Switching off the cable guy Story on STAR - Zee distribution alliance and it's impact on cable operators etc.

Tamil Nadu chief minister J.Jayalalithaa has put cable television back on the boil. One of her first announcements after being sworn in last month was the revival of the defunct state-owned Arasu Cable TV Corporation to fulfil AIADMK’s election promise of delivering cable television at just Rs 45 per month. Governor S.S. Barnala followed this up with declaring the state government’s intent to “nationalise private television operations”. This effectively means the takeover of Kalanithi Maran-owned Sumangali Cable Vision (SCV), a near-100 per cent ground distribution monopoly aligned to the DMK and the Sun TV group. Jayalalithaa’s last attempt to take over Sumangali in 2006 failed after the governor sent back the Cable Nationalisation Bill saying broadcasting is not a state subject. But her determination to break SCV’s cable monopoly in the state has obviously not diminished. This has brought to the fore the confusing cable wars — the battle for the Rs 20,000-crore subscription revenue between 60,000 local cable operators (LCOs) allied to hundreds of bigger cable networks called multi-system operators (MSOs) and the TV broadcasters; and the decade-old attempt to digitise the system so that it is accountable, monitored and taxed like any other industrThe Unchanging Cable World

To encourage the shift, Trai has proposed that cable networks be treated on par with telecom service providers and be given an income tax holiday till March 2019. It has also recommended that the basic custom duty on digital head-end equipment and set-top boxes be reduced to zero for the next three years to soften the blow of the heavy investments. But for implementation, the law has to be amended suitably — the Cable Television Networks (Regulation) Act 2002, especially Section 4 (A), has to be changed to ensure that all channels are digitally delivered and analogue signals are outlawed. The industry is hoping a new digital addressable system (DAS) will become the law during the monsoon session of Parliament. Trai has even set up a 22-member task force representing the industry’s varied interests to carry through the digitisation regime.Discordant Voices Easier said than done. CAS was mandated by law but never saw the light of day. The consensus, though, seems solid this time, say industry spokespersons. “For the first time, Indian Broadcasters Foundation (IBF) and the MSO alliance are sitting on the same side. We all want a return on investment and the government wants the analogue spectrum vacated for other uses,” points out MSO alliance spokesperson Mansukhani. Significantly, it seems the government has been convinced that it is the biggest loser if the old cable system survives. A rough calculation of evaded entertainment and income tax shows a loss of Rs 3,800 crore every year, says Star India’s Shankar. This is corroborated by the Hong Kong-based consultant Media Partners Asia (MPA) that points out that of the gross Rs 18,000 crore collected on ground as subscription revenue, 17 per cent makes it back to television channels, 4 per cent to MSOs, while the lion’s share — 79 per cent — is cornered by the local cable guy, who pays only a fraction of the taxes due. “But in this round, even the small cable operators are for digitisation. Fear of being wiped out by DTH is ensuring that,” Mansukhani adds. “With digitisation, the Indian industry will finally have the incentive to invest and create,” says James Murdoch, chairman of News Corp, Europe & Asia, echoing the demand of the international media companies. If the industry were to digitise and modernise, “instead of a $15-billion industry, we would be talking about a $120-billion industry,” promised the News Corp scion. But Murdoch and Mansukhani will have to account for the discordant voices. “Even the US does not have mandated digitisation. As much as 20 per cent of cable distribution in the US, including media giant Comcast, is analogue,” points out DigiCable’s Kohli. Under CAS, the consumer had the option of switching to a free-to-air regime and avoiding encrypted, pay channels through the set-top box. Most people opt for 11-13 channels, and under CAS they had the option of going for the free channels. However, in the proposed DAS regime, all channels will be through set-top boxes, thereby limiting choice, Kohli says. The MSO support for digitisation is also seen as a desperate move to make the cable industry more attractive for local investors and foreign equity partners. Though the government has hiked the FDI level for cable networks to 74 per cent to encourage digitisation, it is applicable only for digital networks. The small operators, who make up the bulk of the industry, have a different take. Ravi Singh, vice-president of the Cable Operators and Distributors Association (Coda), a broad alliance of small cable networks, says his association is against any rapid digitisation process. “Each set-top box costs Rs 1,600 and the maximum we recover from the consumer is Rs 1,000. In the metros alone, we are talking of 20 million set-top boxes. Where will the investment come from?” he asks. How soon will the old analogue cable see its sunset? The schedule for Parliament’s monsoon session is out, and the ‘sunset amendment’ in the cable law does not seem to find a place. The wait will obviously be longer than expected.