MUMBAI: JP Morgan India's report on the Indian cable industry titled: "CAS: The Medicine for a chronic ailment" states that the location where the signal would be encrypted would gain significance. The report envisages two possible alternatives that could emerge.
'Encryption at MSOs/ICOs head end' and the 'Encryption By the Broadcasters' model. The report believes that the latter is inherently appealing for the broadcasters as they can control the revenues through one entity. However, the simplistic model is likely to fail, as control of the company doing the encoding could become a big issue.
The report throws some light on how CAS will work
The report interprets CAS will ensure that the following scenario could be likely:
o There will be a Free to Air (FTA) bouquet. The government will specify the minimum number of channels (segments) to be in the FTA bouquet and the ceiling of the price that can be charged to the consumer.
o There will be a pay tier comprising of encrypted channels. There is however nothing that stops the broadcasters and the distributors to make bouquets in a way to bundle channels.
The report states that currently the bouquets were decrypted by the MSO/ICOs and distributed to the consumer. However, in the CAS method the decryption of the signals (of the pay channels) will take place at the individual consumer home.
Under CAS, the report says that the customers taking a FTA bouquet would not necessarily require a set top box while the customers opting for pay channels would need it. The government would set the cost of the FTA bouquet. The money paid towards FTA channels would essentially be the money that a LCO would make. The broadcasters would set pay channel rates and these revenues should be pass through.
The report mentions that it is not clear as of now whether bundling would be allowed in pay bouquets, as is the case currently.
The report points out that the intention of the government is 
(1) to reduce the cost to consumers by letting them choose what they want to see. Currently, the cable operators have to take the full bundle from broadcasters. Therefore, while subscribers in a particular locality might not want a South Indian channel, the cable operators still supplies it as the subscribers in some other locality where he/she serves require that channel. The government hopes that by resting the choice at consumers end, this practice would stop. 
(2) The other intention is that by putting up set top boxes at each home, level of under declaration would reduce significantly.
However, the report mentions that the key question is where the signal gets encrypted. There are two possible options:
Encryption at MSOs/ICOs head end
Here the encrypted channels would be downloaded by MSOs/ICOs and would be decoded. They would then be further encoded through encoders (costing about 50,000 per channel) and sent for onward transmission. The box at the user's end would be programmed to receive the channels that have been paid for.
Encryption By the Broadcasters
This model, suggested by Zee, envisages setting up a joint company by broadcasters and MSOs. In this model, the separate channels would be downlinked in one headend and then encoded together. The encoded signal would be up linked again to a satellite, which would then beam the signal to the whole country.
The box at the user's end would be programmed to receive channels that have been paid for. In this method, termed as headend in the Sky (HITS) model, the need for duplicating encoding equipment for final transmission to consumers would be obviated. 
Implementation Schedule and problems thereafter
The initial suggestion from the government is to start the implementation of CAS from starting with four metros over the next year and then replicate the model through the country. See Chart 2.
The report claims that the regulation has never been strict enough to allow a well-developed cable system to come up in India.
The Cable Act, 1994, currently governs the cable industry. The key provisos of this act are:
o No person shall operate a cable television network unless he is registered as a cable operator under this Act: The amount of fee (Rs500) shall be deposited in the Head Post Office where the application for registration or renewal of registration or issue of duplicate certificate of registration is being made.
o No person shall transmit or re-transmit through a cable service any programme unless such programme is in conformity with the prescribed programme code; no person shall transmit or re-transmit through a cable service any advertisement unless such advertisement is in conformity with the prescribed advertisement code-"likely to promote, on grounds of religion, race, language, caste or community or any other ground whatsoever, disharmony or feelings of enmity, hatred or ill-will between different religious, racial, linguistic or regional groups or castes or communities or which is likely to disturb the public tranquility.
o No cable operator shall carry or include in his cable service any programme in respect of which copyright subsists under the Copyright Act, 1972 (14 of 1972) unless he has been granted a license by owners of copyright under the Act in rest of such programme.
o Compulsory transmission of two Doordarshan channels.