Cable TV

Cable ops real gainers of pay channels turning FTA: CSB report

MUMBAI: A report titled "Conditional Access or Catch 22 - Who Will Blink First?" compiled by the Citigroup Smith Barney (CSB) report (dated 15 May 2003) states the real gainers of pay channels turning free to air would be the cable operators.

The CSB report states that as per current CAS regulation, the cable operators are mandated to carry only 30 free-to-air (FTA) channels (of which about six to seven channels would be channels of the government-owned Doordarshan, which they have to carry per regulation).

The government has also mandated Rs 72 as the maximum price for the basic tier, leaving cable operators with little incentive to carry additional channels.

Consequently, the free-to-air channels will likely have to pay a 'carriage fee' to the cable operators to form part of the basic tier, according to the report. Hence, turning free-to-air may not be the panacea to all problems for the pay channels.

Finally, pay channels turning free-to-air would have negative implications for both advertisers and content providers. With a drop in subscription revenues it is likely that pay channels would seek to raise their advertising rates and cut back on content development costs.

Pay channels - forming part of the free-to-air tier

The report says that the definition of a pay channel reads in conjunction with the definition of basic tier suggests that there is nothing in regulations that prevents a pay channel to be part of the FTA basic tier. Technically speaking, in certain areas, a pay channel may tie-up with the MSO/LCO and be part of the free-to-air basic tier.

However, this solution can only work if the government does not regulate the basic tier price at Rs 72. If the free-to-air price remains at Rs 72, the LCO/MSO will have little to share with the broadcasters after recovering their basic costs.

If cable charges remain at the current levels of Rs 150-300, then of course this could be a possible solution; says the CSB report. But then that is status-quo - effectively today most pay broadcasters are in any case 'negotiating' for a share of this Rs 150-300 - issues of non-disclosure, consistent hikes by broadcasters, etc were the cause of the entire regulation in the first place.

The report adds that the only possible long-term solution to rectify this convoluted industry structure would be either a Direct To Home (DTH) implementation (associates of both Zee and Star have obtained licenses) or roll-out of cable services through telephone lines (Reliance Infocomm, BSNL have announced plans) - in both cases bypassing the local cable operator.

While both these solutions have implementation hurdles, they would be appropriate for addressing the Tier 1 high income household brackets ,which in any case is the

core population which all parties are fighting to address.

Attempting to stratify a 42 million strong cable household population across affordability and demographics as CAS seeks to do is a process with many pit-falls and too many short-term dislocations.

Also read: 

One out of 6 cable households will get pay channels: CSB report

Tier 1 channels going 'pay' will have a negative impact: CSB report

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