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Content cost to be the biggest issue for MSOs in digitising Phases III and IV: VD Wadhwa

BENGALURU: High content cost could be the biggest issue for the multi-system operators (MSOs) who are looking at digitising their cable TV networks in the relatively low ARPU Phase III and IV cities, feels Siti Cable CEO and executive director VD Wadhwa.

Talking at the Bengaluru edition of TelevisionPost.com’s on-ground initiative GroundPost, Wadhwa said the broadcaster should take a considerate view. “Today whatever we are paying in Phases I & II, the broadcaster somehow expects to realise the same in Phases III and IV—if not in the first year, at least by the second. This is going to be the biggest challenge when your current ARPU is low. We have seen this happen both in Delhi and in a Phase II market. Monetisation takes at least 18–24 months to reach a decent level.”

Bengaluru-event43Wadhwa said that in Phase I markets, actual payout by the local cable operator (LCO) to the MSO is about Rs 90–100. In Phase II markets, the weighted average is not more than Rs 60–70, even after two years of digitisation.

Broadcasters should look at a gradual increase in subscription revenues from Phases III and IV. “I used to be on the board of MediaPro (distribution JV company between Star DEN and Zee Turner which got dismantled) and know that 85 per cent of the broadcasters’ subscription revenue comes from Phase I and II markets. Only 15 per cent comes from Phases III and IV. This has to improve gradually and cannot go up at the same rate as Phase I and II markets. To my mind, this is the biggest hurdle for digitisation,” Wadhwa stated.

The bigger MSOs are in dialogue with the broadcasting fraternity in this regard. “We have already taken up the issue with the IBF (Indian Broadcasting Foundation) and given representation to the regulator (TRAI) as well as the ministry (I&B). Once we get a resolution for this problem, we would be able to move ahead with digitisation much faster,”  Wadhwa said.

Wadhwa believes that there is a need to change the mindset in the industry, as many people believe that digitisation is imposed by the government. “I have demonstrated to various friends in the industry, particularly LCO friends, that the moment you do digitisation, there is a one-time opportunity to make money in terms of set-top box (STB) seeding. The boxes are given at a subsidised rate and in most of the cases, this subsidy does not go to the consumer; it goes to the intermediaries. And the moment you convert an analogue connection into digital, you have the opportunity to realise Rs 70–80 extra from the consumer on the grounds that compared to 70–80 channels, now he will get 250–300 channels.”

He urged the LCOs to think differently and consider the benefits.

Wadhwa further said that collaboration is crucial to success. “Wherever we collaborated, monetisation improved. Once digitisation happens in Phase III and IV markets, I see no reason why ARPU should not rise on a par with Phase I and II markets.”

Talking about the issue of portability of the STBs, he said, “Everybody is following a conditional access system, and the boxes are configured to the subscriber management system (SMS). It is not easily portable and the second point is that the boxes are subsidised. Unless you have recovered the cost of adding that customer, portability will not be viable in this industry.”

Wadhwa, who joined Siti Cable in 2013 from Timex India, said that he has an outsider’s perspective on the industry. “This is an industry where so much of monetisation opportunity is possible. Consumer is looking for better quality, better services and he is willing to pay,” he said.

For the majority of the industries, getting something extra out of the consumers’ pockets is the biggest challenge, but it is not so in this industry. “I also think that if the broadcasters, the MSOs and the LCOs collectively focus on the consumer service aspect, there will be nothing to stop us,” he added.

He also cautioned that both MSOs and LCOs have to take digitisation very seriously. It requires a large capex, a huge commitment, a need to change mindsets, and a greater consumer focus.

“When the cable industry was in analogue form, DTH came and became an instant success, particularly in the urban areas. The reason was that analogue could show only 70–80 channels, whereas DTH was able to show 200 channels. Today, when cable is going through digitisation, it actually is having the edge over DTH. DTH has a limitation in terms of channel capacity, whereas cable can carry as many channels depending on the bandwidth. Cable can also carry two-way connectivity; it can provide broadband, telephony, better signal quality, etc. So we need to create awareness for the consumer. Today, the consumer mind-set is that DTH is a superior technology,” he said.

“DTH is charging at least 20–25 per cent higher than cable industry. It may not be for the base pack, but definitely for the higher packs. This price parity perception can change only when we start improving our quality aspect of service to the consumer.”

Hitting against the switch-off tendency, he said that the easiest thing an MSO does in case of non-payment by an LCO is switching off the signal. “The MSO thinks he is irritating the LCO and the LCO will pay him the money. However, he does not realise that he is pushing the customer away from the brand,” he said.

Packaging

MSOs should prioritise packaging, he said. “In all its markets, Siti Cable was the first to do packaging. Despite being the smallest player in many markets, we are starting with packaging from Day 1. Unless everyone is working together, solving the packaging issue, and following all the QoS (quality of service) norms, things are not going to improve,” he warned.

He added that in Delhi, Hathway, DEN Networks and Siti Cable have collaborated and their current monthly collections now stand around Rs 125 per customer. “This has happened only after we collaborated. We decided that we would do packaging and not poach each others’ territories. We will follow certain rules, without being lured by all the small frictions in the market,” he noted. “We are also doing such collaboration in central India and other parts of the country.”

He added that Siti Cable is in the mid-90 percentage compliance of subscriber application forms. With the exception of two or three centres, most of its interconnect agreements are also in place. “We never release any STB in the market in the pre-activated form. We activate the box only after activation charges are received along with the duly filled in subscriber acquisition form and the clearance from the finance department. Once we all start following this discipline, our subscriber acquisition compliance will be far superior, and we will not be chasing all the procedural or the documentation aspect of the business.”

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