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How Hinduja Group’s HITS service NXT Digital plans to tap cable ops

MUMBAI: Hinduja Ventures’ subsidiary Grant Investrade has named its headend-in-the-sky (HITS) service NXT Digital. It is planning to roll out services in August in digital addressable system (DAS) Phase III areas.

The company signed a grant of permission agreement (GOPA) on 14 July, thus ending an almost three-year wait to get the HITS licence.

Mr Anthony D'Silva, MD - Grant Investrade Ltd-2“We had applied for the HITS licence in November 2012. We signed GOPA on 14 July 2015. Despite the delay in obtaining the licence, we feel the timing is right for us to participate in Phases III and IV of DAS,” said Grant Investrade managing director Tony D’Silva.

Grant Investrade has already invested $80 million in the project. Out of this, $55 million has been pumped in to create a state-of-the-art broadcast facility in Noida. For Thaicom’s seven C-band transponders, the company is shelling out $9.1 million. The company will invest $100 million in the HITS project.

What is on offer for cable TV operators

Unveiling the business model for the HITS service, D’Silva said that the company will offer two service models—White Label and Full Service—to the multi-system operators (MSOs) and last-mile operators (LMOs).

In the White Label model, the MSOs/LMOs in digital addressable system (DAS) areas will do the content deals on their own. They will enter into a tripartite agreement with the broadcaster and NXT Digital. The LMO/MSO will pay subscription fee directly to the broadcaster.

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The Full Service model is for MSOs/LMOs who do not have a DAS licence. For these operators, NXT Digital will enter into tripartite contracts with the broadcasters and pay subscription fee to the broadcasters.

In both models, the operators will have to invest in the set-top boxes (STBs) and digital headend, which is available in three tiers, namely Bronze, Silver and Gold. They will be able to offer 300+ services in Bronze, 400+ services in Silver, and 500+ services in Gold.

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The Bronze, Silver and Gold tiers are available at Rs 8.9 lakh, Rs 12.9 lakh and Rs 13.9 lakh respectively.

NXT Digital will provide the backend service to the operators, for which it will charge a service fee of Rs 20 per subscriber from the operators.

“We will take care of the entire infrastructure and backend including a call centre for customer service, while the network owners can concentrate on growing their business through managing their networks, local channels deployment and broadcaster deals,” said D’Silva.

According to D’Silva, cable TV operators in Phase III areas do not have to make huge investments in the technology and skilled manpower required to convert their analogue households into digital if they partner NXT Digital.

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Set-top boxes

The standard definition STBs, with USB and PVR facilities, will cost Rs 1400 per unit. The high-definition STBs, with USB and PVR facilities, are priced at Rs 1800 per unit.

The STBs will be available to the LMOs and independent MSOs on a cash-and-carry trade model. They will be required to buy at least 20 STBs at any given point. The company is in talks with NBFCs to provide financing for procuring STBs.

The STBs will be provided by Changhong, Telesystems and some other companies.

Technology Infrastructure

Grant Investrade has hired seven C-band transponders from Thaicom. While three transponders will be immediately active, the other four will be available within three months.

The HITS operator has selected Nagravision DLK for conditional access system (CAS), OpenTV1 for Middleware, and Hansen Technologies for subscription management system and billing solutions. Vynsley Fernandes’ Castle Media is the technology programme manager for the HITS service.

In order to prevent swapping, every operator who avails of the NXT Digital service will have a unique code for their network and all STBs will be locked to a code. NXT’s service will be encrypted at three ends from the earth station, headend and the STB.

According to D’Silva, NXT Digital will provide 500+ MPEG 4-encrypted services including HD channels, which will go up to 1,000 channels in a year. It will also provide value-added services (VAS) like Darshan, TV Everywhere, and education content.

The HITS operator will have two call centres, one for North India and the other for the South.

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Fully prepaid system

The payment for service fee as well as subscription fee to broadcasters will be on a prepaid basis. The operators will be provided with a wallet through which the payment will be received. The wallet will need to have adequate balance in order activate a service. Besides, the HITS operator will launch an app to enable operators to activate or deactivate a service.

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Why D’Silva feels LMOs and independent MSOs will make the shift

NXT Digital will enable LMOs and smaller MSOs to stay independent and retain the ownership of their network, D’Silva said.

Before acquiring the licence, Grant Investrade had conducted a study by reaching out to over 2,000 LMOs, MSOs and their representatives across 120 cities in Phase III and IV markets, and asked them about their expectation from a HITS platform.

The research threw up six major requirements of the LMOs and independent MSOs. They wanted to retain ownership of their network; drive broadcaster deals; package and price their offerings according to the needs of their markets; they wanted the facility to acquire STBs according to their convenience; the ability to insert local channels for their end-subscribers; and a sophisticated digital service that could help them compete with other digital platforms like DTH to ensure their digital offerings were future-ready so that their subscriber bases would only grow.

D’Silva said that NXT Digital’s business model has been built on these six aspects.

Brand name and logo

NXT Digital’s logo has been designed by Chlorophyll. The eagle in flight symbolizes the empowered LMO/MSO.

Sales team and demos

The company has hired 200 employees in the sales team to conduct demos in 40 places across India. Apart from these sales executives, the distributors will also conduct demos.

Grant Investrade has readied a pan-India awareness drive across markets, showcasing its portfolio of services, technology capabilities and quality of services.

The campaign will use all media consumed by this primary target audience, including radio, local-media and OOH.

Business model

Grant Investrade is targeting 15-20 per cent of the Phase III market. According to D’Silva, there is an opportunity to digitise 50 million homes.

Grant Investrade will get Rs 20 per subscriber. This means that if the company is able to provide service to 10 million subscribers, it will earn Rs 240 crore (Rs 2.4 billion) annually. With Phase IV also opening up, it will obviously chase larger volumes. Rent for the transponders will form a main component of the company’s operational cost.

“Our business model is built on low margins and high volumes. We also have Phase IV to go after. We expect to be operationally profitable after two years. Profit at the net level will take longer,” said D’Silva.

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