Cable TV Powered by

'Trai has come up with the correct CAS economics' : K Jayaraman - Hathway Cable & Datacom MD & CEO

http://www.indiantelevision.com/sites/default/files/styles/smartcrop_800x800/public/images/cable_tv_images/2015/12/24/K%20Jayaraman.jpg?itok=if3i3nTc

The Telecom Regulatory Authority of India (Trai) has laid out a fertile ground for digital cable TV take off. The formula is simple: price everything low and large volumes will create a viable market dynamics.

India has seen it in mobile phones. The lessons will repeat itself in the television industry. Despite the initial blip, the industry will correct itself and grow as at the centre of this pull of gravity rests the consumers.

Broadcasters are not in tune with this logic. Their programming costs are rising. So why not let them have the freedom of pricing their products?

The cable operators, along with the consumers, are in love with the a la carte pricing of pay chanels at a maximum of Rs 5. The multi-system operators (MSOs) feel that a new business model is being set.

In an interview with indiantelevision.com‘s Sibabrata Das, Hathway Cable & Datacom managing director and CEO K Jayaraman argues how every stakeholder will eventually stand to gain. The a la carte pricing will make digital cable popular while the revenue share across the value chain has been "very accommodative."

Excerpts:

Do you agree with what the Telecom Regulatory Authority of India (Trai) has fixed as the price and revenue share under conditional access system (Cas)?

The regulator has come up with the correct economics. Consumers will have choice and at a real affordable cost. The a la carte pricing of channels at a maximum of Rs 5 in Cas areas will increase the penetration of set-top boxes (STBs) and drive in volumes. The revenue share allocation across the value chain is also very accommodative. Broadcasters will get 45 per cent share and have access to advertising revenues as well. While multi-system operators (MSOs) will have 30 per cent and carriage fee, local cable operators are also given a fair share with full revenue on the free-to-air (FTA) package and a 25 per cent share on pay channel revenues. Also, the government will get more tax revenues.

Broadcasters complain that the maximum price of Rs 5 per channel is too low and doesn‘t take into account their high programming costs.

When subscription becomes transparent, the rate has to be low. For digital technology to take off, we need such a price regulation. Let us face the reality: these are the consequences of a new environment and a change in business model. Besides, the price regulation is only for one year. Free market will prevail and price will be discovered eventually.

With a la carte pricing, cable bills are expected to drop. How will falling ARPUs (average revenue per user) affect the cable companies?

Nothing can be worse than the current model. But under Cas, we will, at least, have a legally sanctioned revenue, albeit lower. No doubt we will get a Hindu rate of return. But we will not have under-reporting of subscribers. We are happy that a proper business model is being set. Revenues Will grow once the business model settles. Everybody will be on the move. As consumers have choice, broadcasters will have to worry about pricing their channels correctly within a maximum of Rs 5. If they do that, then MSOs can also make money. We will have to focus on providing quality cable TV service. If we don‘t do that, we have competition from direct-to-home (DTH) service and will face threat of being wiped out.

Cable companies will also have to subsidise the boxes. Do they have the resources to absorb subsidy costs and still scale up?

All of us will have to be in investment mode because the business model is changing. The initial subsidy on each box will work out to Rs 1,500. This is the price we have to pay for a change in the business model. But this can be squared off once it settles down. The price of STBs will fall by 15-20 per cent with a surge in volumes. Cable companies will have to raise resources, either through debt or equity. For those who can‘t, survival will be tough. The telcos like Reliance Infocomm are waiting to step in. We should be prepared for a high volume, low margin game. Distribution, initially, is a volume business.

Won‘t your traditional business from non CAS areas be a support?

Yes, we will have other businesses to run: internet, non CAS placement fee, ad revenues from local cable channels. We will also have carriage fee from FTA channels in a CAS system. For cable companies to cover up their overhead and variable costs (STBs), they will have to do other related businesses.

A la carte pricing will drive down our ARPUs. But we are happy that a proper business model is being set

Like having a well-rounded revenue stream?

If you are a composite cable company, you will survive. We will have to provide video, voice and data through a common pipe. Standalone players will have a tough time. We, for instance, are preparing to launch voice over internet protocol (VoIP) services by the last quarter of this year. Test runs are currently on. We are also be aggressively pushing digital cable TV in non CAS markets. We recently launched in Jalandhar, having rolled out our digital services earlier in New Delhi, Mumbai, Pune, Bangalore, and Hyderabad.

Do you see DTH having a perceptional advantage over cable?

DTH platform providers are well capitalised and have a more long term vision. Their ARPUs can also settle higher as they better their products. But they have a huge variable cost in occupying transponder space. Cable companies, in contrast, have already made the investments and have low operating costs. Of course, now they will have a variable cost towards procurement of boxes. But they have an existing relationship with customers and cable is two-way enabled. Digital cable can also offer more channels. Composite cable companies with focus on multiple revenue streams can effectively fight DTH.

How are you planning to infuse capital to fund digitisation?

We will raise Rs 1 billion as debt to fund the first phase of CAS The bulk of the investments will be towards subsidising the STBs. Funding will also be required in setting up VoIP and expanding broadband infrastructure.

Is it a good time to acquire last mile operators?

If cable companies have the resources, acquisition of last mile will make sense. In the CAS areas where you have an administered price regime for one year, the payback period will be longer. But once the price is market-based, then recovery will be faster as more channels come under the pay system and people start subscribing to them. Even in non CAS areas, acquisition will provide size upon which a digital platform can be built later. But in case of Hathway where we have limited resources, we would rather put the money in placing more STBs.

Will Valuations of cable companies go up under CAS?

CAS will bring some semblance of order into the business. But it is a long term roll out and needs cash flow. What is more important is that cable companies will attract capital, whether in the form of equity, debt or convertible bonds.

Will there be a consolidation in the industry?

Consolidation will happen wherever digitisation is required because of new technology and service requirements.

Zee network‘s Wire & Wireless India Ltd (WWIL) is planning to launch a headend-in-the-sky (Hits) platform and has expressed intent to make inroads into south and western suburbs of Mumbai. Do you see territorial warfare among MSOs returning?

Hits is right now viewed more as a fashion statement. We are delivering digital without having Hits. If it is necessary, then everybody will do it. As far as poaching of operators go, it is an open ground. Cable companies who focus on good service and have capital to create capacity will turn out winners. Competition is not a one-way street.

Latest Reads

http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/01/16/den.jpg?itok=X8UT9TVb
Den reports lower numbers for third quarter

BENGALURU: Indian cable distribution network and broadband internet services (broadband) provider Den Networks Ltd reported 6 per cent drop in consolidated operating revenue numbers for the quarter ended 31 December 2018 (Q3 2019, quarter or period under review) as compared to the corresponding...

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/01/15/TrueVisions.jpg?itok=LjG9wHP8
Thailand's largest pay-TV operator TrueVisions extends partnership with Synamedia

LONDON and SINGAPORE, 15 January 2019 – Synamedia, the largest independent video software provider, today announced it has extended its seven-year partnership with TrueVisions, Thailand’s leading pay-TV operator.

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/01/09/si.jpg?itok=pJrF_1gx
SITI Networks launches My SITI mobile app

SITI Networks Limited (BSE: 532795, NSE: SITINET), an Essel Group company, has launched My SITI mobile app for its customers.

Cable TV Multi System Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/01/08/tv.jpg?itok=_Ehkuf0S
Pay TV subs show first ever decline globally

MUMBAI: The third quarter of 2018 saw a slight fall in pay TV subscribers, making it the first ever marked changed and probably a point of worry for cable and DTH operators world over. The decrease was by 0.11 million, down by 0.02 per cent, as per informitv’s Multiscreen Index reported by Advanced...

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/01/02/tv.jpg?itok=0MVLLQW9
Hathway, DEN, Siti reveal packs under new TRAI tariff order

Major DTH players and MSOs have started updating new channel and package pricing as per the new TRAI tariff order. Soon after major broadcasters announced new rates, DPOs are taking swift action making it easier for consumers to choose their desired channels. Last month, TRAI gave an additional one...

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2018/12/27/tv.jpg?itok=DAGo6DKa
Maharashtra stares at possible 3-hour cable TV blackout today as LCOs flex muscle

Cable operators across the country, and particularly in Maharashtra, seem to have upped the ante in their confrontation with the Telecom Regulatory Authority of India (TRAI) over the new tariff order that will be applicable to the broadcast sector from 29 December 2018. At a protest gathering in...

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2018/12/18/ortal.jpg?itok=FwRrOvsd
Ortel loss mounts: NCLT orders insolvency process

Ortel Communications Ltd (Ortel) reported a higher loss for the quarter ended 30 September 2018 (Q2 2019, period or quarter under review) as compared to the immediate trailing quarter Q1 2019 and the corresponding year ago quarter Q2 2018. On 27 November 2018, the National Company Law Tribunal,

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2018/12/06/vbs.jpg?itok=MdZkrwW8
The challenge of DD FreeDish and new tariff order for DPOs

With the emergence of a large number of OTT platforms and cord-cutting globally, the future of pay-TV looks bleak. The talk of the town is how pay-TV industry will manage to survive the crisis. Moreover, the new tariff order (NTO) in India is also set to overhaul the entire ecosystem.

Cable TV Local Cable Operators
http://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2018/11/15/den.jpg?itok=MEILIG20
Den reports improved numbers for Q2 over Q1

The Sameer Manchanda-led Indian cable distribution network and broadband internet services (broadband) provider Den Networks Ltd

Cable TV Local Cable Operators

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories