"Advertising and media planning business will become creatively integrated post CAS" : Jagjit Singh Kohli ETC Networks executive director and Broadband Pacenet India chairman

ETC Networks director and Broadband Pacenet India chairman Jagjit Singh Kohli is a man doing a tight-rope balancing act as far as the conditional access system (CAS) is concerned. Donning multiple hats - in his capacity as a broadcaster; as a MSO; a friend philosopher and guide to last mile operators who seek his counsel - Kohli is making every move cautiously as he has to consider every aspect and dimension.

Kohli is one person whose counsel is sought not just by the cable trade but also by government officials. Even today, Kohli is looking at the next frontier in cable television revolution (or should we say evolution) as he refuses to accept that the ideal equilibrium situation in cable television has arrived as yet.

ETC Networks recently organised a CAS seminar for the advertising fraternity at Mumbai's Mayfair Rooms. Kohli (and Broadband Pacenet India CEO S Ravindran) answered posers thrown at them by media planners and buyers

The following are excerpts of comments Kohli made during that seminar as well as viewpoints on various issues related to the current CAS chaos, impact of CAS on advertising and Broadband Pacenet India plans, as recounted to's Ashwin Kotian:

You have mentioned that the media has been highlighted issues of lesser significance? What are the real issues about the conditional access system (CAS) implementation that have been ignored?

First of all, I must say that the term "CAS" itself is wrongly used in India and not understood in entirety - cable is one of the ways to deliver content to the consumer in addition to others such as DTH or broadband. Also, it is important to mention that India's late adoption ensures that it ends up getting the best technology - consider examples such as telecom or colour TV technology. In India, CAS roll out will definitely be sophisticated and 90 per cent of it will be digital.

Media has carried a lot of rubbish and has blown irrelevant issues because the journalists have been speaking to the same group of people over and over again. Real issues pertaining to the technology and business aspects of CAS have been totally ignored.

The implementation of the conditional access system (CAS) rollout could have created several opportunities for the cable trade and made life easier for the consumers.

Certain fallouts of the current policies could have been avoided and these issues affecting the Indian consumer and entrepreneur has been totally ignored by the decision makers.

Consider two examples: As per current CAS guidelines, consumers who shift their houses have to surrender their set top boxes (STBs) if they move to an area that is serviced by another multi system operator (MSO). Secondly, the government has wasted a wonderful opportunity to give a stimulus to local manufacturers who could indigenously manufacture set top boxes (STBs) and sell them in the global markets.

These problems could have been averted and newer opportunities could have been created by adopting remedial measures.

The government should have allowed open source or open standards rather than permitting MSOs to have proprietary technology in the set top boxes. Rather than treating it merely as a box, the government should have treated it as an appliance. Due to this fallacy, it is possible that CAS might not spread as fast as the Internet did!

Experts say that governments have some reservations about open architecture. Consider the recent example wherein it was alleged that broadcaster Al Jazeera was sending hidden cryptic messages to terrorist networks. Agreed that the government had some issues about open end architecture. But If you allow free import of hardware, you should also allow open source and open standards. Linux has become so popular due to its open-ended nature. When China adopted CAS some years back, it asked the CAS solution providers and encryption companies to open up. This was the origin of China Crypt.

There was a great opportunity for local manufacturers to indigenously manufacture STBs with open source or open standards and sell them in the world markets. If the government is not careful, what could happen is that most of the boxes that come in will be containing technology that has become outdated in many developed countries. India could become a dumping ground for boxes that have been discarded by those countries.

Several Indian MSOs have fallen prey to the nexus of the major CAS companies who support the major headend providers and the five-six major subscriber management system (SMS) providers. Indian MSOs have partnered foreign companies that are hand in glove and the boxes that will enter India will be plain vanilla entry level low-end boxes.

The Indian consumer shouldn't be made to pay for outdated technology. None of these above mentioned companies offer guarantees against hacking. If the MSO wants any changes or replacements, this nexus will ensure that the MSO will have to pay each link in the CAS chain. The MSOs will eventually have to pass on the brunt to the consumers.

The government should also have allowed last mile operators (LMOs) to obtain feeds from different MSOs at the same time. The need of the hour is open connectivity agreements between the LMOs with the MSOs; and open content distribution deals between the MSOs and the broadcasters.

Will there be fragmentation or consolidation in the MSO space post 14 July?

Contrary to the initial perceptions that the conditional access system regime (CAS) will benefit multi-system operators (MSOs), the ground reality seems to indicate something totally different.

Yes, the MSOs will certainly become more powerful in the broadcasting and advertising stakes - but the MSO space will no longer be dominated by a select few. Several cable operators are grouping together and exploring possibilities of forming cooperatives with independent headends not affiliated to any of the current dominant players. Some of these groups will be keen on making the necessary investments. A free-to-air headend requires an investment of anything between Rs 1 million to Rs 1.5 million whereas the investment in a digital headend varies between Rs 200 million to Rs 300 million. If the digital headend is really state-of-the-art the price tag can even go up to Rs 100 million.

The local cable operators (LCOs) and last mile operators (LMOs) are harbouring feelings of antipathy against the existing MSOs and the incumbency level is high right now. The impending implementation of CAS has given them an opportunity. Earlier they couldn't protest due to various reasons: peace and tacit understanding between MSOs; rigidly defined territories; broadcasters' rigid stance of not dealing directly with cable operators. All these issues are a thing of the past. But yes, those broadcasters who have quality content will wield some influence.

"Post CAS, MSOs will hold the key to provide data that will supplement the statistics provided by the rating agencies as well as the broadcaster sales teams"

Do you feel that MSOs will become more powerful post CAS?

The post-CAS MSOs will definitely become more powerful from the advertising point of view; eventually LCOs will bargain from multiple feeds from several MSOs at any point of time; MSOs will provide multiple revenue streams to LCOs; agreements with MSOs and LCOs will keep broadcasters on their toes.

Advertising stakes point of view:

Ad media planning business will become creatively integrated post CAS. Advertisers will get a chance to blend interactivity with content. Ad agencies will have to develop creative content that is more focussed.

Ad agencies and media planners will have to keep in touch with the MSOs as distribution-related knowledge will play a large role in media planning and buying. This is an aspect that has been totally ignored by media planners and buyers who have been depending on ratings. Post CAS, MSOs will hold the key to provide data that will supplement the statistics provided by the rating agencies as well as the broadcaster sales teams.

This, in turn, will bring privacy related issues to the fore. Privacy is a tricky situation and it is somewhat similar to the situation wherein mobile telephony operators can pinpoint the location of an individual. The MSOs and LMOs will have to weigh the pros and cons of sharing consumer information with those that seek this information. However, in the long run the advantages of sharing this data will far outweigh the negatives - the consumer will get lots of benefits.

Further complications will occur due to the impending arrival of MPEG 4 - that provides object level rather than frame level (MPEG 2) that is currently available. MPEG 2 involves merely compression techniques whereas MPEG 4 is more advanced. Even the US government has mandated the use of advanced versions of MPEG by the year 2006.

The ability to develop and deliver messages in a certain context gives an advantage to advertisers and offers challenges to ad agencies. For instance, it would be possible to change the on-screen hoardings in different households based on the profiles of these households - irrespective of the actual hoardings in the stadium. Broadcasters as well as advertisers will need the help of MSOs and LCOs to make this a reality.

The cost of the backend support for activating such services will be humungous. There are few instances of broadcasters adopting and implementing MPEG 4 at present. It is being used primarily by the broadband operators.

Eventually LCOs could take feed from multiple MSOs and HITS operators:

LMOs must be eventually given a chance to have open connectivity agreements with MSOs and open content distribution deals with broadcasters. However, for this to happen, the LMOs should be given permission to connect to two or three MSOs (and HITS operators) who will have to be flexible from the frequency point of view. To deliver a digital package of 36 pay channels, only three cable frequencies are required (S-21, S-22, S-23). If the MSOs implementing CAS through Headend in the ground (HITG) model have different frequencies, the LCOs and smaller MSOs can take feed from two or more MSOs or HITS operators. In the case of HITS, it is easier to implement as the transmodulators in HITS are agile. Beyond S-21, there is greater flexibility due to bandwidths more than 7Mhz and 8 Mhz.

Pressure on pay broadcasters to continue status quo:

Another way in which the post-CAS MSOs and LMOs will become powerful is due to the pressure they can apply on broadcasters. Pay channel broadcasters have an agreement or understanding with MSOs that their channels will compulsorily remain pay for a fixed duration of time. If they retrace their path and convert some of the channels into free to air, there is a chance that MSOs or LCOs might initiate legal proceedings against the broadcasters.

MSOs will provide immediate earning avenues to LCOs irrespective of how many people adopt STBs:

Consider the fact the LMO will earn Rs 72 post CAS from the FTA channels. In order to earn an equivalent amount through commissions from pay broadcasters, the LMO will have to ensure that the consumer buys Rs 300 worth of pay channels (considering a 25 per cent margin). Value added services such as Internet Access, subscriber databases, fulfillment services will be the primary revenue earners for LMOs from day one.

Tell us about piracy related issues post CAS?

In the post CAS scenario, wooing the MSOs and cable operators will be very important for the broadcasters. The piracy can occur at various levels - STBs, MSO level or at the LMO level.

In the latest version of STBs (128-bit), it would take hackers decades to crack the system. The 1024-bit STBs are virtually impossible to crack. The 64-bit STBs are comparatively easier to hack as compared to 128-bit or the 1024-bit ones, even though the keys change in a matter of seconds. Ideally, the chosen STBs should have a public key, a private key and other complex identification elements. Companies need to constantly update these identification elements.

But, foolproof methods have to chosen. For instance, in several countries that have adopted CAS, one notices that piracy is an issue - for instance, LMOs can place a pirated box obtained without the knowledge of the MSO and continue to charge the consumer who wouldn't know the difference; or MSOs can continue to under declare by using pirated boxes or illegally obtaining codes from the HITS or HITG. Therefore, it is important to note that MSOs and LMOs are the key to successful implementation of CAS.

There are chances that several households will woo cable operators encourage piracy of signals - at least for their secondary TV sets. It would be virtually impossible to steal signals for the primary TV set. As CAS progresses throughout the country, cable operators from smaller towns and cities will definitely consult the metro cable operators for piracy related tips. Abroad, the codes for the popular conditional access systems are easily available on the web or Internet sites. This could be a scenario at a later stage even in India.

The post-CAS MSO and LCOs/LMOs cannot be ignored after 14 July. Broadcasters, consumers and advertisers can ignore them at their own risk.

"Even if consumers take time to adopt STBs, services such as Zero will empower cable operators to earn more during the interim period"

What are the ways in which MSOs can offer opportunities to LMOs to earn revenues from day one?

The implementation of the conditional access system (CAS) has definitely ushered in an era of new business opportunities for the trade constituents.

Broadband Pacenet India (BPI) is forging an alliance with a consortium of 12 international promoters who are in the process of launching a smart card based payment mode for cable consumers and others who wish to avail of the service.

The promoters have decided to brand India's first domestic indigenous payment gateway as "Zero". Zero will be available to all those cable subscribers who invest in a set top box (STB). The launch of Zero will coincide with the launch of CAS services and its implementation across metros.

The service will be offered and publicised through a network of cable operators who will earn monies for the same. They can also get incentives as the consumer (who has been sold the card by any particular LMO) spends more - just like the commissions in an insurance business.

We have obtained the requisite Reserve Bank of India (RBI) clearances and The State Bank of India will be the participating bank. Zero will be positioned as India's first multi-application card that will provide consumers with access to a wide array of financial options.

Zero will have the potential to threaten global players such as Visa, MasterCard and AMEX. Zero will offer much more than the traditional companies such as VISA, Mastercard and Amex at no extra costs. The services include financial applications, loyalty programmes, debit card services, credit card services, e-purse facilities, access card facilities and entitlement card facilities. More importantly, merchant establishments won't be charged extra transactions costs. At present, global players such as Visa and Amex charge anything between 2.5 to four per cent.

Zero is also slated to be an interoperable card and users won't have to pay anything extra if they conduct transactions in banks who have an agreement with member banks. The promoters plan to increase the network to 63 cities in the country.

Zero will offer an added revenue stream to cable operators in the post-CAS scenario. Even if consumers take time to adopt STBs, services such as Zero will empower cable operators to earn more during the interim period.

Tell us about Broadband Pacenet India set-top boxes?

Broadband Pacenet India set-top boxes are highly sophisticated indigenous "home genies" that include features such as a peoplemeter and ethernet output (to enable Internet surfing).

Our advanced STBs (rather 'home genies') will be economically priced around the same level of Rs 3,500. I expect penetration to touch 50-60 per cent levels if the current "pay channels" remain "pay".

The primary issue will relate to the smart-card user identification elements such as the public and private keys. "Pacenet's STBs have RSA data security for enhanced security. Pacenet has gone for the 1024-bit configuration that is almost impossible to crack.

Pacenet is the only company to produce and supply Indian made STBs. Our 'home genies' will have elements such as RSA 1024-bit; DES (Digital Encryption System) and AES (advanced encryption systems); with peoplemeter facilities. We have plans to get these STBs certified by companies such as Business Proton and Tata Consultancy Services and then sell them in the global markets.

The Pacenet boxes will have the ability to provide value added services and can be upgraded at low costs and will also offer exchange facilities that several other MSOs have promised.

What do you feel about the recent move by the finance ministry has, along with abolishing excise duty on set-top boxes (STBs), notified a reduction in customs duty from 25 per cent to 5 per cent on key components of a set-top box -- tuners, remote control units and RF-modulators?

It is definitely a welcome move - especially in the case of the tuner that costs around $12 (comparatively RF modulators and remote control units are cheaper). Earlier, if you had to pay Rs 100, one paid Rs 16 (basic customs duty, CVD and 4 per cent); now with the provision for value additions of say Rs 10, one would end up paying Rs 17.10 (not much). The point to remember is that one can claim this through MODVAT. The benefit should have been given to manufacturers.

The only way the government can effectively boost Indian industry's demand for the 40 million boxes, only if the IPR for the design of the box and CAS is held in India. Otherwise, if import is cheaper, the government will only play into the hands of foreign manufacturers - please note the box and CAS are integral units. That is why STBs can be rented (avoiding sales tax) because the box is part of the plant controlled by CAS. In China, the government has made Chinacrypt as standard--so consumer gets flexibility and the government gets security.

Royalty on CAS can be calculated at $10/box and smart cards are replaced every year (cost $4)---these will be continuous outflows and the subscriber will have to bear this cost. Certainly, the government has to endeavour to make it consumer friendly as other countries have done.

"Several broadcasters will have to take a decision about converting pay channels into FTA and vice versa. It entirely depends on the business model that the broadcaster adopts"

Will ETC Networks channels remain free to air or go pay at a later stage?

Although ETC Networks had earlier announced that its channels etc and etc Punjabi would become free-to-air after 14 July 2003, there is a possibility that etc Channel Punjabi will go pay.

The decision would depend on the business/revenue model of the channel. Our research indicates that etc Punjabi has exclusive content that is not available with competitors - for instance, the Gurbani (live renditions from the Sikh holy book relayed from the Golden Temple, Amritsar). Moreover, our internal research indicates that large chunks of viewers in North India are hooked on to the channel and will definitely pay the monthly charges.

The flagship Hindi music channel etc would remain FTA. etc music channel has substantial reach, penetration and distribution. In fact, it gets advertising revenues due to these strengths. Moreover, it also earns monies due to sponsored trailors and music videos amongst others. There is no question that etc Hindi would remain free.

Several broadcasters will have to take a decision about converting pay channels into FTA and vice versa. It entirely depends on the business model that the broadcaster adopts.

Currently, some of the MSOs are asking pay channels for commitments that they would remain pay for a certain specified duration. However, the government notifications don't specify any such commitments. As far as the government is concerned, the more the number of FTA channels, the better it is. The government can then claim that CAS is a success.

What do you feel about the broadcasters' proposal to have differential regime?

Some broadcasters have proposed to have different MRPs (market retail prices) for channels in different cities. In their meeting with MSOs on 18 June, broadcasters had given MSOs a chance to add their margins to the pay channel rates specified by the broadcasters. However, I feel that the differential pricing regime should not be allowed as the government wants standardised rates across the country. However, the fact remains that most of the LCOs are demanding 25 per cent of the 50:50 break of revenues between the MSOs and the broadcasters.

"Rating agencies would still provide data on the non-CAS homes. Rating agencies and media agencies will have to eventually coordinate with MSOs for research findings and consumer insights."

How will the post CAS scenario make life for media planners and buyers?

The implementation of the conditional access system (CAS) will definitely make life difficult for media planners and buyers. The opportunities available for advertisers will increase dramatically. In fact, media independents and ad agencies will have to create specialised teams that will deal with the post-CAS scenario. Moreover, they will have to analyse data from the rating agencies such as TAM as well as data compiled by the MSOs.

CAS will provide ample opportunities for branding. The opportunities will include options such as EPG (electronic programme guide) and OSD (on screen display) that will become a part and parcel of every household that owns/invests in a set top box (STB).

The plain vanilla STBs that are being offered to consumers in the initial stages of CAS implementation can provide opportunities such as:

* On screen display while the STB is in the process of booting or starting

* Messaging service including targetted OSD (on screen display) depending on the profile of the household or the subscriber.

* EPG (electronic programme guide).

OSD will be a great opportunity for media planners and even the cable trade constituents. Consider a scenario where a cigarette ad will be displayed on the TV screen of a subscriber who smokes. Pharma companies can target the households of doctors. Selective dissemination of messages is a distinct possibility as the MSOs/cable operators have the expertise to collect data about consumers.

There will be a greater opportunity for education based shows or channels.

Will rating agencies become redundant?

The rating agencies would still provide data on the non-CAS homes (those households that don't invest in an STB). Rating agencies and media agencies will have to eventually coordinate with MSOs for research findings and consumer insights. MSOs have started thinking seriously about data collation and mining.

Abroad, there are STBs that are empowered to act as peoplemeters. In India, the basic boxes that are being currently offered by several MSOs don't have this facility. But all Broadband Pacenet India manufactured STBs will have the peoplemeter facility as well as Ethernet output. BPI is the only MSO that won't be importing STBs but will be indigenously manufacturing STBs and providing it to Indian consumers.

Why would the consumer pay for a costlier STB that can act as peoplemeter?

Eventually, broadcasters will lure consumers with loyalty programmes. For instance, Zee TV can coax consumers to buy STBs with peoplemeter facility; urge them to watch Zee TV for 'X' hours a week; offer them discounts on the Zee bouquet package rates for the subsequent months!

Remember, CAS will empower several households that couldn't afford to buy a computer earlier as the STB will give them a chance to surf the net through their TV sets.

According to you, who should be blamed for the current state of confusion?

The point remains that every constituent of the cable trade is in favour of CAS. All of them have taken some steps forward. The MSOs are caught in a trap - they have made quite a few investments and they are unsure of the future developments. Broadcasters are playing a cautious game. The LMOs are all in favour of CAS. The government is going ahead despite scares of "probable backlash" from voters.

Yes, currently there seems to be some kind of a Catch 22 situation. One must realise that there can never be an ideal situation. I am confident that CAS will eventually be a great success in India.

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