile, there are potential pitfalls to providing entertainment on a sliding-income scale. If pricing decisions of pay channels are left entirely to the market, this still leaves broadcast networks the option to increase prices abruptly; for example, sports channels may choose to inflate their rates right before a major event, leaving consumers with no choice but to pay if they want to watch. Thus, leaving it solely to market dynamics might create an undesirable caste system where certain kinds of content are put out of the reach of lower-income groups.

The government must take every precaution to ensure that the basic tier leaves these consumers with a reasonably attractive package. The method of implementation is the key to the success of CAS. Instead of the one-size-fits-all logic of centralised administration, the Ministry expects each locality to come up with a basic tier suitable to that particular area.

However, as Guha Thakurta pointed out, there has been no attempt to set up a regulatory body to settle disputes within sections of the industry. He wondered about the Bill's timing and the turf clash with the Convergence Bill, which has been on the anvil for long.

While there is general consensus on the potential benefits of conditional access, the debate is centred on the system in its current form, which leaves many questions unanswered. Girimaji, who was part of the Special Task Force on CAS, voiced her reservations on the haste to push through the law. She insists on the need for a regulatory body that would conduct a scientific survey among consumers to identify the composition of the basic tier. She emphasises the need for an independent grievance redress system. "What about performance standards expected from cable operators? What about the price and after-sales service for the set-top boxes? Unless these finer points are resolved, it would be disastrous to introduce the CAS."

It might be an awkward balance, but the real test for implementing CAS lies in the manner it addresses all these concerns.