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TRAI tariff order, disruption posed challenges to DPOs in 2018

Tariff order will play the biggest role in the business this year

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MUMBAI: Distribution platform operators (DPOs) in India trod a tricky terrain throughout 2018. Both DTH and cable operators continued to face the heat of Jio FTTH, the rapid growth of over-the-top (OTT) platforms and the uncertainties posed by the implementation of the new tariff regime towards the end of the year.

OTT platforms and challenge of cord cutting

With the fall in data triggered by Jio, OTT went beyond male, metro, and millennial which posed a potential threat to the cable and DTH industry. As online viewership increased rapidly, traditional distributors were exposed to the threat of cord-cutting.

What bothered cable operators more than independent platforms was traditional broadcasters driving the B2C lane. Almost all the major broadcasters strengthened their presence on digital, offering catch-up TV along with original content, thus allowing them to bypass revenue sharing with traditional distributors without having to worry about the tariff order or down-linking permission from the government.

KCCL CEO Shaji Mathews pointed out that broadcasters are trying to develop OTT platforms in such a way that their dependence on cable and DTH is reduced. He also added that they are developing it to push for additional viewership and to have an alternative medium.

Jio’s FTTH foray

After leading the wireless data revolution, Mukesh Ambani-led Jio Infocomm returned with another blockbuster offering last year - Jio GigaFiber. The grand entry in the fixed-line broadband sector was not only a challenge for broadband service providers but for cable, DTH players also as the FTTH service is bundled with additional benefits including TV service. Given that the Jio FTTH service will come at a lower cost as compared to market rates, another price war is likely to be unleashed by India’s richest man. In addition to that, the higher amount of data at better speeds will convert more people into binge-watchers of online content increasing the risk of cord-cutting.

Jio’s entry in India’s low-penetrated FLBB sector has created opportunities for larger MSOs as the former quickly realised the difficulty of last-mile connectivity.

“If you talk about Jio coming in the industry, we are very much positive towards it that they have recognised our structure - broadcaster, distributor, MSOs, LMOs. Since they have recognised it and tied up with major players like Den and Hathway, it’s a win-win situation for industry also,” Maharashtra Cable Operators Foundation member Asif Sayed said.

According to Mathews, it is not the first time that the cable industry has been subjected to disruption. The advent of DTH too was rooted in disruption. According to him, the cable industry is well equipped to face the impending Jio onslaught.

DD FreeDish growth

Public broadcaster Prasar Bharati’s free-to-air (FTA) platform DD FreeDish too became a cause for concern for the distribution industry. The new tariff framework caps monthly cable or DTH bill of television households at Rs 130 (plus taxes) for the first 100 FTA channels. However, DD Free Dish offers the same free of cost. Doordarshan director general Supriya Sahu believes DD FreeDish is not only used by a marginal section of the society but is also evolving as an alternative option which clearly indicates that it could be a potential threat for DPOs. As per consulting firm EY, the number of DD FreeDish subscribers is expected to reach over 40 million by 2020.

DPOs forged new alliances

With the threat of disruption looming large, cable and DTH operators adopted new strategies to survive. Major DTH players as well as MSOs signed content deals with popular OTT platforms and rolled out hybrid set-top boxes as a counter.

Essel group-promoted Siti Networks unveiled “SITI PlayTop” with YouTube and YouTube Kids in-built, its first hybrid set top box, in September 2018. Another leading MSO, Hathway, launched two new products – an OTT set-top box and a cable hybrid box. Mumbai-headquartered MSO IMCL’s group company ONE Fiber also introduced an OTT device. DTH companies too got in on the act. In the first half of 2018, Harit Nagpal-led Tata Sky entered into a strategic partnership with streaming giant Netflix. India’s largest DTH operator Dish TV announced the national launch of its OTT platform and DishSMRT Stick - a streaming device to make any TV smart. Jawahar Goel’s company has also planned new consumer-friendly initiatives including the launch of Hybrid connected box and integration of voice assistance in next-generation smart STB.

Added focus on broadband

Realising the importance of online video in the entertainment sector, MSOs and some LCOs with their existing resources focused on broadband business to further cement their positions. Cable operators with a reach of over 100 million households can easily upgrade fixed line coaxial cable to carry high-speed broadband. Fastway CEO Peeush Mahajan said his company expanded its broadband service in new locations in 2018 and the MSO’s focus will be expanding further in as many as areas possible this year. Even DTH operator Tata Sky rolled out broadband service in 15 cities as it remodeled itself as a video and broadband company.

KCCL’s Mathews said that most major MSOs have now started investing in broadband and FTTH. He also added that the implementation of fixed-line broadband has been hampered because of various governmental issues like lack of coordination between the various ministries on issues like license fee and difficulties in acquiring licenses.

VAS remained key

While the ARPU growth was on the lower side across the ecosystem, DTH operators invested in various value-added-services to drive growth. Dish TV launched VAS services for both DishTV and D2H brands such as ‘Bhojpuri Active’, ‘Fitness Active’ among others with an objective of delivering quality content to consumers across regions in their language. Tata Sky too expanded its regional services with the launch of VAS like Tata Sky Telugu Cinema and Tata Sky Tamil Cinema. At the end of year, it also launched Tata Sky ShortsTV, a service dedicated to curated short stories and films.

DTH sector’s sluggish growth

The growth of direct to home (DTH) subscriber base of private players in India was the slowest over the last five years for the nine month period ended 30 September 2018 (TQY 2018, TQY period, three quarters of the year under review) as per TRAI. The good news was that the quarter ended 30 June 2018 (Jun-18, last or previous quarter) saw a reversal of fortunes. From a loss of about 30,000 (0.003 crore, 0.3 million, 0.3 lakh) subscribers in the quarter ended 31 March 2018 (Mar-18), DTH subscriber growth was positive 18.4 lakh (0.184 crore, 1.84 million) for the quarter ended 30 June 2018 (Jun-18). However, in the case of the quarter ended 30 September 2018 (Sep-18), subscriber growth has once again nose-dived to just 8,000 subscriber additions.

New tariff regime

The most crucial development of 2018 was TRAI’s win against Star India in the Supreme Court with regards to the new tariff order. With the radical change in the overall ecosystem, the organisations sounded cautiously optimistic. The new rule is expected to bring transparency in the value chain along with creating a level playing field for all stakeholders.

While broadcasters and DTH platforms are likely to be benefitted, LCOs seem highly concerned about what’s in store for them. LCOs feel the 80-20 revenue share will work for DTH operators but not for MSOs. They prefer a share cap for LCOs instead of taking it out from the 20 per cent that MSOs have. While the deadline to implement the order was 28 December 2018, TRAI offered respite to the sector handing an extension until 31 January 2019 to ensure a smooth transition.

With less than a month to go, DPOs have also started updating new channel prices and packages on their websites to inform consumers. Many large MSOs like Hathway, DEN Networks and Siti Cable have come up with "suggestive packs" bundling popular channels of all major broadcasters. Moreover, as TRAI has withdrawn its appeal before the Supreme Court to reinstate the 15 per cent cap on discounting of channel bouquets under the new regime, DPOs say now the order lacks value. As broadcasters now can give a discount of 50-60 per cent on bouqets keeping the a-la-carte channel price high, DPOs will not be in a position to package their products.

Given the fact that there will be some time needed for consumers to adjust to the new structure, broadcasters may call for a rating blackout for at least six to eight weeks. However, it will not be the first rating blackout. When the industry went from analogue to digital distribution, the ratings were held back for around nine weeks. Though initially there was chaos, later both cable operators and DTH platforms reaped benefit from digitisation. “TRAI tariff order implementation provides transparency in the system and gives more choice to the consumer. Dish TV has been prepared to implement the new tariff order and stands to benefit with faster and healthier growth,” India’s largest operator Dish TV feels.

Standing at the next revolution in TV industry, time will tell how the new regime will pan out for stakeholders. 

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