| D D Gupta, the 50-something chairman of Singapore based SPL Innotech Pte Ltd, has made at least 10 business trips to India in the last six months. But he now rues his hurried decision to clamber on to India's promised CAS (conditional access system) bandwagon. |
| Thanks to the government putting CAS on hold, he's worried about recovering the Rs 4 crore investment his technology company made for designing CAS-related systems for India. |
| "Now even the travel costs are pinching," says Gupta, who booked orders for subscriber management systems (SMS) and analogue set top boxes from three large independent cable operators in Delhi and Mumbai. |
| Gupta's only solace, perhaps, is that he's not alone. According to Consumer Electronics and Television Manufacturers' Association calculations, down the CAS value chain, multi-system operators (MSOs), importers, electronics manufacturers and IT design companies are estimated to have lost between Rs 220 crore and Rs 225 crore. |
| So if an independent cable operator in New Delhi like Vikki Choudhary laments the Rs 4-5 lakh he spent on buying 1,000 set top boxes which are sitting idle, MSOs like the Hinduja's In Cablenet are bearing inventory costs to the tune of Rs 75 crore. |
| Needless to say, India's cable television industry made big time investments in anticipation of the Cable Television Networks (Regulations) Amendment Bill 2002 that was supposed to usher in CAS. But that was before the government developed cold feet, clearly with an eye on the elections. |
| A quick recap: last year the government passed the cable amendment bill that included CAS, despite major opposition from broadcasters. It gave the industry up to July 2003 to roll out the system in the metros. So the public would need a set top box at home to access pay channels. |
| However, in view of the impending Delhi assembly elections, CAS was de-notified in the capital. Taking a cue, Mumbai and Kolkata rolled back the deadline for CAS to come into force. |
| The government's dilly-dallying didn't please Siti Cable chief Jawahar Goel, who had upgraded his cable network and created a massive infrastructure to offer CAS through HITS (head-end in the sky) at a cost of Rs 250 crore. |
| Last month, Goel took the government to court, as did an equipment importer, a consumer activist and the Cable Networks Association in three separate petitions. |
| The Siti Cable petition made the point that the company had made investments on the basis of legislation and the change in government's stand could severely cripple its bottomline. |
| The Delhi High Court has apparently heard the arguments and reserved its order. It has also requisitioned the CAS files from the government. An information and broadcasting ministry official confirms that the files are with the court. |
| Though Goel is unwilling to divulge how much the company will lose if CAS is not pushed through, company sources say that the biggest cost is the set top box inventory. Thousands of boxes were ordered when the government waived the customs duty on CAS equipment. |
| Adds a senior Hathway official: "To import, you need to open a letter of credit. And you have honour that and make the payments whether or not you require the goods later. Today, that's what most companies are stuck with." |
| The Raheja-owned Hathway Cable pumped in Rs 150 crore to upgrade its head-ends in Delhi, Chennai and Mumbai. A worried Hathway executive exclaims that if the government does not implement CAS, the company may be pushed to writing off the investments. |
| "You must understand that we have invested in proprietary technology in our set top boxes. So it's not that we can push these elsewhere and recover our costs," he says. |
| The situation at Hinduja TMT's Mumbai office is similar. Senior executives are brainstorming on how to recoup costs if the government fails to implement CAS. |
| The company's president K V Seshasayee admits that it sunk Rs 120 crore into the system "�- in people, infrastructure, business processes and enterprise resource planning. |
| "One of our bigger costs is people as we set up a A-class marketing team and hand-picked our technology team," he explains. |
| Seshasayee says that the company also set up a 50-seat call centre to handle customer service. The employee strength, however, has been reduced to 10 now. |
| Interestingly, though Orissa's capital Bhubaneshwar was nowhere on the CAS roll out map, its leading cable operator Jagi Panda was eagerly awaiting its implementation. |
| "While it may have affected other companies' financial health, it has definitely affected Ortel Communications' growth plans," she says. |
| For one, Panda has been unable to raise money from the institutions to expand her operations. "The standard answer is, let the CAS confusion clear," she says. |
| Besides, she complains that in the absence of CAS, Ortel is unable to tailor its services for various segments of the market. |
| "We are compelled to provide a "one size fits all" service at Rs 195 per month though we know that some of our customers would prefer a free-to-air channel for Rs 100 to Rs 125, while others would be willing to shell out more for premium channels." |
| Even as different players in the industry wait for the final word on CAS, companies are responding to the crisis in their own ways. |
| SPE's Gupta is furiously looking at Sri Lanka, Bangladesh and Indonesia to push the boxes that he manufactured for the Indian market. |
| The Hinduja's cable company In Cablenet expects to unfold "voluntary CAS" if the government does not keep its promise. |
| Says Seshasayee: "No way are we going to sit idle. We will have to attract the customer to the box on its own merit." |
| For the purpose, the company will play up the digital reception quality and value-added services associated with the box. He says the company will quickly introduce pay-per-view to sell the box. |
| Back in Delhi, Siti Cable's Goel is also writing option strategies. His gameplan: convert one niche channel per head-end into digital mode, to be accessed through a box. |
| "For instance, if a certain area of Delhi has a dense Tamil population, we will convert a popular Tamil channel digital at that head-end so that the consumer in the area needs a box to view it," he says, adding that this will help push the boxes gently into the market. |
| After the regional channels, the company will target special interest channels like Discovery and Reality TV. |
| "Of course, a complete transition will depend on how quickly we can market the box and educate the customer," he adds. |
| Goel is also hopeful of consumers switching to CAS after DTH is rolled out. "He will then be exposed to high quality digital reception. I am optimistic that the industry will finally convert," he feels. |
| Hathway's top brass, however, is slightly worried at this approach. "The MSOs seem to be losing focus when they talk in terms of alternate strategies. Under law, the onus of implementing CAS is on the government," says a senior Hathway executive. |
| His fear: it sends wrong signals to the government which may wash its hands off the whole exercise when it sees the operators going it alone. |
| Besides, the Hathway executive feels that the box cannot be pushed "voluntarily" into consumer homes unless there is a strong content driver. |
| "Do you think these guys can rustle up a Sony or a Star Plus overnight? That is the kind of content you need to drive the boxes into homes on a mass scale and not some esoteric French film channel which may find a handful of takers," he says. |
| Agrees consumer electronics company Thomson's country head Sanjiv Kainth: "It is a difficult product to sell," he says, referring to the CAS set top box. Thomson had also booked orders to manufacture set top boxes for the Indian market. |
| So in the absence of government backing, can market forces usher in CAS? "Only if there are better piracy and copyright norms. Otherwise why should I buy a box for premium content when I get everything free," asks Kainth. |
| Still, the cable industry is lapping up any positive signal from the government on CAS. It is happy that the set top duty waiver has been extended till December. |
| Of course, finger are still crossed in anticipation of the Delhi high court judgement. And if it is in favour of the MSOs, D D Gupta may not bother about his travel bills so much. |
| Who's hurting |
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