The Hindu : CAS regime: market not fully ready to make switch

Online edition of India's National Newspaper
Sunday, Jun 01, 2003

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Business

CAS regime: market not fully ready to make switch

By Ramnath Subbu

MUMBAI MAY 31. The Conditional Access Services Amendment (CAS) in the Cable Network Act which is notified for implementation by July 14 this year, has created a stir in the cable television industry.

The CAS will be implemented first in the four major metros which have 6.4 million cable homes. Once implemented, it will dramatically alter the nature of the Cable TV industry with consumers choosing and paying for what they want to watch.

There has been much debate over what the customer would and should pay for a set-top box (STB), a device to decode signals from operators and a facilitator on which the whole CAS system is based. It was earlier estimated that consumers would pay between Rs. 4,000 and Rs. 7,000 per STB, which is not domestically produced and attracted customs duty of 51.8 per cent.

After many representations, on May 29, the Central Government slashed duties on STBs to 5 per cent. Basic customs duty was cut 20 per cent and countervailing duty (CVD) and special additional duty (SAD) of 16 per cent and 4 per cent have been waived. As a result, the STB will now cost between Rs. 2,700 and Rs. 4,000. However, this rate will be available only till July 31, although the Union Minister for Information and Broadcasting, Ravi Shankar Prasad, has not ruled out extending the period of the duty cut.

In the 12 years since its entry into India, the cable television industry has grown to reach 45 million homes and figures from the Indian Readership Survey (IRS) show that urban cable TV penetration is 85 per cent and rural 33 per cent. In the last three years, the industry has been plagued by blackouts by broadcasters, customer protests over hike in subscription fees and a worsening condition of the operators due to frequent hike in fees by the broadcasters.

The thought of having a one-time payment for the STBs would be daunting but some multi-system operators (MSOs) have announced attractive schemes such as lease rentals with low deposits. SitiCable is offering a scheme where there would be a refundable deposit plus a daily rent starting at 60 paise a day. It is offering an STB at Rs. 2,750 plus taxes. Hathway is offering an early bird scheme of Rs. 999 (refundable) plus rent of Re. 1 per day. The regular scheme consists of Rs. 2,600 (refundable) and a rental of 60 paise a day. InCableNet is offering a scheme with a deposit of Rs. 999 plus a daily rent of Re. 1 up to the third week of July. Other schemes are being worked out.

The STBs are imported as there are no Indian manufacturers making them in volumes. "Also, the problem is that Indian STB makers are unable to meet the specifications of Bureau of International Standards (BIS)," said Ashok Mansukhani, Executive Vice President, Hinduja TMT, and director, InCableNet, an MSO who is importing around one million STBs.

InCableNet has already dedicated around Rs. 150 crores, Hathway Rs. 100 crores and SitiCable similar amount for their systems. Mr. Mansukhani said, "InCableNet reaches around 1.8 million homes in Mumbai and Delhi. Earlier, we estimated that 20-25 per cent of our customers would opt for the CAS. However, with duty reduction, we estimate that around 30-35 per cent would opt for it".

According to K. S. Raman, former president, Consumer Electronics and Television Manufacturers Association, and Managing Director, Sundarsons Electronics, "In the span of about one year, the CAS system has been decided upon and the customer has to pay for a number of things for no fault of his".

There was the option of the Direct to Home (DTH) transmission where signals are received directly through a small dish antenna and an STB. Mr. Raman said, "The correct system would be the DTH where the customer does not have to depend on the cable operator (MSO). If a customer must pay, then the DTH is the right system as the middleman is eliminated".

However, Mr. Mansukhani said, "DTH is a costlier option. The content is available direct to the individual customer and there is no control over it. Besides, licensing fees were far too high. DTH would have worked out to at least Rs. 1,000 a month".

As regards, content, very little is known about which pay channel is offering what and at what price although there is talk of a `Tier' system with a `basic pay' tier graduating into a `premium pay' tier. The broadcasters' `bouquet' rates for bundled channels or `one-off' rates are awaited. "The problem is that the broadcasters are still to give the `a la carte' prices. It is necessary to have prices even if bundled," said Mr. Mansukhani.

The CAS regime is, in all likelihood, being ushered into a market not fully prepared to make a switch. The entire issue today revolves around the technical arrangements for CAS' introduction and not about content. Who would benefit from CAS is a big question. Broadcasters like Star would be apprehensive because it would definitely lead to a dip in advertising revenues due to a shrinkage in the number of viewers. The MSOs or cable operators such as Hathway or Siticable would not want it as they then would be open to strict monitoring.

The customer or TV viewer would certainly not want it because they have to pay extra to buy the STB and monthly rentals would most certainly be higher. Barring the overseas suppliers of the STBs, the urgency shown in implementing CAS could unfortunately work to the detriment of all concerned.

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