CAS in metros by Sep-Oct '03: JP Morgan report

MUMBAI: The implementation of conditional access systems (CAS) in the metros, for which the government has mandated a 14 July deadline, will take about three months, a new report suggests.

According to the latest JP Morgan report on Indian media dated 19 March 2003, a copy of which is with, the CAS rollout process will be completed by September-October 2003. The CAS rollout plan, however, still leaves various questions unanswered in the minds of investors, the report says.

None of the three mainstream channels (Star, Zee, Sony) will be free-to-air, the report avers. Financing is not likely to be a problem area, though the monthly financial charge (depending on the price of the STB) will be a key determinant of CAS penetration, it states.

Other broad conclusions of the JP Morgan report are as follows:

o Free-to-air (FTA) bouquet price: The government appointed task force will likely release its FTA bouquet price soon but the other decisions are expected by mid to end-April.

o Headend in the sky (HITS): Multi-system operators (MSOs) are likely to adopt the HITS model in the long term, as it will enhance their reach. The local cable operators (LCOs) will also find the situation economical as they will not be required to invest in multiple encoders, which would otherwise be the case. Thus, HITS is a win-win situation for the MSO and the LCO.

o Set top box (STB): Nearly all MSOs are talking of adopting the digital STB (which is compatible with HITS). There are strong indications that the low feature digital STBs will initially be available for around Rs 5,000. These can later be upgraded to higher features if interactivity is desired.

o Pay channels: The subscription rates of the pay channels are likely to come down. However, the extent of price drop will likely depend on the FTA pricing and the offtake of the STBs. Broadcasters can continue to offer bouquets as long as they provide the individual channel prices. Their revenue share with the MSOs will likely be in the range of 50:50.

o Direct-to-home (DTH): DTH can suffer as CAS gets a headstart over it. Additionally, the FDI, cross-ownership issues and technical regulations will pose impediments to the usage of DTH.

o Impact on Zee: It is very difficult to assess the impact of CAS on Zee as its strategy might change with the offtake of encrypted signals. However, in a scenario where Zee (along with the other broadcasters, Star and Sony) remains pay, any downside to revenues is not expected. Additionally, Siticable revenues will get a boost from the revenue sharing with broadcasters, which should give a fillip to Zee's earnings.

The JP Morgan report claims that its team of analysts has conducted a detailed study of the various issues involved and received feedback from several stakeholders in the cable industry, trying to understand the nuances of find the law and answers to unresolved issues.

Also read these related reports:

MSOs gear up for proposed CAS time frame

Financing of STBs not a problem area

HITS provides win-win situation

FTA price at Rs 70-80 per subscriber per month

Consumer adoption level at 25-30 per cent in 2003

DTH unlikely in medium term

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