Cable Vs. DTH - An Overview of the World Scenario
(Posted on 5 June, 9:25 PM)
In the wake of the opening up of the earth and skies (literally)
to private operators, India is all set to see a "war of the accesses".
With very few large players, a widespread geography and an extremely
rowdy and unorganised cable operator set-up, the options between
DTH and Cable as access modes are both set to woo the ever increasingly
discerning Indian consumer.
This report attempts to provide an overview of the world scenario
and draw some parallel (if any) to our country. I have tried to
collate information from various countries, all in different stages
of "access provision" development.
Canada
Cable competition has increased in Canada in the past few years
due to changes in technology and government regulations. There
have been delays, however, in launching direct broadcasting services
(DBS), largely due to restrictions against non-Canadian programming
- 51 per cent of channels carried on cable and DTH must be Canadian
programming. As a result, a "gray market" exists: subscribers
illegally using US made dishes and receiving US satellite signals.
Despite the popularity of the dishes, Canadian DBS consumers basically
face the same problems as US consumers: 1) Lack of local broadcast
signals, 2) expensive equipment and installation, 3) zoning laws
and tenant restrictions against mounting dishes, and 4) digital
converters necessary for each TV set (and additions are costly).
As in the US, the main factors affecting consumer choice between
cable and DBS are programming choices, cost, and signal quality.
In major markets, DBS offers a few local channels but cable still
has the advantage. As in the US, Canadian cable operators plan
to compete with DBS via new services, i.e. internet, digital and
telephony. Despite competition from DBS and other subscription
video services such as wireless, cable penetration has increased
in the past few years, from 65.3% in 1994 to 67.8% in 1996.
Competition in Canada is likely to increase overall multichannel
subscribership, but cable has an advantage due to price and local
programming.
Latin America
Latin America has approximately 13.4 million multi-channel
subscribers with an overall penetration rate of 15 per cent. The
problem with piracy has started to improve as thousands of cable
licenses are being granted across the region. Deregulation of
both cable and telecommunications is bringing foreign investment
into Latin America, especially from the US, Canada and Europe.
Consolidation and acquisition is necessary in order to upgrade
cable networks to provide cable telephony and other new services.
Smaller cable and MMDS systems are being acquired by the major
MSOs.
DBS has provided further impetus for cable operators to upgrade,
with their digital packages providing 150 and more channels compared
to 50 on cable. There were 487,000 subscribers to DBS in 1997,
with 3.2 million forecast by 2002. Due to its high cable penetration
rate, DBS growth in Argentina may be limited. Regulations and
pricing have slowed DBS progress - equipment costs and programming
packages are expensive for the average consumer.
Overall, DBS is not a major threat to the cable industry
in Latin America, especially with many MSOs becoming DBS distributors
in their countries.
Europe
Cable companies around Europe are consolidating in order to
upgrade their networks to provide digital, interactive and telephony
services in Europe. Cable telephony is already in service in the
UK and Scandinavia and is cable companies' biggest strategy against
DTH in those countries. In fact, in the UK, cable telephony revenues
are surpassing cable television's. Cable television has over 30
million subscribers in Europe, but DTH is no idle threat with
17 million. Germany leads the region in both cable and DTH subscription
with 28 million subscribers in both.
Cable television has been in the U.K. since the early 1980s
when the first franchises were awarded. In 1990, DTH services
were launched with BSB and Sky - they were not successful and
merged. Significant consolidation has taken place and today there
are some half dozen cable operators.
The UK has more DTH households than cable with a penetration
rate of 15.9% vs. 11.8%.
In Eastern Europe there is a high penetration of analog DTH
compared to cable, but nothing much happening in digital either
way so far.
Sub-Saharan Africa
It is difficult to predict the future for television in Africa.
The liberalization of broadcasting regulations and the increasing
penetration of low cost DTH technology have led to significant
growth in Africa's television market. In November 1995, Multi-choice
was launched and continues to dominate the African DTH market.
Multi-choice claims over 1.1 million subscribers, and even far-away
places such as Zambia are receiving Multichoice's M-Net channels
and have as many as 4,800 subscribers.
The challenges, however, facing the African DTH market can
be identified by a lack of funds, technological discrepancies
or government intervention.
DTH seems to be the most economical method of reaching widespread
population, however it is also faced with the challenge of providing
services to a country having over 60 dialects and widespread population
that may have no interest nor means in paying for a satellite
service because of its cost.
Middle East
The Middle East, with a population of over 165 million and
over 26 million television homes, demonstrates a market with significant
potential. However, it remains a market where only a small minority
actually pays for what they watch on TV.
Cable TV is experiencing growth first beginning in Israel but
Qatar has 12 channels available, while Bahrain and the UAE both
have ten. The multi-channel alternatives, satellite and MMDS,
are increasingly important, though in some states such as Qatar
they are mutually exclusive. The satellite TV sector exploded
after the Gulf War with the launch of services such as ESC (Egypt)
and MBC (UK) in 1991, EDTV (Dubai, UAE) in 1992, Abu Dhabi in
1994, LBCI, FTV (Lebanon) and Al Jazeera (Qatar) in 1996 and ANN,
a Syrian-owned channel broadcast via London, in 1997. The consumer
taste for variety and polished programming packages has laid the
foundation for the conversion from over-the-air broadcasting to
pay TV.
The challenge to becoming a successful operator in the Middle
East lies in the provider's ability to offer a unique product
while adhering to the cultural and religious sensitivities of
the market.
Satellite penetration is as high as 27% in Saudi Arabia and
as low as 6% in Lebanon. Because of this widespread difference,
it can be argued that MMDS will become the dominant medium for
pay TV. Star TV, for example, is marketing the MMDS network in
Qatar, Dubai and Bahrain.
Finally, the Middle Eastern television viewer has yet to come
to terms with actually paying for quality entertainment, but time
will tell what will happen.
Asia and the Pacific
Broadcasting in Asia continues to grow by leaps and bounds.
Penetration is consistently on the rise with DTH and cable penetration
currently reaching one in five TV households and estimated to
reach one in three households by 2005. In 1991, the first subscription
DTH service was launched which led the way in the Asian satellite
revolution.
Growth is expected in cable, MMDS as well as DTH to meet consumer
demand which is likely to rebound strongly after the current turmoil
recedes.
Which technology prevails in each market is likely to be
determined by a combination of factors including geography, which
technologies were first established, which players have the most
"political clout", etc.
Concentration of population and income level will dictate the
ease in which a consumer can access a pay TV service.
Australia
In July 1997, the telecommunications market in Australia was
deregulated allowing new carriers to compete directly with the
two incumbent carriers, Telstra and Optus. Australia is also a
unique study in cable, because it is one of the few countries
in the world where competing services are laying fibre-optic cable
and hanging it overhead simultaneously.
The road to convergence in Australia has also not been a smooth
one. The services vying for the ability to provide cable, telephony
and data transmission all in one are experiencing losses at an
alarming rate. Cable is in a state of overbuild with over 1 million
homes already passed. It also seems that these competing cable
companies are readily accepting losses in order to gain market
dominance. Attempts to merge these systems have been repeatedly
foiled by Australia's anti-trust regulator, the ACCC.
Just what the future holds for Australia is unpredictable
but one thing is certain, opportunities exist for the large and
knowledgeable participant in traditional media and television,
while emerging technologies and convergence opportunities will
arise with the deregulation of the telecommunications sector.
India
India is a dynamic study in itself. Just ten years ago, about
20 per cent of the total homes could only receive government services
broadcast on one channel operated by Doordarshan, the national
television operator. By 1997 there were 50 private satellite channels
and 19 different services from a revitalised Doordarshan. One-third
of the homes now have television and about 10 per cent of the
total homes subscribe to cable.
The most significant event in the cable sector was the passage
of the Cable Television Ordinance Law in January 1995. This ordinance
requires the registration of cable operators and mandated technical
standards that required most operators to upgrade their systems
in addition to issues regarding content. This legislation has
ended the "cottage industry or small scale industry," at least
in the secondary cities. At one time there were over 100,000 cable
operators in India, but that number has since been reduced to
60,000 networks. Many operators wishing to avoid the obligation
of paying steep entertainment taxes, which can be as high as 30
to 40%, or the cost to upgrade their systems are selling out to
emerging MSOs such as Siti Cable and In Cablenet or forming alliances
to compete with larger MSOs.
The challenge for cable exists in the rural areas where installation
and application are extremely cost prohibitive, and nearly three
quarters of India is designated as rural territory. This has created
an opportunity for DTH, which serves an immediate threat to the
high-end cable networks. Some of the key player who have shown
an interest in operating a DTH service are the Star, Zee Telefilms
(the Subhash-promoted group has decidedly cooled off on it though)
and the Modi Group. Two or three other DTH packages are expected
to launch in 2002, and package choice is likely to increase subscription
rates in the medium term, although different marketing techniques
may generate confusion as the benefits vary from package to package.
DTH providers claim to target only the wealthy rural population,
although a high proportion of their subscribers will be the urban
rich as well, many of whom already subscribe to the higher-end
cable networks. DTH, however, is faced with a lack of high quality
programming, a lagging infrastructure for distribution and collection
and technological barriers.
However much like the USA the extremely high penetration
of Cable in the Indian households would be a definite threat to
the highly optimistic proponents of DTH in the country. Also,
the MSOs are in an active drive to upgrade their existing networks
in order to lay a backbone for the recently liberalised broadband
industry. Hence the cable operators seem to have won the first
round of the battle by providing the consumer value additions
in the form of high speed Internet and other services.
*Kiran Karunakaran, The author works for Bharti Telecom
and is an alumni of the ICFAI Business School, Bangalore.
*All arguments and views expressed in this report are his
personal views.
