"Digitalisation in India" : a complete essay !

Digitization has sneaked into every aspect of our life. The latest directive of TRAI for digitization of cable T.V is another initiative to bring the advances of technology to our door step.  By considering the factors like providing services, subscriber, the cable operator, industry structure and the industry challenges we can understand the present scenario and estimate the future consequences.

TV viewing services in India is currently provided mainly by three mediums Analogue Cable Services, Digital Cable Services and Digital DTH Services. Analogue cable services have been existing in India for more than two decades in India; however, analogue cable services have limited number of channels and do not have extra features and value added services. Digital DTH services in India have been started less than a decade back and are gaining popularity and acceptance in India mainly because of their superior picture and sound quality. The receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. This is a major constraint which subscribers tend to think over.

Through DTH which means Direct to Home Service, the recipient will receive the signals directly from the satellite on his Set Top Box. The viewer gets a wider range of channels to choose from which can be activated through packages. The picture quality is much superior and the sound is crystal clear. The viewers are also able to watch High Definition content which is set to make television viewing even more superlative. One can now watch his favorite sports action or travel or adventure series in high definition recording it and by replaying it. There is up to 5 times picture quality over normal or standard definition picture quality and the images carry 16: 9 aspect ratios.

With Indian TV market 3rd largest in the world with 146 million households it takes some time to digitize the TV connections. This is the reason why Govt. has ordered to digitize in four phases. The government on its part has been rational on its part by introducing the digitization in phased manner.

• Phase-I : In four metros by December 31, 2011
• Phase-II :  In all cities having a population of over one million, by December 31, 2012
• Phase-III : In all other urban areas (municipal corporations/ municipalities) by December 31, 2013
• Phase-IV : In the rest of India by December 31, 2013

 The government is also furthering its cause of connecting every village with broadband through this digital revolution. The increase in competition between the broadcasters will invariably lead to viewers getting more out of their rupee paid. The users are also set to gain from the fact that digitization enables a more interactive T.V viewing, piggy backing of other value added services like the broadband though the cable network. But the shortage of set top boxes and the issue of hike in the monthly subscription fee by many cable operators brought in a little bitterness to this whole exercise.

Industry structure

The distribution side of the value chain remains highly fragmented - though market structure changing rapidly with a thrust on consolidation. The cable and satellite television market in India had emerged in the 1990s and has since then experienced a strong growth in terms of number of subscribers having grown from mere 400,000 in 1992 to around 90 million today, representing a CAGR of 35 percent for the last 18 years. The channels seen on TV (pay channels or free to air, FTA, channels) are created by different broadcasters and transmitted from satellite to receiving stations (head-ends) owned by MSOs. The MSOs in turn re-transmit these signals through cables to the LCOs (Local Cable Operators), who have their own last mile cable network to individual homes.

Industry challenges

Under-reporting of subscriber base by LCOs (Local Cable Operators) leading to inequitable distribution of value : In the absence of an addressable system, the subscription revenue transaction among the broadcasters, MSOs, and LCOs is currently undertaken either on a fixed-fee basis or on the basis of a negotiated subscriber base. Considering the strong bargaining power enjoyed by LCOs who own the last mile, the distribution of subscription revenue in effect remains heavily skewed in their favour. As per the industry estimates, LCOs declare only around 15 percent of their paid connectivity to MSOs and broadcasters. This not only deprives the MSOs and broadcasters of their fair share of value, but also results in service tax leakage for the government. The lack of trust and transparency in the business models of the industry has also led to frequent disputes between stakeholders and increased litigation incidences.

Non-standard pricing and local monopoly status of LCOs leading to sub-optimal customer service: In a market survey commissioned by TRAI, it had observed that the average monthly cable bill for a subscriber varied widely from Rs. 149 in Kochi to Rs. 322 in Shillong, even though services being provided did not warrant such variation. Apart from this, there are instances where the cable charges are increased by LCOs for a locality arbitrarily. These shortcomings are the natural fallout of the local monopoly status enjoyed by most LCOs and small MSOs who are able to avert competition and thus prevent free market forces to keep prices under check.

Capacity constraints in analog cable stifling growth of new channels and introduction of technologically advanced content: The number of television channels in India has grown at a rapid pace from two in 1992 to 120 in 2003 to around 600 at present. Arrival of a plethora of new channels in the Indian television space in the backdrop of limited bandwidth of the analog cable system, results in allocation of prime frequencies by MSOs to channels offering higher carriage (or placement) fee. Limited capacity, coupled with the absence of an addressable system, has also resulted in limited availability of subscription-driven niche content such as science, golf as well as technologically advanced content like high-definition (HD) channels. This trend is further fed by the inordinate dependence of broadcasters' revenues on advertising(less on subscription) impacting niche content offerings since focus tends to shift on advertisement friendly genres.

Since digitization would bring about full addressability, it would eliminate the menace of under-reporting of subscriber base by LCOs. This will aid increase in subscription revenues for broadcasters. Further, the increased capacity of digital distribution channel is likely to spur greater investments by broadcasters toward niche, targeted and HD content and lead to diversification of their revenue streams. The carriage costs paid by broadcasters to distributors, which currently remain high in view of the limited bandwidth of analog cable, may decrease post digitization. This is all about digitalization in India.