(23 March 2007 6:00 pm)

MUMBAI: National economic gains from a new approach to investment in cable TV infrastructure could deliver a 54.6 billion rupee ($1.2 billion) increase in economic activity and Rs 18 billion in new tax revenues within five years, according to the Cable and Satellite Broadcasting Association of Asia (Casbaa).

However, even with a target of 20 million cable broadband subscribers by 2010, the Indian market would remain less than half the size of the China market which, like India, is experiencing national economic growth of more than nine per cent per year.

Casbaa executive director India Anjan Mitra says, "To achieve this goal we will need a new approach to capital investment in pay TV, including abandoning the view that cable should be treated as a utility with commodity like price controls. Today, the approach is more in line with old style thinking on electricity services or traditional political battlefields like print media.

"The fact is that if we don't change our entire attitude to cable, we could suffer nothing less than a 'digital failure'. However, if policyrnakers get the environment right, there will be huge rewards for the economy, first in the big cities, but then rolling out to the still needy rural areas."

According to Casbaa, India's cable TV networks are a huge national asset built over more than a decade by private investment. "We should recognise this important fact and use those networks to create significant new economic activity" said Mitra. With around 70 million homes wired, cable TV already plays a bigger role in India than in any other major market.

The industry organisation called on the Government of India to learn the lessons of telecoms liberalisation and to let consumers decide "what they want to pay for cable TV services and what they want to watch. After that, for digital networks, it's a matter of "build and they will come'."

Casbaa suggests that senior leaders must adopt a new vision for the contribution the cable television industry can make, and a new regulatory approach designed to make that vision a reality. This is the most important single step: the overall approach must take account of the unique economic asset and window of opportunity for digital broadband development provided by India's cable television networks. Simply continuing regulatory policies designed for the broadcasting industry of yesterday will not produce an upgraded and dynamic digital industry for tomorrow.

Casbaa VP for regulatory affairs and government relations John Medeiros says, "Digital broadband is changing the face of the economically crucial global communications sector and India will benefit hugely if it joins that revolution."

Medeiros noted that global experience shows that while the adoption of digital TV may start slowly, the pace of change picks up quickly.

"The very nature of digital cable broadband provides consumers with rlore content choice and more price options, on demand services become pervasive, allowing people to choose exactly what they want to watch and when, as well as yet more choice in terms of linear (traditional) TV channels," he said.

According to Mitra, the greatest opportunities for economic growth will only come when the investment ciimate is right for consolidation of India's thousands of small cable operators in the big metros and rural areas which are then able to upgrade their last mile networks.

"Today, MSO cash flow the bloodline of the communications business is constrained, leaving the industry handicapped when it taps into the capital markets. The exciting experience of other countries and already seen in the Indian telecoms industry is that domestic and overseas investors are ready and able to generate the large sums necessary to deploy cable broadband if there is a chance of reasonable returns," said Medeiros.

But most importantly, "government funds are not needed to achieve these goals. What is necessary is a supportive environment." The stakes are high to get it right, and senior policyrnakers as a first step must decide to take an active interest in setting the course for the regulatory framework of for this strategically important industry. Allowing bureaucracies to implement their own agendas will be stifling in the long run.

Casbaa notes that despite its status as India's leading last mile connector, the cable TV industry in India has not been able to enter the next stage of evolution network upgrades and deployment of digital television and broadband services. Penetration for broadband digital services by the cable networks is, for instance, minimal. Of 68 million cable homes, only 350,000 have broadband, and hardly any subscribe to a bundle of broadband and cable TV.

Industry revenues illustrate the same point. India's cable television sector generates $4.3 billion per year in turnover (subscription and advertising), making it one of the largest in the Asia Pacific. Regrettably, only a fraction of this figure less than $100 million flows from broadband digital services.

Nevertheless, the cable industry, as India's leading last mile network, will continue to hold the key to exponentially increasing the country's broadband take up.

The reach of the cable industry will continue to grow, as it is projected to further consolidate its status as the leading last mile service provider. The cable industry, for instance, is expected to serve more than 100 million homes by 2010. This size and scale, if harnessed, presents a great opportunity to drive broadband digital deployment.

Analysis from advanced markets as well as India suggests that digital television over cable networks will be one of the most important drivers of innovation and growth in the information and communication technology sector, with digital television providing a platform: (1) to stimulate growth in the local content industry leading to a diversity in programming never witnessed before; and (2) to enable a narrowing of the digital divide, opening the full potential of interactive services to parts of society that otherwise may remain excluded from a purely PC based digital world.

In addition, the advancement of digital television and broadband services over cable networks will afford consumers the ability to choose from more than one infrastructure provider to buy advanced converged services.

Consumer choice, as it stands today in leading countries, is largely between the competing infrastructure players: telecoms companies via Digital Subscriber Lines, cable operators via hybrid fiber coaxial cable, and, to a more nascent degree, Direct to Home Satellite (DTH) operators in partnership with xDSL, cable, or wireless broadband operators.

The development of broadband digital services in countries in Asia and elsewhere is strongest where infrastructure based competition is most prevalent. Further, as in other infrastructurebased areas of the economy, knock on investments follow providing other participants an opportunity to flourish, including content providers, software companies and technology firms.

If India could achieve half of China's current level of GDP contributlon from broadband digital services (a reasonable target, given that India's growth in other areas, including mobile phone subscribers, has overtaken China's), the addition to India's GDP would be roughly Rs 54.6 billion which in turn would likely generate an estimated 100,000 new jobs. The government would be reaping about Rs 18 billion in new tax revenue.

In addition to the broad macroeconomic benefits, such an operating environment would bring about a major increase in activity within the television/entertainment sector alone, with massive stimulation of India's creative industries, financed by dual financial flows from consumers who have in India and abroad demonstrated that they are prepared to voluntarily pay for content when it is compelling, and advertisers, who would benefit from the ability of digital architecture to deliver more targeted messages.

This last feature of the digital entertainment marketplace greatly increases participation in the advertising industry, as smaller advertisers can improve their marketing to niche targets at relatively low cost, thus generating further economic activity and spreading the benefits of digitalisation to a broader range of economic actors.

In a more fully digital environment, other follow on effects would flow. A broad range of niche television products would be made available to meet the desires of smaller groups of Indian consumers than are now targeted by mass market media. E government channels could be extended to the regional/state level. New channels might be developed to satisfy devotees of particular sports or even Bollywood news.