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The delay in the rollout of phase three and four of digitisation did not come as a shock for the industry. Most stake-holders agree that the deadline of 31 December could not have been met.
However, mutli-system operators and direct-to-home players are now hopeful that the year is spent in ironing out the creases in the process.
Digitisation is the process of converting all analogue television signals to digital by installing set-top-boxes (STBs) in the subscriber homes.
Subscribers can op either for digital cable services provided by MSOs like Hathway, InCable and Den Networks etc. or go in for DTH connection like those provided by Tata Sky, Dish TV, Videcon d2h etc. Phase one and two of the process was completed over 2012 and 2013 and the deadline for phase three was until now December 2014.
The MIB's stand on the matter is that it wants to give thrust to indigenous STB manufacturers and the one year delay would be used to bridge the gap in STB manufacturing in India. Currently, the industry depends on imports from China for seeding (deploying) STBs in the territories that are undergoing digitisation.
While stakeholders are happy that they have time to now get things in order for phase three and four, they are also concerned about the ministry's motive regarding indigenous STBs.
"The requirement, according to industry estimates, of STBs in phase three and four of digitsation is to the tune of 70 to 100 million units. Currently, there are hardly any manufacturers in the country who can meet that demand. How the industry will cope with the shortage (at the domestic manufacturing level) is something that needs to be seen," says Tony D'silva, CEO - Hinduja Group - Media, and MD & CEO - IMCL.
RC Venkateish, CEO, Dish TV agrees and adds that the essential part of the STB, which is the chip that needs to be integrated with the hardware and encryption software is not manufactured in India.
Thus, what can be made in the domestic market, is the casing, capacitors and some wires that are part of the STB. The rest has to be imported. Industry estimates reveal that 55 per cent of the cost of an STB comes from the chip which would need to be imported in any case.
Also, in case of the imports from China, the local cable operators and MSOs get a credit of up to three years. This gives them the elbow room to get the revenues and pay off the loan over that time.
D'silva adds that only extending the deadline is not enough. "There is a lot to learn from the phases one and two and unless the industry does not sit down and talk about it, find solutions, no amount of delay will matter," he says.
For example, he says, there is the issue of licensing of operators in the smaller markets. These local cable operators are registered service providers at the state level, but once they come under the ambit of digitisation, they need to obtain a license from the ministry.
"In case of national level MSOs, one can understand the need for a license, but when the local players are registered/licensed by the state, why make them get a license again, when they would continue doing what they have been doing until now?" he questions.
Analysts believe that the impact of the delay will be felt maximum by the broadcasters who will suffer in terms of domestic subscription revenues. It will be a double blow since the monetisation of phase one and two is still picking up at a very slow pace. Digital Cable operators will also be impacted, but a lot will depend on their expansion strategy.
"SitiCable will be hurt the maximum by the development followed by Den Networks, whereas Hathway Cable and Datacom (Hathway) would be hurt the
least. SitiCable is betting big on phase III and IV of Digitization followed by Den Networks. Hathway concentrated largely on phase I and II of Digitization and its strategy for phase III and IV was to cherry pick the markets," says an analysis by ICICI Securities.
However, the delay gives Siticable more time to raise funds while Den Networks and Hathway can concentrate on getting phase I and II of Digitization right with respect to monetization. In case of the DTH operators, Dish TV will be at a clear advantage since it now has another year to promote its second brand Zing in the phase three and four markets.
The brand was launched specifically to target the tier two and three towns and villages and rural markets in the country.
