Now more than ever, cable companies realise the need to upgrade service and content as they face the threat from direct-to-home (DTH) and telecom operators who are planning to offer triple play service in future. Hathway Cable & Datacom is focusing on extending its digital cable television services which are currently available in four cities. There is also an aggressive push to drive revenues from broadband business while growth from cable TV subscription is expected to remain under pressure until addressability (as in CAS) takes off.

Speaking to Indiantelevision.com's Sibabrata Das, Hathway Cable & Datacom chief executive officer K Jayaraman elaborates on the need for multi system operators (MSOs) to have an integrated revenue model from digital and analogue cable TV, broadband and cable channels.

Excerpts:

Will Siticable's recent acquisition of Kolkata-based MSO Indian Cable Net Company (formerly RPG Netcom) set the ball rolling for more such deals and consolidation in the cable TV industry?
For a pure cable company, there is no business case at this stage to play the acquisition game. Growing in size on the MSO model doesn't make sense. By acquiring another loss-making MSO, the new management can't change the business model overnight.

RPG Netcom has been looking for a buyer for the last few years. So why this new interest shown by two companies to buy out the ailing MSO?
They must be having their own strategies. But for cable companies with a pure subscription model, acquisition deals are not feasible. Expansion doesn't make strategic sense at all at this stage.

Were you evaluating a takeover of RPG which would have given you a footprint in the eastern region?
There is no point in taking over another MSO in the current business environment. As a model, MSOs can't make money. For our size, we are happy with the market share that we have.

Does this mean that Siticable and Sun Network had broadcasting interests to protect?
I can't comment on the business strategy of other companies.

Are broadcasters seriously eyeing cable companies even as distribution is getting tougher?
There is a bandwidth problem on cable networks. We can't carry all the channels on the analogue system because of space constraints. Positioning of channels is also becoming important with more channels getting launched. Broadcasters need a spread because of this bandwidth clogging; there is a case for establishing synergy with cable networks.

Will this ignite higher valuation for cable companies?
Valuation for securing that synergy is not high. Most MSOs are saddled with losses.

Isn't carriage or positioning fees becoming a healthy source of revenue?
It is not something you can base your revenue plans on. The main source of revenue for cable companies will continue to be subscription earnings. Placement fees are like an artificial respirator put on the MSOs; pull it out and we will all die.

Does it make business sense to acquire and create size in a particular territory like Siticable has done in Kolkata? Could you then structure a revival plan around carriage fees based on the strength of your market share in that territory?
I can't comment on what Siticable plans to do. But more the size, more is the programming cost. The revenues are not commensurate, at least not in the current MSO model. Moreover, positioning fee is a temporary phenomena.

Can't you take cable networks on lease model?
Even in this model, there is an operating cash loss with expenses exceeding income. Old liabilities and current losses can't be washed away.

Was 2004 a less tough year for cable companies?
Alternative delivery platforms, a hot topic in the early part of the year, couldn't launch in 2004. We were expecting telecom operators like Reliance Infocomm to launch their triple play service. That didn't happen. Nor did other DTH operators come into existence. And the Telecom Regulatory Authority of India (Trai) came to our rescue, by regulating tariff and prescribing the Interconnect agreement. This means broadcasters can't ride roughshod over us. There are systems and procedures to follow; we can't be switched off arbitrarily.

Isn't the scenario different today with Space TV and Sun Direct TV obtaining clearance from the government?
Serious competition from DTH is definitely on the horizon. We will have two new players joining the race soon. There will be a market for it as it is a new technology and is being offered by reputed players. DTH has tremendous potential, if cable companies don't get their act together.