Television

Financing of STBs not a problem area

MUMBAI: A JP Morgan report points out that the monthly financial charge (depending on the price of the set top box) will be a key determinant of CAS penetration.

The JP Morgan report says the following about the type of STBs (set top boxes), prices and financing options:

Type of STBs to be used, Analog or Digital?

All the MSOs have decided to go ahead with digital STBs as they have a few advantages:

o Firstly, digital STBs are used the world over because of their superior picture quality and higher security.

o Secondly, the bandwidth consumed by ten analog channels is equivalent to one digital channel. Thus, more bandwidth is available to the cable operators for providing other services.

o Thirdly, as we will enumerate in detail later, the headend in the sky (HITS) model is likely to be adopted by MSOs in the long run, and HITS is compatible only with digital STBs.

o Finally, digital STBs would guarantee easier transition to high-end digital boxes in the future with a greater amount of interactivity. However, the MSOs and the larger conglomerate of cable operators and independent cable operators (ICOs) effectively control around 50 per cent of the market. The smaller operators in the fragmented industry might go in for the cheaper analog models. However, this percentage will likely be small in the metros, where CAS will be implemented first.

Price of the STB

The price of an STB will be a key determinant in the level of acceptance of CAS. The current prices of analog STBs are as low as Rs 2,000. Some of the manufacturers, such as Himachal Futuristic Communications and Catvision, are looking to lower the prices even further.

Digital STBs currently cost around US $70-80 pre-duty, which is around Rs 3,500. These are base models of digital STBs, which do not have many interactive features. However, the low feature digital models can be upgraded to high-end models with incremental investment in the future.

The current duty on STBs is over 50 per cent, which makes the final cost of the box around Rs 5,500. Budget 2004 did not cut the duties of STBs, as had been widely expected (though the basic customs duty has come down from 30 per cent to the new peak duty of 25 per cent).

Still, the duty is pretty high and the industry expects the government to re-examine the issue. Overall, digital STBs with low interactive features to be available for around Rs 4,500-5,000 before any MSO starts placing orders. It is likely that the volumes of orders placed will bring down the prices of STBs.

Financing options available to the subscriber for an STB

Until now, there have been no tie-ups between financial institutions and MSOs for the financing of STBs. This can be attributed to the fact that there are a number of uncertainties-such as the pricing of the FTA bouquet and the question marks on the strategies pay channels will adopt.

Financing is unlikely to be a problem going forward. The risk borne by the financial institution is limited by the fact that the STB of the defaulter can be retrieved.

Additionally, interoperability problems would mean that subscribers will have limited use of the set top box of one operator in another MSO's or LCO's network.

A multitude of schemes to be offered across the nation varying from down payment to part payment with monthly installments. Additionally, if the price of the STB remains above Rs 5,000, the MSO might have to provide some subsidies.

Financing will likely not be a problem area, though the monthly financial charge (depending on the price of the STB) will be a key determinant of CAS penetration.

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