“Phase III and IV should be broken into three phases”: Ashok Mansukhani

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By Seema Singh Posted on : 21 Apr 2014 07:19 pm

Having served as Indian Revenue Service Officer in the income tax department for 22 years, Ashok Mansukhani’s last government posting was as Doordarshan deputy director general (1992-96), during which DD metamorphosed from being a single channel broadcaster to a multilingual and multichannel regional entity reaching over 100 million homes in the country.
 
Mansukhani’s association with the cable TV industry started in 1996 when he joined IndusInd Media and Communications Limited (IMCL), the media wing of Hinduja Ventures Limited (HVL), as director. Over the years, he became executive director and then president of Hinduja TMT before taking on the mantle of whole-time director of HVL.
 
In his present capacity, Mansukhani is preparing IMCL for a future that is essentially about pay-per-view, video-on-demand and triple-play services, even as his contemporaries grapple with the initial phase of digitization. With his vision and experience, Mansukhani has also been appointed president of the MSO Alliance.
 
In a t?te-?-t?te with indiantelevision.com’s Seema Singh, Mansukhani, who is just back from a week-long holiday, talks about the way the industry is moving in terms of digitisation, plans for IMCL, and the growing need for communication among its various stakeholders.
 
Excerpts:
 
IMCL underwent huge reshuffling a couple of months back. What was the reason behind it?
 
There is a new digital era that has come in and the board and promoters may have felt that it would be good to bring in fresh talent, to get professionalism in the analogue regime as we transit to the digital era. And what has really been done is that a new team has been brought in that not only understands media but will be able to carry the media assets of the Hinduja group in the next 10 years. So, it is from that point of view that changes may have been made.
 
The company recently got the licence for taking forward its Headend In The Sky (HITS) project. How far has the work progressed?
 
Every possible step will be taken to meet the December 2014 deadline. There are certain permissions which are statutory in nature and which need to be taken. There could be perhaps a three to four week lag factor because of elections. But post 15 May, the process will get fast forwarded and personally, I would like to see it operational before the end of the year.
 
Will HITS play a major role in phase III and IV markets? How will IMCL cope with these phases?
 
Yes it will, because it is meant to really take advantage of the fact that in phase III and IV, there are hardly any MSOs that operate. But there are 6,000 independent operators and 60,000 LCOs and a majority of them are in phase III and IV. Now they will find it tough to meet digital regulations, quality of service norms, subscriber management system, conditional access systems and sourcing of STBs.
 
It is a tough task for a small guy, but if he continues to be the proprietor of his network and is helped by a HITS platform to be able to supply high quality 300-500 channels in MPEG 4 capacity, then surely it will cause excitement. To add to it, it will be a prepaid model, having complete transparency.
 
Yes, HITS will play a major role, but that doesn’t mean that Indigital will be left behind. From the group’s perspective, both will be developed and both are being developed.
 
Incable exists in phase III, but not in phase IV. For phase III, there are already specific cities for which plans are being drawn up. Incable is also pioneering the concept of digital feeds, which is fibre optic based feeds. Because it may not make sense in a city like Udaipur to put up a digital headend of Rs 10 crore, but it may make sense to take a city like Bhopal and set up a headend and the rest of the state can well be served by fibre optic feed, because then the cost of transmission goes down.
 
Incable anyways has thousands of kilometres of installed fibre optics of its own, which many others do not have. So we have the capacity and we will now utilize that. Even in phase II, we have digital feeds running through fibre optics. There have been regulatory issues like broadcasters having a different view, but our say to broadcasters is that in digitisation when every box is accounted for and every customer is paid for, then surely the mode by which we transmit should not be the problem of the broadcaster, but should be left to the MSO to work out the best cost effective model.
 
Digitisation means that you can use a mix of both. Currently, fibre in India is to the colony gate and in the time to come, it will be to home and when that happens, there will be quadra-play. We will have cable telephony as well coming in, but these are far away, at least 3-4 years away.
 
 Will we see investments in IMCL as well by the group?
 
IMCL is currently being funded by HVL through a preferential share capital based on its requirements for phase III and consolidation of phase II. IMCL will not suffer from shortage of money. That's not the issue. The issue is that IMCL has to cope with change and with that change, whatever support is needed is available.
 
SitiCable has launched local cable TV channels. Is IMCL treading that path? If you have to launch a channel, what kind of content will you have?
 
We are the pioneers as far as local content is concerned. In Mumbai for example, we had In Mumbai channel which we started way back in 1995-96. It was operational for a couple of years and was very popular. It had a mix of news, local events, interviews and it was more of a city-specific channel. At one stage, almost every city that Incable was operating in had a local channel and even today there are local channels, but it has typically not been run by the company in the recent past, but has been run by people who had perhaps bought time on the channel or have agreed to share a part of their advertising revenue.
 
So basically, they source the content and not the company, since our focus had shifted more on distribution. But today, with a fat distribution pipe being created and video on demand on the way, with two-way to happen with broadband, localization of content, in my view, has a strong public demand.
 
It also helps in stickiness in terms of vast competition in MSOs and DTH. So at one stage, when In Mumbai was part of Incable, it was a reason that people stayed with us, because they wanted to watch it. Also we had In News which ran in five languages.
 
Localisation, not on the Siticable model, but perhaps reviving the In Mumbai model, may take place.
 
While news and sports are important, I feel localized content, like local events, regional events, festivals and community events, have been neglected. The vast progress that we have seen internationally is more of a mom and pop show in India.
 
This area can undergo an upgrade, both in terms of quality and quantity. It is an interesting area to look at. Animation is again an interesting area that can be tapped.
 
Content can be self generated, syndicated or can be brought in and then re-created. What we have seen recently is that there is enough competition in every sphere of television and yet there is scope. Therefore, our sister company in entertainment will look at it and take advantage. There are 30 million cable TV homes with boxes, another 100 million to follow. 2014 is an ambitious year. Even if we can achieve 50 per cent of this, there will be 80-90 million cable TV homes to tap. 24 hours of programming is needed. It is not easy to really supply that content, so perhaps it’s easier to create content or to source it and then re-purpose it for your own audience.
 
The Telecom Regulatory Authority of India (TRAI) recently came out with its regulation on tariff rise in non DAS areas. How does it impact the business of MSOs?
 
This simply means that the cost of television has gone up by 27 per cent. When the consultation had started, I had personally taken it up with TRAI and told them that the price shock, if it has to be given, must be in phases. It was expected and long due and in the long run, as long as packaging is sensibly done, a la carte channels are offered, it will benefit all the stakeholders.
 
In the beginning, customers will be hit by the price shock, but after that, they will adjust.
 
Time has come for MSOs to discipline themselves. The MSO today has to take a stand that it doesn’t make sense for a non-paying or a zero paying LCO to have the signal.
 
Every change is resisted initially, but once it happens, things fall into place.  There is a need for more communication in the industry.
 
 When do you see gross billing starting in Mumbai for phase I? By when will digitisation of 38 cities in phase II be completed?
 
There have been discussions and there are amendments in the entertainment tax acts, but the notification has not been issued as yet by the entertainment tax authorities. According to me, in whichever way gross billing has to happen, it will take a couple of weeks more.
 
The 38 cities that comprise phase II should be completed by 30 June.
 
When do we see packaging of channels taking place in phase I and II cities? Why is it taking so long? What kind of packages can one expect?
 
The initial task of installing 30 million STBs was tough. Today, attention has shifted to packaging which will also be a function of the prices at which packages can be obtained from the broadcaster. There is disaggregation that will happen soon, which will lead to re-pricing of packages, possibly from July 1.
 
Packaging has to be a joint exercise of broadcasters and MSOs. Currently, it is not. So that’s another aspect which needs to be kept in mind that at the end of the day, it is the product of the broadcaster and the distribution is ours.
 
What if packaging teams were to be set up between MSO Alliance and IBF as an example? They could then get together and do a customer research and find out who wants to do what.
 
New models for packaging need to come in. Why should I pay ‘X’ amount for sports throughout the year, when during the year, there will be only three times that we watch Sports channels,. So can’t we have variable pricing, say during the world cup?
 
The second phase of digitisation will happen when the market will mature. And all this will happen in 2014-15 and 2016.
 
DTH today has a much better hold on packaging, than the MSOs. Regional packages need great attention and especially for national MSOs. The need of a customer in Bengaluru is different from that of a customer from Gujarat. Packaging requires research and customer connect. The customer is being currently taken for granted and they do not like it.
 
We still need to move to the CPS model and once that happens, the MSO can collect the money and pay the broadcaster. There are people who are still working with an analogue mindset in the digital era.
 
One way is to sell the channels on an a la carte, the other way is to shrink the package and the third is to say that I will give you growth, but cannot give the growth you demand which has no relation with the actual size of my network.
 
Why is there resistance from broadcasters, every time a new packaging model is suggested? 
 
When status quo is disturbed, things change. Also when a particular channel is not available in a package offered to most, then the broadcaster may lose the advertisement support. But in time to come, we will move to a 50:50 regime, in subscription and advertisement.
 
What is the impact of the TRAI regulation on disaggregation on MSOs?
 
The regulation has given a great level playing field for independent MSOs like IMCL. So far, there has been clear favoritism towards MSOs who are owned by broadcasters and therefore, independent MSOs have had tough times or litigation times and that has taken away from further move to say digitisation. This is a welcome move and yet, sufficient safeguards have been given to the broadcasters. They have got 27 per cent tariff hike. The order should be accepted in the spirit. It is to increase digitisation and not to harm anyone.
 
Are you looking at enhancing broadband services, like Hathway Cable & Datacom did recently?
 
We have broadband services and that will be a key focus area in the years to come and what I personally look forward to is: pay per view, video on demand and triple play services. But these will take time. These services will be possible more in the prepaid era.
 
We always have been operating broadband as we have the ISP licence.
 
We don't want to ape Hathway. They have their own focus point, we have ours. We want to develop digital best practices, keeping in mind what the customers want.
 
How would you look at phase III and IV markets? Will Incable compete with HITS in these areas?
 
It will be in phases. We will first concentrate on phase III, where we already have a reach, so we will see which cities to cover there. Then we have to decide which cities will be covered by the HITS platform. Which cities will have headend and which will have fibres. These are things that the IMCL management is working on.
 
No, the two will not compete with each other, as the markets will be different. There could be synergies in best practices but not in market.
 
 Should phase III and phase IV of digitisation be taken at the same time? Do you think it can be completed within the deadline of December 2014?
 
My view is phase III and IV should be broken into three phases. If it took two phases to do 30 million homes, how can one expect 100 million homes to be done in two phases? The statistics don't work and then currently, there is no movement in phase III.
 
While TRAI gave a start date for implementing digitisation, there is no need to give an end date. The regulator should incentivise those who digitise faster. Tax holiday or tax benefit or a better rate in terms of 42 per cent guideline of the Supreme Court, would work better than giving deadlines.
 
Phase III and IV is huge and untapped. The industry needs to be recognised as a small industry. Also there is a need for bank financing, formation of cable cooperatives and associate ventures. This is the reason that IMCL has pioneered joint ventures which exist is smaller towns and cities.
 
 
Dish TV launched its new Zing service in February; does it bother the MSOs in any way?
 
90 per cent of cable TV homes in phase I and II remained with MSOs. While the customers may have switched MSOs, they largely stayed with being a cable TV home. And this, when everyone thought that DTH players will have a smooth walk in these cities. DTH is an expensive proposition.
 
If DTH players think of launching something which is less expensive, it can lead to cannibalizing DTH itself and not necessarily an MSO. The MSO already has a sunken asset. We are just looking at stickiness of consumers and return on investment. Such moves will not affect MSOs.
 
Post elections, there can be a regulation on the cable TV monopoly. Do you think that will impact MSOs?
 
It may affect the regional MSOs, but not the national ones. These are proposals, but what comes out in the fine print will finally determine our way to look at it. I expect lighter facilitative and not restrictive regulations and I think TRAI is moving towards that.
 
What are the biggest challenges for you today?
 
The ability to harness the latest technology with the fastest way in which you can bring in specialty content at the cheapest possible cost in such a way that every member of the value chain is made happy with the money he retains after all taxes are paid is the real business plan challenge that industry needs to work on and which we are also working on. Ultimately, we should be able to run a profitable business.
 
Do you see the ARPUs going up? If so, by how much, and when?
 
The ARPUS will go up by 20 per cent in the next 12 months.

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