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2013: The LMO Onslaught
If 2012 was when the last mile operators had felt they would not survive the onslaught of digitisation, 2013 was when they united, plotted and gave sleepless nights to the multi-system operators (MSOs). The year 2013 clearly belonged to them as they basked in the glory of a new identity they assumed for themselves—last mile owners (LMOs).
Under the constant fear of being usurped by the MSOs in digital addressable system (DAS), India’s disunited and fragmented LMOs kept aside their petty fights and made common cause with each other to protect their old autonomy and get their fair share of revenue that would accrue from the transparent cable TV ecosystem.
Finding themselves in a do-or-die situation, the LMOs across the country—and particularly in states like Maharashtra, Gujarat, West Bengal, Madhya Pradesh, Andhra Pradesh and Karnataka—came out of their shell to fight the battle for survival. Afraid of being driven out of business which they had built after years of perseverance and arguing that DAS was heavily tilted in favour of the broadcasters and the MSOs, they resorted to all available means of resistance.
Whether it was the High Court, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), the Parliamentary Committee or Open House discussions, the LMOs made their presence felt on every forum.
The Cable Operators Federation of India (COFI), headed by Roop Sharma, ensured that the voice of the LMOs was heard in the corridors of power, while the state- and city-based LMOs filed petitions to get DAS Phase II deadlines extended. They also sought legal relief from some of the Telecom Regulatory Authority of India’s (TRAI’s) DAS regulations such as revenue share and billing rights.
The cable operators’ associations in Andhra Pradesh, Gujarat, Karnataka and Madhya Pradesh obtained stay orders from their respective state High Courts to extend the 31 March deadline of DAS Phase II.
As a result of the litigations, DAS implementation came to a standstill in 11 of the 38 cities for some time. With the litigation slowing down the pace of digitisation, the Indian Broadcasting Foundation (IBF) moved the Supreme Court to club all the cases to get a verdict that would be binding across the country.
Says COFI president Roop Sharma, “We are not opposed to DAS but the manner in which it is being implemented. CAS (conditional access system) was better than DAS as the revenue share was adequate for the LMOs.”
Sharma warns that the agitation against DAS will continue till the government implements measures to protect the LMOs. “We have been opposing DAS and will continue to oppose it till the issues we are raising get resolved. Through DAS, the government is infringing on the fundamental right of the LMOs.”
Sharma blames the Ministry of Information and Broadcasting (MIB) and TRAI for not caring about the welfare of the LMOs when the DAS architecture was being designed by the broadcast sector regulator. The Tariff Order and Interconnect Regulation, she says, will leave the LMOs at the mercy of the MSOs who will now bill the customers directly. The LMOs will be reduced to being collection agents with minimal say in packaging and billing. Besides, the 45 per cent revenue share from free-to-air (FTA) channels and 35 per cent from pay channels is way too less for them to run their operations smoothly.
Sharma’s list of demand includes the following: better revenue share for LMOs, right to bill customers, licensing framework for LMOs, set-top box (STB) ownership and the power to switch off STBs.
The real resistance to DAS, however, is happening in the states. Maharashtra saw the emergence of Maharashtra Cable Operators Foundation (MCOF), headed by Arvind Prabhoo. The MCOF was formed by LMOs from across the state with the common agenda of representing the voices of LMOs.
Himself a cable operator, Prabhoo did manage to instil confidence into the state LMOs who had been hitherto clueless about what the future held for them in the DAS regime.
Within seven months of its launch, MCOF had struck a chord with the LMOs by raising issues of entertainment tax, consumer billing and revenue share.
Before Prabhoo arrived on the scene, Anil Parab, the head of Cable Operators and Distributors Association (CODA), was the de facto leader of the LMOs having opposed and almost stalled the CAS order in 2003.
Prabhoo feels CODA could have done much more for the LMOs just as it did when CAS was being implemented. “Had they been serious, the situation would have been different. After all, they had managed to scuttle CAS.”
CODA’s inability to raise relevant issues provided space for another federation to take up the issues of LMOs. That is where MCOF came in. It soon swung into action by successfully challenging the state government’s GR (government resolution) that asked MSOs to pay the entertainment tax directly. The GR was also challenged by Nasik District Cable Operators Association (NDCCOA).
Till the GR was issued, the LMOs were paying the entertainment tax to the government. The LMOs saw the GR as a ploy by the state to take away their recognition as LMOs.
After taking on the government in the entertainment tax issue, MCOF took on the MSOs by carrying out a cable TV blackout for three hours on 2 October in various cities of Maharashtra. The blackout was in response to random deactivation of STBs by the MSOs.
This was followed by another round of stand-off centring subscriber billing. While the MSOs, as per TRAI mandate, want to bill the customers directly, the LMOs want to keep the billing rights with themselves.
With the MSOs in no mood to yield to direct billing, the LMOs decided to act tough by refusing to collect money from the ground as per package rates.
“If we allow the MSOs to bill the customers directly, we will be at their mercy for our revenue share which is what we don’t want to happen. And suppose if our commissions get delayed, is there any settlement mechanism to take care of that?” asks Prabhoo.
Prabhoo also points out that there are grey areas like entertainment tax and service tax which need to be sorted before starting subscriber billing.
Another flashpoint is the issue of revenue share. While the MSOs are in favour of having one-third revenue share for each stakeholder, Prabhoo feels that the LMOs should get over 50 per cent.
“I don’t think that the MSOs should get that high a share as they are almost like distributors. We should get at least 50 per cent of the revenue share as we provide service to the last mile customers,” says an unrelenting Prabhoo.
MCOF tasted its first major success when Hathway Cable and Datacom decided to allow the LMOs to bill customers in Mumbai.
Taking the LMO cause forward in Nasik was the NDCOA under Anil Khare that proactively challenged not only the entertainment tax in Bombay HC but also the TRAI’s DAS regulation that mandates MSOs to raise direct billing from the consumers in the TDSAT.
The billing case is expected to come up for hearing on 23 January. However, in the backdrop of Supreme Court ruling that TDSAT cannot adjudicate on TRAI’s regulations, the NDOCA will now have to take recourse to the High Court.
Away from the legal battlefield, the MCOF had organised two business summits to educate the LMOs about the opportunities in DAS. The summits were organised with the aim of informing the LMOs that all was not lost for them and that they could earn much more from value-added services (VAS).
In Gujarat, the Gujarat Cable Operators Association (GCOA) filed a petition in the apex court challenging the TRAI’s Tariff Order and Interconnection Regulation. However, the apex court directed the GCOA to first approach the HC, following which a petition was filed in the Gujarat High Court where the matter is still pending.
“Did TRAI ever consult the LMOs before finalising the Tariff Order? When the infrastructure is ours, the customer is ours, how can TRAI make us subservient to the MSOs? Just by providing a STB and signals of channels, the MSO cannot become the master of our destiny. We will continue to oppose DAS democratically on every forum,” says an agitated Pandya.
In Indore, around 100 LMOs came together to form Indore Cable Operator Mahasangh to take up the issues faced by LMOs in that city. Indore was part of Phase II of DAS.
“We formed an association in Indore to collectively fight for our fundamental rights that are being usurped by the government through DAS. TRAI regulation is one sided. Our business is being taken away by the MSOs,” said Indore Cable Operator Mahasangh’s Ajit Singh Baveja.
MCOF’s Prabhoo says that if things don’t settle down, then they might contemplate setting up a headend. “We have close to 1,700 members with a subscriber base of 1 million. Tomorrow we can set up our own headend and deal directly with broadcasters by offering them 50 per cent revenue share.”
Incidentally, a similar experiment is currently underway in Kolkata with some LCOs planning to set up their own headend. Kolkata, however, is no stranger to last mile consolidation. In 2005, a group of 160 cable operators came together to form an MSO called Kolkata Cable Broadband Pvt Ltd (KCBPL), which later formed a joint venture with Gujarat’s leading MSO, Gujarat Telelinks Pvt Ltd (GTPL).
The year that was had seen the beginning of a gripping tale in the cable TV sector when the LMOs turned the tables on the MSOs. The year ahead promises to bring more excitement.
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