Digital TV to bring better content, fee transparency

By Madhu Gadodia and Anushree Rauta, Naik Naik & Co
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To combat the artificial bandwidth shortage created by cable operators and the loss of revenue to the government, the Cable Television Networks (Regulation) Amendment Act, 2011, has been passed to digitize the analogue TV network across the country. Experts foresee that successful digitization and its related aspects will revive the sick industry within a few years.

The act prescribes digitization in four phases, starting with Delhi, Kolkata, Mumbai and Chennai, and gradually covering the remaining cities on the basis of population.

Implementation

As a consequence of digitization, all analogue licences held by local cable operators (LCOs) will be cancelled and LCOs will have to procure digital cable TV licences. The Telecom Regulatory Authority of India (TRAI) has worked out a scheme to regulate the carriage fee charged by multi-system operators (MSOs), in an attempt to make process less discriminatory and more transparent, and TRAI retains the power to intervene when necessary.

Madhu Gadodia Partner Naik Naik & Co
Madhu Gadodia
Partner
Naik Naik & Co

All televisions will connect through set-top boxes that receive signals from a mini-dish and turn the signals into content. Viewers will be able to choose their channels but certain basic channels will be provided to all.

The International Telecommunication Union has set 2017 as the global deadline for most countries to switch from analogue to digital broadcasting signals. India’s Ministry of Information and Broadcasting has stated that the phase deadlines are irrevocable, and is sure that they will be met.

The law provides penalties for not complying with the deadline but the government is confident that compliance will be achieved as it is in the interest of all the stakeholders. The first phase, to be completed by the end of this month, is crucial to the success of the exercise.

Analysis of benefits

Stakeholders will benefit from the implementation in various ways. Broadcasters will be able to monitor their subscriber base and control the flow of revenues. Their subscription revenue will rise, reducing their dependency on advertising and increasing their value.

Regulation of the carriage fee will increase profitability and enable broadcasters to focus on better content creation. Higher profitability will also ensure better employment opportunities.

MSOs will acquire full control of set-top boxes and, consequently, the control of the consumer will shift from LCOs to MSOs. Mergers and consolidation in the industry are expected as LCOs will tie up with triple-play service providers or MSOs to upgrade their infrastructure. It is predicted that over time, MSOs will dominate and gradually take over LCOs.

Consolidation will ensure increased income flow for the big players in the industry. Already, the largest cable service providers are owned by broadcasting companies.

Requirements for capital expenditure will create more investment avenues in the Indian market, and consequently increase the GDP.

Anushree Rauta Associate Naik Naik & Co
Anushree Rauta
Associate
Naik Naik & Co

Consumers will enjoy improved picture and sound quality, and enhanced services such as high definition and video-on-demand content. Viewers will be able to choose and pay for only channels of their choice, rather than having to pick from packages with fixed prices.

Television premieres are broadcast for most movies soon after their release, enabling film-makers to reach a wider audience. This contributes to growing ancillary revenues that comprise around 15% of total film revenues in India. Movie-on-demand services through pay television are set to widen the revenue streams and business models for the film industry.

The increasing popularity of cable and satellite syndication presages a shift of small to medium budget films towards this medium as opposed to conventional theatrical release, which involves huge marketing and distribution expenditure.

Adverse effects

LCOs that are unable to afford the cost of the transition or find it unviable for their small customer base will have no option but to collaborate with an MSO to provide digital cable TV.

Consumers also will have no freedom of choice with regards to their TV connection, rates and viewing options. Affordability will become a major issue for many consumers.

The switch also has high infrastructural demands in terms of installation and use of set-top boxes. What is in theory designed to benefit the public at large may in reality end up being an added bonus for already flourishing big corporations.

Digitization looks to change the face of the TV industry. Broadcasters, which have been subject to the arbitrariness of cable operators, now stand to benefit from the regulation of carriage fees. This is expected to mean improved content and an enhanced TV viewing experience for consumers.

Naik Naik & Co, founded by Ameet Naik, is a full-service law firm with specific focus on entertainment, real estate, retail and technology. It has three offices in Mumbai and two in New Delhi. Madhu Gadodia (madhuchaudhary@nnico.com) is a partner and Anushree Rauta (anushreerauta@nnico.com) is an associate at the firm.

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