LMOs to get shares in pay revenues, say MSOs

MUMBAI: Post CAS, the cable trade will don the new mantle of building infrastructure for the convergence era. This is how MSOs and other experts are justifying the huge investments which LMOs (last mile operators) and LCOs (local cable operators) will need to make post July 2003. The cable trade will eventually get a share in pay channel revenues, say most MSOs.

Speaking at the SCAT 2003 Bombay workshop, InMumbai networks CMD Ram Hingorani urged the LMOs and LCOs to leave the past behind and move away from the old cable system to a new era of building convergence related infrastructure.

Several LCOs and LMOs in small towns had expressed doubts about investing in infrastructure as they believed that the consumers in those areas wouldn't even consider taking pay channels and persist with the basic tier channels. This would shut out the alternative revenue streams which everyone is talking about.

Hingorani also came out in favour of proper declarations, payments of entertainment and service taxes by the cable trade. This could pave the way for a regime with reduced taxation rates, he said.

Hingorani stated that post-CAS numerous possibilities arose for increasing revenues from the same infrastructure. These new revenue streams included revenue sharing between cable distributors and broadcasters of pay channels, new emerging streams from video-on-demand, pay-per view amongst others.

Through the IBF (Indian Broadcasting Federation), broadcasters are pushing for a 70:30 ratio between themselves and the MSOs. The MSOs would have to share the 30 per cent with the LCOs and LMOs.

Hingorani however, states that the revenue sharing ratio would depend on the individual strengths of the channels within a bouquet. For instance a Star Plus would command a premium and perhaps a 70 per cent share. But, the same wouldn't be true for the weaker channels. Hingorani believes that the weaker channels would require the LCOs and LMOs to sell the channels to the subscribers. 

On the issue of the distribution of STBs, Hingorani ruled out MSOs providing boxes to consumers free of cost. He stressed that the various constituents must see the investment in STBs from a futuristic and long term perspective.

The best way was to bring down the landing costs of the box, he said. Towards this end, MSOs have already made presentations to the finance ministry to reduce customs duties on imported STBs from the unrealistically high 54.5 per cent to 10. 5 per cent, he added. 

He added that the world is heading towards digitization and the Indian cable trade must adopt digital systems. 

However, other US-based experts present at the seminar warned Indian LCOs that the US had adopted technology fast but hadn't made much profits because they hadn't studied the markets well. The key to success would be in terms of efficient packaging and pricing based on the per capita income levels of the consumers.

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