Mediatrends-TV Media

Article

August 27, 2002

by Ruchita Tandon, Database Manager - Mediaware Infotech

I N D E X

CAS for the un-initiated

The Set-Top Box (STB)

CAS & Effect - the effect of CAS on stakeholders

CAS Implementation in India - The Roadmap

Concluding Comments

Acknowledgements

In addition to the vital inputs provided by the numerous professionals of the Indian Television Industry, we would like to specially acknowledge the inputs of Mr. Atul Phadnis - Director - 'S' Group, TAM India.

Background
For the past few months, there has been a hue and cry about the steady rate hikes in cable subscription fees in India over the past two years.

In May 2002, the Govt. of India tabled the "CAS Bill" in the lower house of parliament (Lok Sabha), where it was unanimously approved.

In July 2002, the Govt. refused to present the "CAS Bill" in the upper house of parliament (Rajya Sabha), choosing to do a review, instead.

The result : strident protests from cable operators.

Cable operators even declared "black-out" for a few days to persuade the government. They claimed that their action was in the interests of the viewers - to protect their right of choice. (This, incidentally was the same line taken by the government while introducing the CAS bill).

The government deferred presenting the CAS Bill, giving no clear deadline.

Meanwhile, industry bodies continue to talk with the government.

To throw some light in this scenario, we decided to examine the issues involved.

CAS for the un-initiated

CAS which stands for Conditional Access System, is a technology that allows the cable operator to provide selected channels to a subscriber.

Or, looked from another angle, CAS allows the viewer to select the channel(s) of his choice.

CAS is also referred to as an "addressable system". The purpose of introducing CAS are many, but the chief purpose is, or should be to set the direction of the future of the Indian Television Industry.

CAS has been implemented in most developed countries, with more or less similar results. The implementation of CAS being in phases demands new equipment/cabling. This gives viewers a choice of retaining their existing subscriptions (without pay channels of course) till they choose to invest in set-top-boxes. Or till the cable operator enforces CAS. It has been found that in the long run, more than 50% of viewers defer set-top-boxes because of the cost. This delay along with other viewer behaviour, leads to substantial segmentation in viewership.

Role of CAS in distribution

The Set-Top Box (STB)

The Indian I&B Minister has been quoted saying that the (economy model?) STB will be made available for as little as Rs 1500/- ($30/-). Officials from the consumer electronics industry say that the cost of the STB may vary from Rs 1500/- to Rs 5000/- under the present tax structure.

The marketplace says that a digital STB will cost around Rs 7000/- ($ 140/-) while an analog STB will cost around Rs 3000/- ($ 60/-). Incidentally, this also roughly conforms to international prices.

India has an estimated 40 million cable TV homes. (60% of urban and 34% of rural TV sets who have access to C&S channels.) To supply STBs to this population will involve an investment of Rs 25 bn ($ 500 mn) to Rs 100 bn ($ 2 bn). Even if we start with the major metros, this figure will not be less than Rs 10 bn ($ 200 mn).

To ensure time-bound implementation of CAS, is to ensure affordable STBs.

This suggests a mix of low-cost or subsidised STBs along with with easy finance options.

Opportunities
New channel for direct marketing.
Opportunity to address the ultimate viewer.
More transparency in distribution.
Selected (niche) pay channels may charge high tariff.

Threats
Increased investments in content to meet increased competition.
New international 'niche' pay channels may enter market.
New distribution strategies will be required for CAS.
Survival of the fittest - weak channels will face problems.
Cable operators still likely to retain control on subscribers.

Opportunities
Will continue control to distribution business.
Will be able to absorb cost of 'conditionality' equipment.
Will become technology savvy.
Will be able to develop new direct marketing channels.
Transparency & regularisation of distribution business will be desirable for all players in the long run.

Threat
Heavy investment for equipment & systems for conditionality.

Opportunities
CAS will lead to digital TV & interactive TV - leading to targeted advertising, infomercials & commercials.
CAS will also provide new direct marketing channels for product manufacturers.

Opportunities
Regulate the industry to some extent.
Set Indian TV industry on the path to the future Additional revenue.

Threats
Heavy cost of subsidising initial investments for STBs & 'conditionality' equipment for head-end.
Heavy cost of regulating implementation of CAS.

Opportunities
Pay only for what he views.
Viewer's choice plays the important role; he can view the content of his choice.
Benefit from the introduction of new advertising options.

Threats
Addition investment for the STB
Nuisance value of targeted advertising

Opportunity as well as threat
Increased complexities with new segments of viewership & viewer behaviour patterns - will result in vastly increased sample size & cost. This complex scenario could be a threat because of increased costs as well as an opportunity as the complexity will lead more people to rely on research data.

The Indian viewer will be split into multiple segments, because of CAS & Non-CAS homes, made complex by volatile subscribers who change their channels frequently.
And as if this were not enough, the number of CAS homes will be constantly changing as the implementation of CAS progresses.

Opportunities
Targeted advertising.
Interactive advertising.

Opportunities
New opportunities & birth of new markets for STBs & related equipment in India.
Influx of foreign technology/joint ventures.

CAS & Effect - the effect of CAS on stakeholders
Introducing CAS in India will affect the following segments which constitute / influence the Indian television industry:

CAS Implementation in India - The Roadmap
The Cable TV Regulation Bill was passed in the Lower House of Parliament (Lok Sabha) in May 2002. To become an Act, it has to be presented & passed by the Upper House (Rajya Sabha) also. This will be followed by a government notification (after a period of six months). If all went according to original plans, the CAS Bill would have come into force sometime early 2003. However, as things stand today, this date will most likely be delayed by 6 months.

The initial phase of the CAS Bill will cover the top 4 Metro cities -Delhi, Mumbai, Kolkata and Chennai.

In any case, given the capital intensive nature, implementation of CAS will necessarily be in phases. As areas are 'CAS cabled' in stages, existing subscribers will be given the option to switch over to CAS, perhaps with a deadline. But finally, the subscriber has to decide when (whether?) to invest in a STB. (For obvious reasons, this behaviour will be more manifest in lower income areas.)

After the last "Cost Committee" meeting on August 22, the Govt. has decided to fix the basic tier package at 33 (including 3 compulsory, Govt. run Doordarshan) free-to-air channels. However, the committee has not been able to decide on the monthly fee for the basic tier. Broadcasters & cable operators have been asked to submit their recommendations before end August, raising hopes that the Bill will be presented in the Upper House in the next session. (Note : If the Bill is to be modified, it will have to be first re-presented & passed in the Lower House.)

The following table gives an idea of the range of expectations from the stakeholders:

Suggestions for Basic Tier	No. Of Channels	Monthly Fee (Rs.)
CHANNELS
Doordarshan	45	100
ESPN	30	25
CABLE OPERATORS
Hathway (Rahejas)	20	75
Indusind Media (Hinduja's)	48	100
Sun Cable Vision (Sun TV)	30	100
Cable Network Association (Independant)	35	150

Legalities apart, the success of CAS will be inversely proportional to
1. Investments (for equipment & systems) for head-end operations of Cable Operators and
2. Price of STB expected from each subscriber

The first case has been considered by the Govt. with a proposal to modify the CAS Bill - to introduce single-point conditionality check per city / area. This will reduce the total investment for cable operators.
To address the second case, the Govt. proposes to provide set-top boxes on lease/soft finance.

Concluding Comments
The Indian Govt. has repeatedly been quoted saying that implementation of CAS is primarily for the viewer's benefit, giving him the 'option to choose'. A more realistic view however, is that STB's are essential for future development of the Indian television industry, including Digital TV & Interactive TV, which are already international standards.

CAS is most certainly the way to the future of television, and therefore Indian television. But as international experience has shown, implementation (read: significant penetration) is not easy.

There is a debate raging currently on the quantum of monthly fee for the basic tier. Suggestions range from Rs 35/- ($ 0.75) to Rs 150/- or ( $ 3/-) per month for 30 to 45 free-to-air channels.

Notwithstanding this debate, the real roadblock (or green signal, as the case may be) will be the price of the STB to the end user along with soft finance / lease options.

Major Indian TV channels have not shown much enthusiasm about CAS. Perhaps this is because:
Pay-TV bouquets may have to be split up into individual channel offerings to viewers (depending on the CAS bill). This will lead to severe competition for the weaker members of the bouquet, resulting in making them "free to air".

It is still not clear whether broadcasters will have full legal access to the Subscriber Database. It seems more likely that this database will continue to reside with the Cable Operators.

Many more special audience channels whose revenue model is subscription-based will beam to Indian audiences, creating further competition.
Just as an example, ESPN channel may face severe competition from a 'Golf' channel for its golf related programming.

The monthly fee of the basic tier (for free to air channels) will have a major say in the viewership of the pay channels. Higher the monthly fee of the basic tier, lower the subscription to pay channels.

Cable operators will find it difficult (impossible?) to treat the number of connections (households) as a business secret. But they will (in all probability) continue to retain control as the 'vital' link of the distribution chain.