Chief executive K Jayaraman is setting the tone for Hathway Cable & Datacom's duel in the digital era. Part of his aggressive ploy is to expand the network in newer markets through alliances with cable operators. His proposal to them: Hathway will invest and build the digital and broadband side of the business while allowing cable operators to retain earnings from their analogue operations and carriage fees.

Jayaraman believes this will carry appeal to cable operators who do not have the financial resources to fight off competition from digital delivery platforms like direct-to-home (DTH). He is setting up a team to map out the growth potential in non Hathway areas.

Jayaraman is also taking the acquisition route to widen Hathway's footprint. Local cable networks in Chandigarh, Mohali and Kanpur were gobbled up early this year to gain foothold in new territories, all northern prosperous markets where digital cable and broadband have potential to take off.

Such buyouts, though, will be selective and limited. But coming after years of inaction, Hathway sees an opportunity in growing along with the digital market. "Competition from DTH is good as it will change the way cable TV has been functioning and open up the digital market. If cable TV can respond positively, it will increase our ARPU's (average revenue per user) and correct our business models," says Jayaraman.

Competition also means that Hathway will have to protect its own turf as DTH gets aggressive with full content and more service providers. With Tata Sky preparing for launch soon and Subhash Chandra's Dish TV recently sewing a deal with SET-Discovery for a whole host of channels including Sony TV, Max, Discovery and Ten Sports, the writing is on the wall: cable will have to move in fast to migrate its customers from analogue to digital.

Jayaraman's initial task is to defend Hathway's direct points and the creamy customers of the local cable operators. "We will have to persuade our direct customers and the top-end subscribers of our local cable operators to opt for digital cable as they will form the main target for DTH service providers," he says.

So far, that has been an agonisingly slow process. Hathway has managed to deploy just under 50,000 digital set-top boxes (STBs), mainly in its direct points. The distribution chain has not been supportive and, as Jayaraman says, only one-fifth of the last mile operators (LMOs) have been co-operative.

Hathway Cable & Datacom chief executive K Jayaraman

For energising the chain, Hathway is giving operators Rs 400 per digital STB. And on niche content, the multi-system operator (MSO) parts with a 50 per cent share on margins. Besides, operators who buy STBs on bulk are given discounts. "At the retail level, the LMOs will have to figure out what they want. It is in their interest to protect their networks," says Jayaraman.

But how does Hathway woo customers and make them switch from analogue to digital? One way is to offer bundled packages along with the cable internet services. The idea is to lock in customers with ARPUs over a longer period while driving sales of digital STBs.

There are various schemes launched over a month-long period. Internet subscribers who have been sitting with Hathway for two years will be given the digital box free to use for a year. They will also have the option to buy the box for Rs 500 (box costs Rs 3375) but have to remain as Hathway's internet customer for the whole year.

Boxes are available at Rs 1,000 for one-year-old customers. And for an existing internet subscriber who has not completed a year, the box is sold at Rs 2750 while Globus (retail store) coupon of Rs 500 is given along with a 20 per cent discount on Onkyo Home Theatres. New internet customers who subscribe to a minimum period of six months will have the option to buy the box for Rs 1000.

"We have started all these initiatives for the last one month. We are rewarding our customers for their loyalty while locking them for a longer period. We feel bundling will help as DTH can't ptovide such services. We are in a unique position compared to the other MSOs as we have a substantial broadband subscriber base," says Jayaraman.

Hathway is backing up the price incentives with a dose of marketing, unprecedented in the Indian cable TV industry. Discount coupons, roadshows, FM radio stations, hoardings, interactive contests - all these media vehicles are being used to promote digital cable. And it has a staff of 70 people on sales and customer support for the digital services. "Our monthly ad spend is Rs 800000-100000. We are now selling 5,000 boxes a month which is still low, but there has been an improvement in offtake," says Jayaraman.

Tieing up with companies for discounts and co-branding is another exercise Hathway has started. "We are going to tie up with Citibank for a co-branded credit card which we will offer to our internet customers. For our digital cable, we are in talks with Onida for discount offers," says Jayaraman.

Lining up premium content is not a focus area. Hathway, though, has launched an ad-free dial-up interactive music channel I-TV through its digital services. The channel, which is currently available in Mumbai and Pune, will also be taken to other cities. Hathway has also introduced gaming on its digital services last month, for which it has selected NDS technology.

Expanding the digital services to new cities is also part of Jayaraman's plans. After launching in Mumbai, Delhi, Bangalore, Hyderabad and Pune, Punjab will be the next stop.

Hathway is creating another arsenal for its fight against DTH. Plans are on to launch VoIP (voice over internet protocol) services by the end of the fiscal. Having built a two-way infrastructure for broadband, this is a natural progression for the MSO. "We had tested for analogue telephony with Bharti but feel VoIP is a better route for us. VoIP test is going on in Mumbai. We plan to launch at least in two cities this fiscal. We can bundle cable TV, broadband and VoIP services to customers which will add to our revenue streams," says Jayaraman.

As the digital platforms gather force, nobody knows who will win the big fight. But, as Jayaraman says, cable will have to develop a well-rounded revenue stream if it has to survive the race.