SET Discovery has been riding high on the wave of ICC cricket for over four years. Having the ICC Championship and World Cup in a single year, the company is targeting a 40 per cent growth in turnover to end 2006-07 at Rs 4.5 billion.

In an interview with Indiantelevision.com's Sibabrata Das, SET Discovery president Anuj Gandhi talks of the challenges digital cable faces and how the distribution scenario would shape up in future to impact the pay-TV broadcasting business in India.

Excerpts:

Are you happy with the way Cas has rolled out so far?
We are terribly disappointed. The multi-system operators (MSOs) were not fully prepared. Their systems were not in place and there weren't enough set-top boxes (STBs). Some operators were even providing boxes without smart cards.

MSOs say broadcasters created an uncertain environment till the end by approaching the courts. Isn't it true that they got very little time for actual preparedness?
There was enough indication that Cas would happen. We were challenging the pricing and not introduction of Cas. Broadcasters signed their contracts with the MSOs on time. Some local cable operators (LCOs) who were against Cas, moved the courts but could get nothing in their favour. If Cas has to take off, this blame game has to stop. All the stakeholders have to play their role.

Is it a case of low consumer demand for boxes?
That is a separate issue and, if need be, can be tackled with different marketing schemes. We are in a situation where the MSOs aren't quite ready. There is lack of information flowing into us, the subscriber forms have not been filled up, and in some Cas markets analogue signals are available of popular general Hindi entertainment channels in prime time.

Why then couldn't this market substantially move to direct-to-home?
DTH is more expensive. It has a higher entry price and there is no big subsidy on the STBs. Besides, DTH operators took time to service this market. With cable operators not capitalising heavily on Cas, we have lost an opportunity to create a build up for a massive ramp up in demand for STBs at the time of the World Cup.

Will the World Cup drive a 40 per cent penetration in STBs as predicted by some positive analysts?
We see the World Cup acting as a catalyst and expect the STB penetration to touch 45-50 per cent in the Cas markets. Only when we reach that level can all the stakeholders make money. Already DTH service providers Tata Sky and Dish TV have announced their schemes for the World Cup. MSOs should also be sorting out their issues and coming out with a plan for the big event.

Is SET Discovery targeting a revenue of Rs 4.5 billion in 2006-07 on the back of the World Cup?
We have set an aggressive target this year and are going to hit it. We will benefit from key cricketing events like the ICC Champions Trophy and the World Cup. Besides, we had cricket on Ten Sports. For the first time, we would be capturing revenues from DTH as we signed up Dish TV and Tata Sky during the year.

Will Cas affect the business?
In the overall scenario, Cas has a very limited number of cable and satellite homes. Besides, Cas has come into effect only in the last quarter of the fiscal.

Do you see broadcasters dropping prices of their weaker channels in a bid to push sale of STBs?
With a price cap on a la carte channels at Rs 5, it won't make business sense to further drop rates. The whole justification for this is to have higher volumes. But we could have got the current levels of box penetration with a more liberal pricing.

Are you suggesting a price ceiling but at a higher rate?
This would have allowed us to play within that float. We could have weighed the weaker channels, observed their relative strengths in the marketplace, and come up with a differential pricing while staying competitive. The whole subscription model at Rs 5 doesn't give us scope for such pricing play and is unfair to niche channels. There is precious little that content providers can do and dropping prices would be bad for the MSOs as well. Besides, we haven't yet got any billing data from the MSOs on the Cas subscribers to chalk out a strategy.

Are you planning to take any action as the deadline has crossed?
It should have come to us by 15 February, but we haven't received any information from them yet. If we don't get any feedback from them in the next few days, we will issue them notices as specified by the Telecom Regulatory Authority of India (Trai) in order to safeguard our interests.

Trai is trying to push for voluntary Cas. How do you think this can speed up in other parts of the country?
Digitisation is a reality but will take a while to happen. Cas has been a learning process and we have to evolve a phase-wise strategy for digitalisation. We have to fix a sunrise and a sunset date where we have to give adequate time taking into account availability of boxes, prices and investments by MSOs.

MSOs are saying that broadcasters should be more understanding and not ask for more subscribers in voluntary digitalisation as the collection of money from the LCOs doesn't improve. Isn't entering into commercial agreements between MSOs and broadcasters crucial for the success of voluntary Cas?
The analogue and the digital markets have to be distinguished. The MSOs can't argue that they can't recover money and so can't pass it on to us. Then how will broadcasters make money from voluntary Cas? There has to be some incentive for broadcasters to push for digitalisation.