As India prepares for the transition from analog to digital cable, the stakeholders face challenges in meeting the deadline. Despite these impediments, the industry is optimistic and looking forward to a conducive regulatory milieu that will help boost broadband penetration in the country.
According to STMicroelectronics, a leader in semiconductor solutions for digital set top boxes, India is the third largest television market after the USA and China with 146 million TV households. That is expected to increase to 190 million in the next five years. Today, fewer than 35% of TV homes are digitized and, approximately, $5 bn of investment is required.
Going by Frost & Sullivan estimates, a cumulative investment to the tune of $10 bn would be required for implementing digital equipment across the value chain, starting from national and regional headends to Local Cable Operators (LCOs) to the end consumers. While the government has set a timeframe to complete the transition, analysts believed that the implementation was going to be a time consuming effort.
Consumers are likely to drift towards Digital TV in the form of IPTV, Digital Cable, Direct to Home or Satellite TV. According to market estimates, the DTH subscriber base in India is growing at a CAGR of 18% and, this year, with the CAS implementation in four metros, growth is expected to be slightly higher.
A recent industry report predicted that 19.3 million set-top boxes would be shipped in India during 2012 alone. The report found that nearly 70% of set-top boxes installed in the country were imported from foreign manufacturers, especially from China. However, going forward, the domestic STB production will increase to meet domestic requirements. Leading overseas STB manufacturing firms are likely to set up factories in India while Indian companies will focus on manufacturing low-cost STBs. The market has already seen moves from players like Broadcom and STMicroelectronics in this direction
DTH players like Dish TV, Airtel Digital TV, Big TV, Tata Sky and Sun Direct are expected to have an edge as they have already established themselves in the market and the local cable operators see them as a threat. Some DTH players like Dish TV tried to make the situation appear like an opportunity for the smaller players by converting them into resellers of its DTH services and products.
King Consumer
The entire Pay TV services market will benefit from the digitization initiative. Digitization would augment the channel carrying capacity of operators, offer better quality, deliver more channels, offer more interactive services and provide scope for delivering various VAS such as broadband, pay-per-view and digital video recording. Therefore, digitization should fuel the consumption of digital content and it would put a check on the under-declaration of subscribers by LCOs, thereby boosting the subscriber revenues for broadcasters. Among all the stakeholders, the consumer is expected to benefit the most.
Shashi Arora, CEO- DTH/ Media, Bharti Airtel, saw the move to give a new dimension to the broadcast industry. “For the industry, it will bring in greater consolidation, reduced dependence on viewership ratings and a drop in carriage fees. We believe in advance planning and preparing for the future. We are well prepared in terms of carrying inventory and committed to offering differentiated features like VAS, movies on demand etc and will make full use of the opportunity and all of these benefits will be passed on to the consumers,” he stressed.
Rajesh Bhat, Senior Group Manager – Technical Marketing, Connect Home Business Unit, Digital Sector, GC&SA Region, STMicroelectronics, viewed the digitization exercise as a means to revolutionize consumer entertainment and enable subscribers to experience HDTV along with services such as Digital Video Recording (DVR), HD gaming, Video on Demand (VoD), and future connected home services.
He said that, through the broadband infrastructure, service providers would be able to offer content and other non-linear broadcast services on multiple screens. This would drive demand for customized content. The focus would be on providing quality content and differentiation leading to greater choice for the subscriber. Service providers would be able to offer customized tariffs, broadband and other value-added-services. Consumers would expect and demand an enhanced user experience through better viewing quality and consumer service.
“Digitization can jumpstart many investments and allow operators to expand into other synergistic delivery mechanisms such as IPTV for on-demand services among others,” said Rajiv Kapur, Managing Director, Broadcom India. Broadcom recently launched affordable STB solutions for the Indian market.
Broadband facelift
Analysts pointed to the fact that subscriber growth in IPTV and OTT services was driven by increasing broadband penetration and a growing number of people using Internet-connected devices. Here, local cable operators can play a pivotal role in taking broadband connectivity deeper down the pyramid.
At present, India has over 126 mn Cable and DTH homes, of which Pay DTH accounts for 42 mn of these homes. Over 84 mn homes have Cable or free to air connections. All these will have to be converted within the assigned timeframe. The sheer scale of this initiative mandates large scale planning and coordination among stakeholders. In such a scenario, Cable could prove to be an effective delivery mechanism for broadband services. Instead of converting all the household users to satellite STB, efforts could be made to sell broadband through Cable.
“There is definitely a business case around integrating these platform, which will require clarity on regulatory aspects and we are looking at these possibilities. In the past, some Cable operators have proved their ability to offer Internet services through Cable, many a times it has been disputed that they might not be able to offer the desired connectivity to support bandwidth-hungry services such as high definition video or IPTV. Besides, India is at a juncture where it needs to start moving towards the Next Generation Networks. The current digitization initiative will require the cable operators to upgrade their network and infrastructure. It is time that we make these networks more efficient to help improve broadband reach and adoption,” Prakash explained.
Chauhan of Frost & Sullivan concurred saying that digitization would enable Cable MSOs and LCOs to offer broadband services to end users. This, in turn, would impact the ARPU of the service providers and help them profit from the investments made in digitization.
“Furthermore, telecom and other Internet service providers can use the digital infrastructure to provide broadband services to end users. Cable Digitization creates opportunities to provide broadband connectivity to over 70% of the 250 million households that are expected to exist by 2014, which corresponds to over 700 million Internet users,” he said.
Challenges galore
However, digitization in India will take a long time for it to be implemented across the country. Experts felt that the industry needed to overcome basic challenges in order to go ahead.
The cost of implementation is the foremost thing that the industry will have to deal with. Chauhan was of the opinion that, with an effective investment requirement of Rs 40,000-50,000 crores, the smaller players, especially LCOs, might not be able to bear the burden of the same.
“The investor sentiment is already down and might take some time to improve. Secondly, there is no clear roadmap for implementation other than the government planning to follow the traditional route of targeting Metros to Tier 1 and so on. From the services provider perspective, the industry has started facing the traditional challenges of increasing consumer acquisition cost, lowering ARPUs, lack of clarity on regulations, increasing cost of content, content differentiation and lack of consumer willingness to pay. Therefore, service providers would need to focus on content differentiation and act as a one stop shop for offering converged solutions to take care of all of the needs of the Indian customer at attractive price point,” he added.
While Bhat considered initial investment to be a roadblock in taking the benefits of digitization to the rural market, he was positive that use of new and advanced technologies could reduce the cost of digitization and help accelerate the process.
Issues such as the existence of a highly fragmented distribution market, regulatory or government uncertainty were also cited as factors that were hindering the growth of this market.
“Digitization in these areas with addressability cannot be a viable solution in the near future, unless special packages are made available to them at an affordable cost. Having said this, it is the customer who will benefit the most from the implementation of digitization,” he concluded.