Mumbai: Headend-in-the-sky (HITS) combined the flexibility and quality of direct-to-home (DTH) services and the reliability and pricing of cable television, said NXT Digital managing director and chief executive officer Vynsley Fernandes on Wednesday. NXT Digital is the only HITS operator in India and Fernandes is bullish on the prospects of video and broadband aggregation using HITS technology.
In a conversation with Media Partners Asia co-founder and senior partner Vivek Couto at the Apos India summit on Wednesday, Fernandes spoke about structural developments in the TV distribution ecosystem, pricing parity for consumers, satellite broadband policy and more.
Cable TV has been around since 1995 and the Hinduja Group introduced HITS to India in 2015. The way HITS technology works is that channels are aggregated at an Earth Station, uplinked to a satellite and instead of being downlinked directly to the customers, like DTH, they are received by cable operators via a refrigerator-sized unit and redistributed to customers, explained Fernandes. HITS allows local cable operators to digitise overnight in remote markets such as Lakshadweep, Andaman and Kargil.
HITS is a capex light model. Post pandemic, there were last mile owners who wanted to be relevant and grow. The challenge was investing in the back-end and connecting to consumers. Fernandes said, “We already have access to 4400 pin codes and we’ve launched 40 NXT Hubs across the country. These NXT Hubs are owned and operated by us and are future-ready. Any last mile owner within 150 square feet can approach a NXT Hub and offer 650 TV channels and broadband speeds of 100 mbps overnight. It empowers the last mile owner to become a digital services provider. By the end of this financial year (March 2022) we will have 100 such NXT Hubs across the country.”
“Last year, cyclones hit India and MSO fibre got damaged. They had the option to lay fibre but that would take a couple of months or move to another platform. We thought, what if they used our infrastructure to go digital? So, we approached the ministry and shared this idea. Credit to the ministry of information and broadcasting, literally in a few months by November 2020 it was promulgating infrastructure sharing for HITS with MSOs," he added.
Speaking about structural developments in the content distribution ecosystem, Fernandes said, “There are two things happening that are changing the structural makeup of distribution in terms of consumption – NTO 1.0 which is bringing parity and transparency and the pandemic.”
“Post-pandemic, OTT platforms have realised that they can be more relevant to customers as part of an aggregated offering rather than as a standalone service,” observed Fernandes. “In metros where broadband speeds are 100 mbps and above, in towns and smaller markets, people want the same product but in smaller bundles or what we call ‘skinny bundles’. These customers have broadband speeds of 10mbps and their main consumption is not entertainment but access to e-medicine or e-education.”
In terms of how much a consumer is willing to pay for content, Vynsley noted, “The actual prices differ widely across the country. There are markets where consumers average revenue per user (ARPU) is under $3, content cost is $2-3. In these markets, there’s not much offtake in terms of paid OTT services, instead consumers access YouTube and other freemium platforms. If you move to cities, the pricing is $300 (Rs 28,000-30,000) for an annual subscription. This is a significant opportunity for multi-system operators for flexi-play.”
Fernandes is of the view that HITS will increase revenues for the entire ecosystem. “Today, a lot of MSOs look at certain markets as not viable because the cost of connectivity is still significant,” he said. “That’s why infrastructure sharing will benefit MSOs and broadcasters. MSO will share capacity and be able to deliver value to customers and better quality of service, while broadcasters will improve their bottom lines.”
In Q1, NXT Digital reported five million video subscribers and one million broadband users growing at 7-10 per cent year-on-year. “There is a 30 per cent overlap between our video and broadband user base,” said Fernandes. “That means a quarter of a million customers are consuming both linear/digital products. There is a runway to grow that base to a healthy 50-60 per cent and that’s our target vision for the business. We’ve just launched our OTT product and are looking at bundled ARPUs. Linear TV ARPUs are currently at Rs 300 and OTT delivers higher ARPUs for us. It doesn’t concern me too much which part of revenue delivers but our offering should reach every demographic in the country.”
During the pandemic, the government couldn’t reach out of several million people who resided in areas where connectivity was patchy. It was prompted to launch e-agriculture and e-medicine services and Telecom Regulatory Authority of India (Trai) has released recommendations on satellite-based connectivity for low bit rate applications. “The government is working on a clear plan and sees the tremendous need for broadband over satellite,” noted Fernandes.
“Satellite broadband is a clear parallel to HITS which was needed to deliver video in markets that could not be serviced by terrestrial networks,” said Fernandes. “Broadband serves the same void by catering to markets that cannot be serviced by terrestrial fibre. Today, a broadband over satellite provider needs four things – reach and footprint, a company with experience working with satellite, regulatory knowledge and ability to work with industry stakeholders.”