Reports suggest that the government is planning an ordinance to scale up digitisation of the cable and satellite television industry. The move will speed up pay-TV revenues for broadcasters and curtail carriage costs.
G Subramanium, chief finance officer of Hathway Cable and Datacom , in an interview to CNBC-TV18, said that in a bid to meet March deadline, government is contemplating an ordinance to expedite digitisation.
Subramanium expects to see huge growth in subscribers post digitisation. “Carriage fees will go down for broadcasters post digitisation, but subscription revenue will make up for loss in carriage fees,” he added.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: What material impact does the move of digitisation will have on Hathway in terms of number of disclosed subscribers and the number of paid subscribers that you can actually derive revenues from?
A: There will be substantial growth in subscribers because the number of subscribers, who are declared to us by the local cable operators, is a fraction of the universe that we actually deal with. Therefore, multiple increases in subscribers are expected to be seen.
Q: What is your understanding of the Cable TV Regulation Act, which the government is trying to implement through an ordinance? What kind of timelines are we working with?
A: The government had contemplated timeline starting March 2012 with a sunset date for country-wide digitisation by December 2014. Once the government formalises the process, we will need about five to six months to gear up. Many of us, particularly the multi-system operators (MSOs) have already got prepared. We are making investment in backend systems, we are modernising our call centers.
We, as a company, are fairly well-positioned to take advantage of digitisation as and when it occurs. We not only provide cable television service but we are also a substantial broadband services provider.
Q: Even if you won’t get into specifics in terms of change in subscriber declaration levels, how much of an increase we could likely see because right now the market is working with estimates of seeing a four times jump over the next couple of years once this comes through. Is that too ambitious or would you agree with that point of view?
A: It will be probably north of that. It depends on certain variables. As and when digitisation happens, the customer is going to be faced with a choice of remaining with cable platform or migrating to other platforms.
We believe that cable is a far superior product and when it will be digitised, we will be able to bundle other services with it. The bandwidth, which will be on offer, will be far higher than other platforms like DTH. Therefore, given the superior product offering at price points, which are far lower than DTH, we should be able to garner very good share.
Q: Government may also take a call on removing pricing caps for channels at the retail level. What kind of impact that may have for you?
A: It all comes down to giving consumer a choice when price cap at a retail level would be removed. The TRAI has proposed in its note that there will be a base price of about Rs 150 for the basic tier.
This proposal will encourage subsidy on the set top box and will ensure that the deployment of digital boxes happens rapidly throughout the country. It is a great opportunity for broadcasters to ensure that they invest into content and give the consumer what he wants.
Q: Do you think digitisation will reduce the carriage fees that broadcasters pay to cable operators?
A: Yes because carriage fee is a premium that you pay since there is a scarcity of spectrum in the cable networks. As and when digitisation happens the quantum of spectrum available on those networks will grow manifold, and therefore, the premium that you can place on scarcity will go down. However, it won’t go down to zero. You will still have to pay a premium of 25-30%.
Q: What kind of a churn away from digitised cable to DTH do you expect to see once this transition happens?
A: Digital cable is a far superior platform in terms of technology. It is capable to offer good amount of bandwidth and bundling of services. Thus, I don’t see huge amount of churn in that. In fact, we have seen churns as low as 3-5% in CAS areas, so when digitisation happens, we will be competing on a more-than-equal platform. Hence, I’m confident that the churn will be minimal.
However, it all depends upon how the industry is gearing up to face competition. If we are well prepared, if we invest in those backend systems and we improve the quality of services that we deliver to the customer, then we won’t face that much of a churn. DTH thrives in an environment, where there is an exclusivity of content. In India, we still do not have that sort of a situation, and therefore, both the platforms will compete on an equal footing.
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G Subramanium, chief finance officer of Hathway Cable and Datacom , in an interview to CNBC-TV18, said that in a bid to meet March deadline, government is contemplating an ordinance to expedite digitisation.
Subramanium expects to see huge growth in subscribers post digitisation. “Carriage fees will go down for broadcasters post digitisation, but subscription revenue will make up for loss in carriage fees,” he added.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: What material impact does the move of digitisation will have on Hathway in terms of number of disclosed subscribers and the number of paid subscribers that you can actually derive revenues from?
A: There will be substantial growth in subscribers because the number of subscribers, who are declared to us by the local cable operators, is a fraction of the universe that we actually deal with. Therefore, multiple increases in subscribers are expected to be seen.
Q: What is your understanding of the Cable TV Regulation Act, which the government is trying to implement through an ordinance? What kind of timelines are we working with?
A: The government had contemplated timeline starting March 2012 with a sunset date for country-wide digitisation by December 2014. Once the government formalises the process, we will need about five to six months to gear up. Many of us, particularly the multi-system operators (MSOs) have already got prepared. We are making investment in backend systems, we are modernising our call centers.
We, as a company, are fairly well-positioned to take advantage of digitisation as and when it occurs. We not only provide cable television service but we are also a substantial broadband services provider.
Q: Even if you won’t get into specifics in terms of change in subscriber declaration levels, how much of an increase we could likely see because right now the market is working with estimates of seeing a four times jump over the next couple of years once this comes through. Is that too ambitious or would you agree with that point of view?
A: It will be probably north of that. It depends on certain variables. As and when digitisation happens, the customer is going to be faced with a choice of remaining with cable platform or migrating to other platforms.
We believe that cable is a far superior product and when it will be digitised, we will be able to bundle other services with it. The bandwidth, which will be on offer, will be far higher than other platforms like DTH. Therefore, given the superior product offering at price points, which are far lower than DTH, we should be able to garner very good share.
Q: Government may also take a call on removing pricing caps for channels at the retail level. What kind of impact that may have for you?
A: It all comes down to giving consumer a choice when price cap at a retail level would be removed. The TRAI has proposed in its note that there will be a base price of about Rs 150 for the basic tier.
This proposal will encourage subsidy on the set top box and will ensure that the deployment of digital boxes happens rapidly throughout the country. It is a great opportunity for broadcasters to ensure that they invest into content and give the consumer what he wants.
Q: Do you think digitisation will reduce the carriage fees that broadcasters pay to cable operators?
A: Yes because carriage fee is a premium that you pay since there is a scarcity of spectrum in the cable networks. As and when digitisation happens the quantum of spectrum available on those networks will grow manifold, and therefore, the premium that you can place on scarcity will go down. However, it won’t go down to zero. You will still have to pay a premium of 25-30%.
Q: What kind of a churn away from digitised cable to DTH do you expect to see once this transition happens?
A: Digital cable is a far superior platform in terms of technology. It is capable to offer good amount of bandwidth and bundling of services. Thus, I don’t see huge amount of churn in that. In fact, we have seen churns as low as 3-5% in CAS areas, so when digitisation happens, we will be competing on a more-than-equal platform. Hence, I’m confident that the churn will be minimal.
However, it all depends upon how the industry is gearing up to face competition. If we are well prepared, if we invest in those backend systems and we improve the quality of services that we deliver to the customer, then we won’t face that much of a churn. DTH thrives in an environment, where there is an exclusivity of content. In India, we still do not have that sort of a situation, and therefore, both the platforms will compete on an equal footing.
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