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Digitisation: The Complex Story

Updated: July 12, 2014 7:30 am

India has witnessed the digitisation process in the first two phases and the results are not satisfactory. It is estimated that India has 240 million households in which 160 million have television at their homes. Of them 80 million are those who have cable connections while 65 million have Direct-To-Home (DTH) connection and rest around 15 million have DD Direct connection

Digitisation of cable networks in India has many stories. Some say that it will give a complete makeover to the TV viewing experience and according to some this could be a bad experience. Digitisation has been seen as a platform which can change the entire landscape of the industry and plug both leakage to broadcasters and taxes to the government.

The new government is also keen to digitise the country as Information and Broadcasting Minister Prakash Javadekar said his government’s motive is to act swiftly. He said that his attempt in keeping with the mandate of the new government would be to take decisions on pending issues as soon as possible as “delay is out, decision is in.” The work of the government is not to create roadblocks but to give impetus to entrepreneurship and industry. He was speaking at the ASSOCHAM meet on media and entertainment, SCREENS 2014 in New Delhi. He affirmed that the path-breaking initiatives on digitisation were bound to improve the quality of television broadcasting in the country. Both the government and the industry should work together for the welfare of the consumers.

His inaugural speech acted like a medicine for the broadcasting industry as he hinted towards more efficiency in terms of working and deleting the word delay from the present government dictionary. India has witnessed the digitization process in the first two phases and the results are not satisfactory. it is estimated that India has 240 million households in which 160 million have television at their homes. Of them 80 million are those who have cable connections while 65 million have Direct-To-Home (DTH) connection and rest around 15 million have DD Direct connection at their homes. India is being seen as a potential market as the phase-I saw digitisation of around 8-10 million people while in the phase-II digitisation, which covers 38 cities, saw a mere jump to 12-14 million people. Now hopes are on phase-III and phase-IV which would digitised around 40-50 million people in coming years.

Despite such good numbers, the cable and broadcast sector is still trying to get the system right on track. The delay in implementation of various phases of digitisation has not materialised the promised jump in subscription revenues and Average Revenue Per User (ARPU).

Digitisation was meant to provide transparency in the process, to create revenue to the government, to get correct TRPs for the channels and to get good quality of cable services to the consumers, but it has failed to provide so. Despite being aware of hiccups in implementing digitisation in phases across cities and towns, broadcasters were hopeful that they would be able to have a lot from carriage fees, thereby increasing profitability. Though digitisation has bought down the carriage fees, the MSOs and broadcasters still have a reason to worry.

Taxation has become one of their main problems as they have to pay multiple taxes. Currently a DTH operator has to pay 33 per cent tax which includes 12.5 per cent service tax and an average of 10.5 per cent entertainment tax (entertainment tax may vary as it is a matter of state). All these are indirectly taken from the costumers. According to a report, DTH companies are facing a loss of approximately 20,000 crore.

Another major problem is of set-top boxes. In the whole process of digitisation all the set-top boxes are imported from China. Complaints have poured in against these boxes. People are complaining about digital set-top boxes installed in their residences and commercial organisations. Visual and audio disturbances coupled with channels going off air from time to time have left the whole process of digitisation in questions. India has failed to set up factories which are dedicated for making such boxes. If we start making these boxes by our own selves then it will not only be cheaper and easy-to-manage but also will create immense job opportunities for the people.

In the haste to install these boxes, cable operators have overlooked a crucial step—that of filling in the Cable Access Form (CAF) before installation of the device. The purpose behind mandating Digital Addressable System (DAS) was to identify the actual number of cable viewers in the country. But with most customers not filling in the form, the purpose still remains defeated.

Through the process of digitisation, the cable industry has seen a paradigm shift of power from Local Cable Operators (LCOs) to Multi System Operators (MSOs). The MSOs have starting taking control on the content which was previously was with LCOs. Of the cable pie, a large chunk was undeclared by the LCOs and hence pocketed by them. This affected the revenues going up the system, to the MSOs and the broadcasters. In the case of digitisation, the mandatory registration of set-top boxes (STBs) and customers’ premises (through customer application forms or CAF) these have been installed in is expected to lead to transparency in the subscriber payment mechanism. These forms have the information details of registered users and their channel preferences.

Another important problem which has been addressed is of licensing. To start one’s own cable network one has to take many permissions from different ministries which is very time consuming. The cable operators who were there in this field for more than 25 years now have to go through a long process to obtain their licence and that is damaging their business badly. There should be a transparent process through which one can easily obtain the licence without any more trouble. The government should ensure that there should a cross billing and customerised billing so that there is a clear and transparent way through which the consumer can get to know where his or her is money is being utilised.

Given the complexity of the exercise across the country and the rate at which television penetration is growing (MPA expects India to have 183 million pay-tv homes by 2020 as against 135 million now) the scale of undertaking of digitisation will be a big challenge. Despite all efforts put up by the government to make India a 100 per cent digital nation, these will not be successful till the time there is a proper balance in the process of digitisation.

By Rohan Pal

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