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INDUSTRY READIES FOR METRO DIGITISATION

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Within a couple of weeks of the I&B ministry's announcement of the digitisation roadmap, the Cable TV industry has begun gearing up to go digital in the 4 metro cities and completely switch off analog CATV signals (analog Sunset) by March 2012. This is the digitisation deadline declared by the I&B ministry for the 4 metro cities of New Delhi, Mumbai, Kolkata & Chennai.

CURRENT STATUS

Chennai is already fully digitised.

Cable TV subscribers in almost all parts of the other 3 metro cities currently have the option to immediately avail of a digital STB, but only some have actually opted for the digital Cable box.

According to DEN, the demand for digital STBs has already spurted. "In this month alone, we will be installing around 1,00,000 STBs in Delhi and Mumbai. By next year, we should install 2.5 million STBs," SN Sharma, president, DEN is reported to have told the press.

"The demand for digital cable is now driven by a pull-factor. Consumers are demanding digital cable services and we have to meet their requirements. Earlier it used to be a push-business where funding, seeding of STBs, commercial agreements with local operators posed numerous challenges. Now, it is entirely different," says DEN's MG Azhar, President (Strategy & Business Development).

"The Demand For Digital Cable Is Now Driven By A Pull-Factor."

ANALOG SWITCH OFF

The key issue for the industry is in fact not digitisation, (most parts of the 3 metros are already digital enabled) but the compulsory switch off of analog CATV transmissions. The I&B ministry notification extensively refers to a digitisation timetable, though compulsory switch off of analog CATV is the real milestone.

When CAS was first implemented years ago, as a test case in select areas, there was a mandatory period of 'Dual Illumination' i.e. when there should be simultaneous transmissions in both analog and digital mode, after which analog was completely shut off. This 'Dual Illumination' ensures a smooth transition, without any house getting a 'dark' TV during the switch over.

The current I&B ministry timetable dues not detail the period for compulsory 'Dual illumination.' This will probably be detailed in the draft of the Cable Act amendments. The digitisation deadlines specified by the ministry probably refer to the Analog Switch Off (Analog Sunset) dates.

The Key Issue Is In Fact Not Digitisation, But The Compulsory Switch Off Of Analog CATV Transmissions.


9 MILLION STBS

Now with the analog switch off deadline less than a year away, MSOs have started paying serious attention to ordering large consignments of digital STBs to meet the demand.

Industry observers have estimated a requirement of The metros have the largest percentage of multiple TV homes. Since each TV set (rather than each home) requires a digital STB, some estimates reckon that approximately 9 million digital STBs will be required to fully digitise all Cable TV sets in these metro cities.

Reports are that almost all leading MSOs have begun placing orders for STBs on the Chinese, Korean and Taiwanese manufacturers.

The I&B Timetable Dues Not Detail The Period For Compulsory 'Dual Illumination.'

LOCAL MANUFACTURE

Despite a large local industry manufacturing TV sets, no Indian manufacturer has yet declared plans to locally manufacture digital STBs. More than 70 million digital CATV STBs will be required between march 2011 and end 2014.

However, China based Sichuan Changhong Network Technologies is considering setting up a Set-Top Box (STBs) manufacturing facility in India. The company already supplies STBs to InCableNet and Manthan.

"Even if we set up a joint venture, we will have a controlling stake. We may also decide to do it on our own," says Sichuan Changhong Network Technologies country manager for India Martin Jiang. "We started in 2008-end and have already sold 3 million STBs in the Indian market," says Jiang. The company's China unit has a manufacturing capacity of 12 million boxes.

More Than 200 Million STBs Will Be Installed By March 2013 & Analog CATV Shut Down In These 200 Cities

1000 CRORE FUNDING

Given the large number of STBs being ordered, some observers estimate that STBs will be priced at approximately Rs. 750 each to MSO buyers, against their bulk orders.

If 9 million new STBs are installed in the metros, it would imply a cost of Rs 675 Crores. There will also be other STB seeding costs and overheads, not to mention the cost of city-wide ad and awareness campaigns. Realistically, funding of atleast Rs 1,000 is envisaged to cover Phase 1 alone, of the digitisation effort.

Estimates are that the digitalisation of cable services will lead to a 2 to 3 fold jump in subscriber declaration numbers. As a direct consequence, subscription revenues will atleast double.

Given the intensely competitive market conditions, and large subsidies on STBs by DTH platforms, it's not yet clear what subsidies will be offered by MSOs, on their STBs.

InCableNet has been waiting to float its IPO, and most networks including DEN are actively canvassing foreign investors for funding.

FDI REVISION?

The TRAI has repeatedly recommended that Foreign Direct Investment (FDI) limits in Cable TV networks be raised from the existing 49% to 74%, as is already prevalent in the telecom sector. This should attract Foreign investments in the sector, as it will enable the foreign investors to exercise control over their investments.

MSOs are eagerly awaiting an announcement in this regard, though skeptics feel that the government will not permit such control of TV distribution to pass into foreign hands.

"The government has already indicated hiking up the foreign direct investments in MSOs from 49% to 74%. This will help the cable business become investor-friendly. The moment a final announcement is made, a number of foreign and domestic investors will be willing to participate in the cable distribution business," said a senior analyst with a leading brokerage firm.

WAITING FOR LEGISLATION

The last hurdle in implementation of the I&B ministry's proposal for All India's analog CATV shut off, is the modification to the cable act.

Various section that refer to compulsory delivery of an analog CATV signal, are to be deleted. Details will also have to be provided for compulsory hire schemes for digital STBs, the period of 'Dual Illumination' etc.

The TRAI has also proposed a new licensing regime for digital CATV networks, in its 2008 "TRAI'S Recommendations On Restructuring Of Cable TV Sector." (See SCaT August 2008).

A committee will formulate the proposed amendments to the Cable Act. These will then be submitted to the Law ministry and Home ministry, for vetting. Thereafter, the amendments will be submitted to the Parliament, during the monsoon session (June to Aug 2011) for final amendments to the Cable Act. If for any reason, the amendments are not passed in the monsoon session, they will be submitted in the winter session (Dec 2011)

The law requires a minimum 6 month advance notice before implementing digitisation. Hence if the Cable Act amendments are passed only in the winter session, Phase 1 of the digitisation will have to be delayed to end June 2012 rather than March of the year. The other phases will not be affected. Ofcourse for digitisation and analog switch off, parliament's approval is absolutely essential. This is the final hurdle for digitisation and analog switch off (Analog Sunset).

More Than 70 Million Digital CATV STBs Will Be Required Between March 2011 And End 2014.

LOOKING AHEAD

End March 2012 will mark the commencement of Indian CATV's digitisation.

A year later - end march 2013 requires more than 200 cities, each with a population of more than 1 million homes, to be compulsorily digitised. This will be a huge digitisation effort, covering more than 200 million CATV homes and represent all of urban India being digitised.

Semi Urban and rural India are to follow in 2014, and analog CATV must be shut off throughout India by December 2014. n