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HomeArticlesCol KK SharmaThe Great Indian Digital Migration A Good idea Implemented badly
Tuesday, 13 May 2014 11:14

The Great Indian Digital Migration A Good idea Implemented badly

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Policy of Digitisation is good on the whole. It was essential to go digital to keep up with the times for better quality, more choice, transparency, more Tax revenue, credibility in subscriber numbers and most important, to implement broadband on cable to enhance national economy. However, flaws in the Policies and misplaced priorities let it down.

Major Flaws in Policies

a)  Mandatory implementation 

i)  Nowhere in the world a technology was forced on people by a government.

ii)  Many countries like USA, UK, South Africa mandated digitisation in terrestrial broadcast to save on spectrum but gave heavy subsidy to existing consumers to facilitate migration because it was a government mandate.

b)  Impractical deadlines

i)  It took 10-12 years to achieve about 80% Digitisation in these countries.

ii)  With 70% poor population, 100 million analogue TV households already existing no support of indigenous manufacturers, it was impossible to digitize the whole market in two years as notified in the law in India.

c)  Misplaced Priorities

i)  Cable TV distribution includes content broadcast and wireline network infrastructure. 

ii)  Broadcast is already digital and infrastructure upgradation including the backhaul network of MSOs and Last Mile networks of Cable Operators is a top priority for Digitisation.

iii)  Once infrastructure is ready, all benefits of digital technology become a reality.

iv)  However, without bothering for infrastructure, Government gave top priority to benefit ‘Pay’ Broadcasters and their vertically integrated MSOs.

v)  Last mile networks are owned by thousands of small cable operators who are independent business entities. All policies aim to hand over control of their business to large multinational groups who do not service the subscribers at all. Such changes cannot be forced on businessmen. They must come with better policies facilitating consolidation and not hostile takeovers.

vi)  Consumer issues are the last priority of the government as even after two years of implementation, consumers are confused about what is happening. Excuse of Public interest to mandate a technology is eyewash. Consumers adopt a new technology automatically when it benefits them. 

Major Flaws in Implementation

No action taken on pre-requisites recommended by TRAI for smooth implementation in its Recommendations dated 05 August 2010. It appears TRAI and Ministry did this exercise only on paper. What was the hurry to mandate a technology when country did not have resources to bear the expense? All incentives as recommended were rejected or not considered by the Government.

Implementation Without any preparation 

The TRAI Chairman, late Sh JS Sarma assured the government in his letter dated 22 February 2011 that 100 million CATV HHs can be digitised within 2 yrs. Recommended preponing the Ministry proposal of 31 March 2015 as the last deadline to 31 December 2013 for the rest of India. Nothing mentioned in the above letter actually happened. Regulator has misguided the government and mislead the nation in assuring affordable entertainment with full accountability and quality, ignoring the economic condition of the nation and preparedness of the government in carrying out the task without giving any support. Regulator and Ministry only relied upon wielding a stick on the Cable Operators and consumers in the name of digitisation.

i)It is alleged that TRAI (JS Sarma) and Ministry(I&B Secy Uday Verma) did this exercise at the behest of one or two large media groups having foreign roots and with vertical monopolies who were constantly lobbying and helping them to frame the new laws and policies with the help of a coterie of lawyers and lobbyists. Senior executives of these media groups accompanied TRAI chairman, CCI chairman, Secy I&B and senior officials of Ministry to US as a lobbying exercise. 

ii)  Implementation started from 01 Jan 2012 but all regulations and even Cable TV Rules were framed later giving undue advantage to existing large players who had started installing digital headends in 2004 and knew what was in store. All new entrants were discouraged by the unfair Ministry policies. 

A. Cable TV Rules- April 2012

B. TRAI Interconnect Regulations DAS-30 Apr 2012 (9/2012)

C. TRAI Tariff Order dated 30 Apr 2012

D. Consumer Complaint redressal Regulation -14 May 2012(13/2012)

E. Quality of Service Regulations DAS- 14 May 2012 (12/2012)

F. Tariff Order on Distribution of STB to consumers- 27 May 2013 (after the end of Phase I & II)

G. Consumers are the worst hit as they do not even know what their rights are.

Set Top Box, non-availability in India

The most important Hardware required for Digitisation and meant to be used with each TV set in the 100 million cable TV households in the country is a Set- Top-Box (STB) which is not manufactured in India. Most of the STBs are imported from China. Contrary to Sh J S Sarma’s claim, Indian manufacturers have not been able to supply more than 5% of STB in Phase I & II that ended on 31 Oct 2012 and 31 Mar 2013. 

  • All STBs were to be complying with BIS Standard (Bureau of Indian   Standard). But because both Regulator & Govt were in a great hurry, 30 M STBs were seeded in consumer households without BIS standard, No BEE Rating, No interoperability, No Guarantee/ warrantee card, No proper repair centers.

  • Inspite of Cable TV Rule 2012 and TRAI QoS Regulation 17(5) of 12 of 2012 allowing consumers to buy compliant STBs in open market to consumers and asking all MSOs to provide information about technically compatible STBs to consumers so that they are not forced to buy STB from their MSO, no action taken by the government or the regulator to ensure this. Consumers are being forced to buy the cheapest possible STBs at high activation fee as decided by the MSO.

  • TRAI Tariff Order on distribution of STBs that came on 27 May 2013, does not permit ‘activation fee’ but 30 million STBs are already given on activation fee and no action has been taken by TRAI to regulate this malpractice by MSOs as well as DTH operators in the last one year.  

  • Collection of CAF forms, activation of SMS system and pairing of STBs that was to be done first, before installing STBs is still pending and TRAI as well as Ministry had forced the seeding of STBs in a hurry to complete the process in the notified deadlines without getting consumer choice and billing process in place resulting in millions of consumers paying two to three times subscription without getting the choice channels and paying for the STBs too.

  • The result of the above is that there is no Addressability working even after two years. Practically, there is no benefit to consumers till date. Only beneficiary are the vertically integrated MSOs and their ‘Pay’ as well as FTA channels which form the default package in their network given to all consumers. 

Unfair Revenue Share for LCO  

Model made by TRAI is based on NEGOTIATION between MSO & LCO which is not possible as MSO by definition is also a competitor of LCO. This is also against the spirit of Supreme Court order dated   03.04.2007 in the case No. between Sea TV Vs Star India. This is giving rise to many disputes and making MSOs strong and help them to create Monopoly in the area which is not in Consumer interest.

  • Fall Back Arrangement as fixed by TRAI is 35% of Basic Tier of FTA channels & 45 % of Pay channel revenue. It is difficult for LCO to survive as he has to continuously invest on upgradation of Network, Service customers 24x7, operate the network and collect revenue from consumers for all other stake holders including Taxes for the government. (Note Section 4, 4a and 4b of Tariff Order dated 30.04.2012)

  • CAS model of revenue share was tested and workable without any dispute but has not been adopted.

  • TRAI has not worked out the barest minimum revenue needed to run a last mile network of 1000-2000 connections in urban areas and 200-300 connections in rural areas complying with the expected quality standards while deciding on the revenue share. In today’s scenario, a revenue share of Rs 120 – 150 is the barest minimum needed for an LCO to survive.

  • In Analogue CAS regime (2003), LCO got total revenue from FTA Basic Package (approx Rs 100) and to compensate low ARPUs he was running video channels and earned from advertising and sponsorships on them. Now that responsibility has been given to MSOs who do not share the ad revenue with LCO although, they use his last mile networks to reach consumers. He also received 25% of pay channel revenue and carriage fee. Now he does not get any carriage fee also. 

  • Revenue share does not support the existing state of the industry where last mile is fragmented.  This may be workable after 5 to 7 years when broadband capability and value added services encourage consolidation. 

  • Clause 1E of 6(1) of Tariff Order 2012 (earlier 3 /2012 dated 30.04.2012) that gives power to MSO to decide on revenue share of an LCO is discriminatory and infringes on LCO’s Fundamental Right to earn livelihood, needs to be repealed.

AGREEMENTS  among Stake Holders

Due to no standard Agreements in place, bigger Stakeholders ( Monopolies) take full advantage of their Position . TRAI Chairman hurriedly (before retirement on 14 May 2012) took out Interconnection Regulation of 30.04.2012 to meet impractical deadlines (along with 3 more Regulations on 30.04.2012 and 14.05.2012).

  • All National MSO ( Den, Hathway, Siti, Incable are having one sided Agreement and enjoying monopolies in different cities. 

  • Even state level  MSO have Monopoly & Political clout like Fastway transmission, Ortel, Asianet and Arasu. 

  • These agreements take advantage of low education and less leagal awareness of LCOs and aim to take over their business at smallest instant.

Fundamental Right of LCOs infringed

Regulator (TRAI) in a hurry to meet deadlines, preponed deadlines dates/years to please vertical and horizontally integrated Broadcaster, DTH & MSOs.

  • TRAI brought a Regulation of 14.05.12 on QoS (No 12 of 2012) in which MSO (one of the stakeholder) has been made supreme to control the business of LCOs and make them slaves from business owners.

  • LCO gives service to consumer 24 x7 and upgrades, operates and maintains last mile network with his own money.

  • MSOs have monopoly in switching off STBs any time without giving Notice to LCOs to harass in the GARB of Technical Fault. 

  • MSO is also in competition with LCOs as he can operate in their area of work (Definition of MSOs). This is also in violation of Supreme Court judgement (Appeal (civil)  5524 of 2005) in the case of  Star India Vs Sea TV of 03.04.2007 whereby it has termed such arrangement discriminatory.

  • All Vertical/ Horizontal Integrated MSOs have done Truce or made a cartel to squeeze LCOs or go direct in their area through their JV Partners or distributors. 

Consumers are Confused

a)  Consumers do not know their rights under the digitization law.

b)  Consumer choice is not available in any metro/ 38 cities.

c)  No MRP of Channels declared by broadcasters. TRAI has left it to the MSOs discretion.

d)  A-la-carte channel option is not available.

e)  A-la-carte channel prices are different with different MSOs

f)  Packaging system is not observed across all MSOs. MSOs of vertical monopolies only put their group channels in the cheapest package to get maximum viewers, other popular channels are put in the a-la-carte list with high prices. Packages do not meet the choice of consumers of that area.

g)  Though a few MSOs are offering packages, many channels are not available in the package as offered. 

h)  Ownership of Set-top-box should be with the consumer. Today consumers do not own them.

i)  Poor Quality, Old Technology (MPEG-2) Chinese STBs are being imported to keep costs low and compromise on quality.

j)  STBs (Set-Top-Box) are not interoperable. 

k)  STBs are not replaced in case of fault/damage

Rates of Cable Service have gone up 30 to 40%

  • Consumers have fallen prey to the ‘Pay’ broadcasters & MSOs, post DAS.

  • Entertainment Tax charged per STB range from Rs. 5 to Rs 60 and Service Tax of 12.5 % further put burden on consumers.

  • Activation fee that has been collected by the MSOs is illegal and must be refunded to consumers or adjusted according to TRAI’s Tariff Order of 27 May 2013 (No1 of 2013). TRAI is yet to direct the MSOs in this regards.

  • Pay Channels are full of multiple advertisements and earn from subscriptions too yet, TRAI has left their tariff unregulated.

How the above problems will get resolved at the earliest is very important for the ultimate success of Digitisation. A lot depends on the new government after the general elections. Also awareness in public is very essential to demand its rights that were promised by the DAS law. This is a difficult proposition as both print and television media have their vested interests not to make the public too much aware lest they lose their profits.

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