The year 2005 was a mixed bag for cable TV in India. Subscription revenues grew 20 per cent to around Rs 81 billion, according to industry estimates. But very little came in by way of quality to prepare for the oncoming battle with direct-to-home (DTH). Though there was a significant jump in cable and satellite TV households in 2005, the major gainers in the distribution value chain were the last mile operators (LMOs). The revenue model of the cable TV business, thus, stayed uncorrected with under-reporting of subscribers continuing to plague the industry.
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Bandwidth on cable networks a big issue But how did the second bouquet impact the market? Says Hathway Cable & Datacom CEO K Jayaraman, "The second bouquet did not discover its price. It was subsidised by carriage fee for the weaker channels in the bundle and the fear of the first bouquet shut off." Distribution, in fact, became important in 2005. There was an oversupply of content while distribution capacity remained static. "Cable has reached 100 per cent capacity utilisation," says Jayaraman. Cable operators even at the local level were encouraged to pump in more investments into fibre so that they could accommodate more channels.
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Consumption of fibre was also fuelled by a 20-25 per cent drop in prices in 2005. Says Mehta Magnetics promoter Jignesh Mehta, a leading distributor and importer of cable TV hardware, "There was a 20-25 per cent growth in fibre laying across the country. Cable operators were upgradating their networks for either broadband connectivity or enabling it to carry more channels." Laying deeper fibre became not only a MSO or independent cable operator game; it moved down the distribution road to the LMOs who saw it as an opportunity to even link up smaller towns within districts. Growth was across the country but perhaps faster in the southern and northern pockets. Says Incablenet head Ravi Mansukhani, "Cable networks upgraded their systems so that they could have more frequencies to offer." Agrees 7 Star founder promoter Atul Saraf, "Cable operators invested in the network to increase bandwidth. Carrying more channels meant getting more carriage fee." Carriage fees double While news channels pampered the market by hiking carriage and placement rates, the second bouquet of distribution companies further choked bandwidth on cable networks. Carriage fees spread like a virus. Says Saraf, "It was like a drug and we all got badly addicted. Cable networks were more engaged in collecting carriage or placement fees than in securing their future against DTH operators. We should have been more prepared for the battle that will unfold in 2006. More time was spent in negotiating for carriage fees and everybody forgot the future. We should have had meetings between MSOs, distributors and local operators." One such meeting took place between LMOs, districtors and MSOs in Mumbai to decide on how to counter DTH towards the end of the year. But no decision could be arrived at. "We expect the LMOs to be more supportive of digital cable as DTH threatens to take away subscribers from cable TV," says Jayaraman. No real thrust to market digital cable Admits Jayaraman: "MSOs should have indulged in more aggressive marketing of digital cable in 2005. We hopefully will correct that this year which will see cable face real competition from DTH. Better marketing, cross selling, promotion and attractive pricing will have to be used to make digital cable acceptable." The MSOs were constrained by the unwillingness of LMOs to support digital cable. The reason: MSOs would become more powerful and customer homes, which were largely under-reported, would become transparent. There were other reasons as well which dampened the sale of STBs. Says Mansukhani, "We waited for the court to give its verdict on conditional access system (CAS). There was a lot of confusion in the market." Siticable buyout of Indian Cable Net the only acquisition story Siticable, which had a 30 per cent market share in Kolkata, became the leading MSO in the city with a 70 per cent share after taking over Indian Cable Net. The MSO rolled out digital services in the city but offtake has been very slow. MSOs did not venture out into new cities in 2005. Bhaskar Multinet, the MSO from the Bhaskar Group which owns newspapers in multiple languages, was perhaps an exception and expanded operations by launching in Bhopal (Madhya Pradesh) where it is up against Raj TV. As a retaliatory move, Raj TV is planning to spread to Indore this year, a market dominated by Bhaskar Multinet. Cable networks also did not indulge in poaching local operators from rivals as a step up to size up the business. "Poaching is a loss to shareholders and no gain to broadcasters. Luckily, we didn't see much of it in 2005," says Jayaraman. Value-added services a 2006 story Broadband was not pushed hard, except for some cable networks like Hathway who marketed and priced it aggressively. Similarly, VoIP was largely neglected as a revenue source. This could change in 2006 though, as cable networks would be forced to launch value-added services to keep in pace with DTH. Digital the road ahead Smaller cable operators are making efforts not to be left out in the cold. They are planning to install low-cost digital headends through which they can offer more channels to consumers. Though these systems are not addressable where a consumer can pay for the channels he wants to view, operators can bypass the bandwidth shortage they face on their analogue networks. In some places like Kannnur, an operator has already started digital service. "Cable TV will have to go digital if it has to fight against DTH," says Jayaraman. Cable operators can also slash prices on their analogue networks to stop consumers from migrating to DTH. Which way cable decides to go we will know only in 2006 after the launch of Tata Sky. |
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