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HomeArticlesDTHDTH industry on the up-swing
Monday, 10 August 2015 10:38

DTH industry on the up-swing

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Direct to Home (DTH) industry is on the swing as government’s mandatory digitization enters third and fourth phase, covering majority of the country with almost 100 million analog TV connections. With 73 million connections already in its kitty in the country, the Industry expect to garner 40 per cent of the Phase- III and IV market. 

Existing MSOs are going very slow in this market as there is not enough infrastructure existing in these regions, being very low density areas and rough terrain. Due to apathy of the government, poor planning and lack of resources as well as presence of very small Independent MSO and LCOs who run their service in these areas, the DTH industry with six players having deep pockets and wherewithal to capture the market is at a great advantage. The industry already has a countrywide coverage of its digital signals to penetrate their DTH service in these phases to the existing customers.

Direct to Home industry started in 2003 when implementation of CAS in Cable TV networks was deferred due to political reasons. Perhaps pay broadcasters had their hands behind this move of the government as they were trying to sideline thousands of LCOs to reach consumers direct. Cable operators were distributing their Pay TV content in non addressable markets, at extremely low ARPUS to get maximum number of subscribers. Pay Broadcasters were finding it difficult to get more revenue.  

The first two DTH companies came up from the pay TV broadcasting groups, Star and Zee. Sun TV group that managed most of the regional channels, particularly in South India was the next one to join the industry. It is only much later when the telcos realized the potential in a converged market that they decided to enter the market. Large telcos, Airtel, Reliance and Videocon joined the Industry later.

 Airtel decided to use its telecom infrastructure to penetrate DTH service to the existing customers. Reliance had a design to get into broadcasting and content production to create its own market whereas, Videocon group leveraged its TV manufacturing capabilities to create a dedicated market for itself, selling its DTH free of cost with each television set. Videocon also entered the STB production business using its already existing electronic manufacturing facilities, thus reducing the capex on STBs.  

Digitalisation commenced from July 2011 and during the teething period of the digital cable TV industry, all DTH operators made a kill for the cable subscribers who were facing numerous reception problems in their Cable TV connections at that time. Biggest gainer were the Pay TV broadcasters, Zee and STAR who already had large distribution digital networks with their DTH as well as MSO networks. They gained both ways, on the ground as well from the sky. Not only that, they also made it difficult for other MSOs to get their content to create a favourable environment for their own/affiliated distribution networks. They had also jointly created a mammoth content aggregator Media Pro, to take full advantage of the digitalization policies. Their monopolistic tactics were further protected by both I&B Ministry and the regulator TRAI during the first two phases by not taking any action on their predatory approaches. Regulations on aggregators only came up after most of the TRP towns of Phase I and II were dominated by them. Today the industry is second largest in the world with 40 million active subscribers, second only to the US. Inspite of all the advantage, the industry has not shown an encouraging growth and is only able to add 8-10 million subscribers every year. If Phase III deadline is extended, it may increase worries of the industry that is still trying to come out of the Red. Reliance Digital is already thinking of quitting the industry, unable to cope up with the expences. 

Some of the problems the industry faces are:-

1.Inactive subscribers. According to TRAI 44.51% DTH subscribers are inactive (see the graph). This number has been increasing every year. It means consumers take a connection at the subsidised rate of the initial offer and after the subsidised period is over they switchover to either cable or another DTH operator giving a subsidised connection. 

2.Multiple Taxation. According to the industry, 34% of their revenue is given to the government as taxes like Service Tax (14%) and Entertainment Tax besides the annual licence fee paid by them which is 10% of the AGR. They have challenged this in the court.

3.Shortage of satellite space. Under the ‘open sky’ policy Government allowed both Indian and foreign satellites to be used in DTH services with the condition that proposals envisaging use of Indian satellites would receive preferential treatment. Department of Space would acquire and allocate necessary transponder capacity from foreign satellites for short term periods till capacity on INSAT system is available.  Out of a total of 78 Ku Band transponders, only 19 are Indian. Each DTH operator needs 18-24 Transponders for 300-400 TV channels. Each transponder is leased for Rs 5 crores a year.

4.Piracy. Piracy on DTH is caused when illegal (duplicate) viewing cards are used by the subscribers. These cards are openly available in Dubai and many other forein countries. Although DTH signals are meant only for India, there is a spill-over in neighbouring countries. It is estimated that 5 million illegal subscribers exist in neighbouring countries. Some cable operators also extract a few pay channels from a DTH signal and add them in their network. 

5.Growing competition from digital cable networks and OTT players. Apart from facing competition among themselves, DTH operators face a growing threat from Digital cable and OTT services.

6.Differential pricing and Low ARPUS. To win over analogue consumers in rural and semi-urban markets of Phase III and IV, DTH operators are creating cheaper packages (Rs. 99 of Dish TV) with regional content and offering daily recharge coupons (Rs 8 per day of TataSky). 

Unfortunately, DTH operators are trying to reach the masses in competition with cable TV industry. Cable TV will always remain a preferred service being easily approachable and cheaper. DTH, with ever escalating costs of transponders, costlier CPEs and rain fade problem will never be popular with the masses. As most of the subscribers are serviced by small operators at the moment, their overheads are very low compared to the corporate. The way Digitisation is progressing at a very low pace, it is difficult for the government to shutoff analogue signals as per the deadlines. Hence, consumers who had shifted to DTH in the early days of digital migration are shifting back to cable as evident from the increasing number of inactive DTH subscribers. According to TRAI, 44% subscribers are inactive.

DTH industry will do much better if it makes itself a premium service for the customers who demand a good service, latest technology like HD and 4K and better reception. These customers will also pay a higher amount increasing the ARPU which at present is at cable TV level of Rs 180.

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