 "Tony D'Silva")
NXT Digital or the Hinduja Group's head-end-in-the-sky (HITS) service will be launched sometime mid-August. It is the second serious attempt at bringing in a technology that is a cross between direct-to-home (DTH) and cable. (The first attempt was from Zee) Think of HITS as a large distributor of TV signals in the sky which could service cable operators or other signal distributors called MSOs. Vanita Kohli-Khandekar spoke to Tony D’Silva, managing director, Grant Investrade, a Hinduja Media subsidiary that will be launching NXT Digital. Edited excerpts:
Your project has been delayed for more than two years. What is the status now?
We have got the final licence. There is just one more clearance needed after we fire the signals. We should be launching by mid-August. Our Earth station has been set up in Noida and we have tied up everything - transponders on Thaicom 7, a conditional access system from Nagravision, subscriber management system from Hansen Technologies in Australia. We have recruited 200 people and most of the key ones are on board. There are 10 promotional vans going out to 30-40 cities giving demonstrations of the service. We have closed discussions with major broadcasters. Star for instance has been very supportive. They have understood the value of this proposition. They have understood how ratings will play out in rural India.
Could you explain the rural-small town connection?
The focus of NXT Digital will be in Phase-3 and 4 towns due for digitisation in the coming months. (These cover 50-100 million small-town and rural homes). We do not intend to go to Phase-1 or 2 markets. In Phase-3 and 4 towns the bigger contribution of digital homes will come from HITS. About 50 per cent of DTH subscribers are in these towns, which also have the maximum churn for DTH operators, because rain usually means signal failure. There are constraints on the number of channels DTH can offer. Also it cannot offer local channels. There are an estimated 22,000 local channels, which show festivals and local events. For example Goa has 13 Konkani channels that are not national.
How does the service work?
We are the back-end for any cable operator or multi-system operator (large signal distributors). We offer 500-plus channels, a terminal to manage your subscribers, a subscriber management system, 24x7 call centre, set-top-boxes and other value added services to cable operators. Plus we will be the broadband partner for the cable operator. And the service can be offered across devices, even on 2G phones. It is an end to end service that costs the operator Rs 20 per subscriber. (Going by estimates from NXT Digital if an operator with 5,000 subscribers attempts to do a basic service like this on his own, his costs could go over Rs 50 per subscriber)
The White Label service is meant for cable operators who have a digital addressable system license and have deals in place with broadcasters. The cable operator will pay per set-top-box on a prepaid basis. NXT Digital will provide everything, the channels, the back-end and customised billing for all customers. The last mile cable operator fronts the whole service. The full service model is for operators who do not have a DAS or digital addressable system licence.
What is the investment, potential and when do you expect to break even?
It is a $100 million (Rs 620 crore) project of which $80 million (Rs 496 crore) has already been invested. There are 5,000 multi-system operators in the analog system, of which 800 have provisional DAS licences. About 200 of them are in the Phase-1 and 2 towns. Therefore, roughly we have 4,000 operators who do not have a DAS licence. We can offer them the Full Service Model and when they get a license they could move to the White Label Service. A lot of MSOs are talking to us because they can use it for expansion (without the cost of laying more cable) in Phase-3 and 4. We expect to break even at 6 million subscribers (in about three years).
How linked is NXT Digital's success to the push for digitisation?
For the 5,000 MSOs, most without a DAS licence, the issue is how to digitise (by December 2015 for Phase-3 and December 2016 for Phase-4). They can either set up their own head-end or go to another MSO or come to us. I have not seen MSOs going and doing active work in rural markets or in Phase-3 towns.
What was the research done before the service launched?
Three years ago when we started the work on the project we first worked with KPMG, then Deloitte on the plan. Then in October 2014, we did a research through Chrome (Data Analytics and Media). This covered 2,000 LMOs across 120 cities and 8 states. LMOs wanted six things: 1, To continue being owners of their networks; 2, the freedom to do their own broadcast deals; 3, packaging and pricing as per local needs; 4, to take set-top-boxes at their convenience, so that they could roll their funds; 5, the ability to insert local channels; 6, to be able to compete with DTH.
But you also have an MSO, InCable…
InCable is just another customer to me. Grant Investrade is a wholly owned subsidiary of Hinduja Ventures. (Of its Rs 755 crore topline in 2014-15, more than Rs 543 crore came from media)
Has the technology worked elsewhere in the world?
Comcast (the largest cable company in the US) has built its business on HITs. There is Telefonica (in Spain). Other firms have used it successfully in Germany, Philippines and Africa. It works wherever terrain is a challenge and the cost of consumer acquisition is high.
What has the reaction been so far from the trade and industry?
It is not a cakewalk. There are a lot of vested interests.
