The Hindu Business Line : CAS may not deliver the goods, says study

WHILE a successful implementation of the conditional access system (CAS) in India could boost the entertainment economy in the long term, the economic and logistical realities would make its implementation a non-starter, according to a research report on the introduction of CAS in the country.

According to the report by Media Partners Asia Ltd, an independent media research and publishing company based in Hong Kong, CAS implementation in India in the current proposed form is set to be undermined by a host of issues at consumer, operator and broadcaster levels.

Post-CAS, to access cable television services consumers would need to subscribe to basic FTA (free to air) channels, and in order to view pay channels, buy a set top box (STB) and then make additional payments to access the pay channels.

Various pricing models and scenarios indicate that post CAS, consumers would have to pay between Rs 250 and Rs 450 per month to access the cable television services for which they now pay a nationwide average of Rs 157 per month.

The report said that such price inflation goes against the Government's stated aim of making cable television more affordable for the consumer. Existing demographic data indicates that Indian consumers will not be able to absorb the costs associated with the price increase.

At present, 30 per cent of the cable television consumers have monthly incomes ranging between Rs 2,000 and Rs 4,000 while 31 per cent have monthly incomes of Rs 4,000-8,000.

These consumers (assuming the existing average monthly rate of Rs 157) currently spend on average, anywhere between 2 to 8 per cent of their income on cable television. Post CAS, these consumers (assuming a rate of Rs 250 to Rs 450 per month), the spend would increase to about 12 per cent.

There are also financial constraints at the operator level; "the fragmented Indian market has very few well-managed and well-funded multi-cable system operators", the report said.

"A typical large-scale MSO (multi system operator) commands revenues of up to only Rs 100 crore, on which operating profit is as low as Rs 20 crore. Most MSOs and local financial institutions also remain unable to subsidise the cost of CAS for the consumer," the report said.

According to the report, most of the MSOs operating in the four metros have stated that they would look to roll out digital set top boxes in an effort to combat piracy. Most MSOs will not deploy two-way digital and interactive STBs priced in excess of Rs 7,000. Instead, most MSOs will deploy a low cost, low quality and therefore hackable STB and conditional access (CA) solution, priced post duty at Rs 3,377. Only a few would deploy a solid and secure STB and CA solution, priced, post duty at Rs 5,337, the report said.

In the current context all major MSOs do not command control over the last mile. Instead, local cable operators own the last mile and control subscriber distribution and management while the MSOs control the head end equipment.

Unlike their global counterparts, Indian broadcasters mainly rely on advertisements to drive revenues. The major local broadcasters - STAR, Sony, Zee - earned advertisement revenues of more than Rs 2,000 crore at the end of March 2003, about 75 per cent of the total cable television ad spend.

The report said that subscription, though growing, remains significantly below the levels it should be, due to under-declaration. At the end of March 2003, subscription for major local broadcaster totalled only Rs 600 crore, more than 90 per cent of total channel subscription but only 7.5 per cent of total industry subscription.

More than 75 per cent of the total revenue of the major broadcasters came from ads, only the rest came from subscriptions.

Post CAS if any one of the three major broadcasters move one of their ad-driven entertainment channels to FTA to protect their ad revenues, the rest would follow. This would ensure that the subscription revenue stream would be completely relinquished, impacting the fundamentals of both mass market and niche type channels.

A test-bed CAS rollout in one city and a simultaneous push for alternative subscription-based television platform will provide greater insurance for consumers, operators and broadcaster, the report recommended.

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