The state-owned telecom duo will shortly be rolling out the country's largest IPTV service. Can they really take on private DTH competitors?
State-owned telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) are not generally considered formidable competitors to private sector players. But a new offering franchised to a Delhi-based company could change things — not perhaps in the telecom space but for direct-to-home (DTH) service providers. The challenger: IPTV or internet-protocol TV.
“It’s time for DTH to retire, introducing MyWay IPTV”, runs the bold ad line for the campaign extolling the virtues of the new technology offered by Delhi-based Smart Digivision, the franchisee for the IPTV launch by BSNL, the national service provider, and MTNL, service provider for Delhi and Mumbai.
MyWay will be launched in over 54 cities — the largest IPTV launch in the country — in the next three months.
“We really do not see any competition,” said Jawahar Goel, who heads Zee group’s DTH venture Dish TV. “Some operators offered IPTV but it did not take off because of the poor quality of the pictures. Also, you need to have a broadband connection which adds to the cost and there are so few broadband homes in the country,” he added.
So why should MyWay be different? One, it is being launched country-wide rather than in a few pockets. Two, the state-owned companies have large fixed-line networks — larger than any private telecom competitor — to leverage. Together, both cover 33 million fixed lines in India compared to about 4.5 million lines owned by four private service providers.
Though that’s the potential addressable market, the spread of the service is dependent on the availability of broadband — a high-speed pipe that delivers information packets at 256 kpbs or more.
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To start with, Smart Digivision hopes to offer the services to 1.6 million to 1.7 million broadband subscribers of BSNL and MTNL (in 54 cities). Total broadband coverage in the country does not exceed six million.
“We expect to get two to three million customers who will use IPTV in the next three years,” said Surendra Lunia, director, IPTV, in Smart Digivision.
Lunia adds that the 54 cities chosen comprise 80 per cent of the country’s broadband subscriber base. The company will invest over Rs 500 crore to roll out the services.
Under the franchise agreement that Smart Digivision has signed with MTNL and BSNL, the company will have access to the companies’ subscribers as well as to the copper wires reaching their homes (the “last mile” connection in technical parlance). In return, the companies will be paid 10 to 25 per cent of the revenues from the service.
To take on DTH players MyWay has priced its offer competitively. A subscriber has to pay only Rs 2,000 for installation, set-top box and free channel viewing for three months, roughly similar to competing DTH offers.
MyWay offers 126 channels for Rs 280 per month or 95 channels for Rs 200. MyWay executives said they are initially subsidising the set-top box which actually costs Rs 3,500.
Lunia says the cost to consumer is comparable but his service delivers more value. So for instance the set-top box can also record programmes once a “memory stick” is attached. A DTH box with recording facility from Tata-Sky costs Rs 10,000 for 80 GB space. In the case of IPTV, the subscriber has to pay an additional Rs 2,000 to attach storage capacity to the box, which is enough for 80 hours of recording or 80 GB space.
Secondly IPTV, unlike DTH, offers two-way interactivity. This means it can be used to browse the net, send e-mails, make online bookings with the click of the remote, if you are not watching a programme.
The company is also tying up the backend to ensure that it is possible to browse mails on TV. “GMail is already done and we are in the process of getting Yahoo and MSN online also,” Lunia said.
Consumers also have the option of typing on TV, either through a virtual keyboard or a real keyboard attached to the TV for Rs 250 extra. DTH cannot offer these services by the very nature of the technology.
Lunia also said that they are offering a Mozilla firefox browser in the set- top box so that consumers can use the Net on TV. It has also tied up with mapmyindia.com which will provide consumers assistance to locate any place in a city.
The company is also working on other value-added services such as uploading an ICICI Bank portal so that customers and roping in the Railways to make it possible to use the TV to book railway tickets. Talks are also on with B2B sites to enable railway and cinema tickets.
Lunia said B2B sites are expected to yield 90 per cent of the revenue stream for the IPTV venture; broadcasting revenues will account for the rest.
BSNL and MTNL have had tie-ups with other companies to offer IPTV earlier, but these have been limited to a few cities. The difference this time is the sheer scale of the launch.
Meanwhile, Bharti, the country’s largest mobile service provider, and Reliance Communication (RCom) are planning to introduce IPTV commercially now. The problem is that the offerings would be limited to the fact that they have just four to five million fixed lines between them.
MTNL and BSNL will be earning additional revenues from a fixed asset for which they are making no investments. That’s a winning business model. The question is whether the franchisee will be able to deliver efficiently and overcome the negative connotations that inevitably come attached to state-owned service providers.