Indian cable operators have this amazing knack of entrepreneurship. History will repeat itself and they will perform the same miracles that they did in the early 1990s. Last time around, they did it without training or adequate support. This time, they will benefit from the training given by MSOs; more importantly they have gained in experience and business acumen. They will do a much better job this time around.

Let us delve on the various aspects on Conditional Access System (CAS) and related issues:

Need for CAS:

CAS will ensure that the industry structure becomes more transparent and will inspire new players to enter the market. The future battles will not be about encryption technology, but will address issues such as customer-friendliness. The onus of communicating the look and feel of the future of cable television in India will rest on the cable trade. We feel that the reception of several free-to-air (FTA) channels will improve post-CAS.

Currently, the cable trade is focusing on tying up the backend - technology, vendors, consumers and also waiting for clear cut indications from the broadcasters about the individual pricing of the bouquet channels.

In terms of remuneration, we believe that the trade constituents have pretty much touched the ceiling - at least in certain markets in the country. Everyone is keen on CAS in order to ensure that they extend their monies.

The consumer has also matured and seeks better quality content and service offerings. The thali system is outdated and it is time to replace it with 'a la carte' menu. Choice is the name of the game. CAS can help create a closer relationship with the viewers in terms of on-screen displays, personalised e-mails, bulletins and language support at an advanced stage.

It is time to iron out certain deficiencies in the existing system. For instance, it has been noticed that regional channels haven't got their due in the existing scenario - especially pay TV channels such as Gemini TV. In the post-CAS scenario, they will all get their due as digital systems will ensure that compression takes place and there is more space for channels.

Benefits of the implementation of the CAS bill to the consumer

1. Lower monthly bill - the power of choice
a. Almost all the people will have a lower monthly bill. Who wants to see all the 50 pay channels? Do all consumers want to see Star Vijay? So should all of them want to pay for Star Vijay? Does a consumer want to see ESPN and Star sports every month or he want to see it only during a match?

So pay for it only at that time! Does every body want all three English channels - Zee English & Star World and AXN? So why pay for all three? Does the consumer want to see Alpha Marathi & Alpha Gujarati and Alpha Bengali and Alpha Punjabi. Or will he want to see only one of these channels. Today, the consumer is paying for all of this without wanting it!

b. After CAS, the consumer will pay for only what he wishes to see. And the consumer will decide what he wishes to buy. Some cable operator will not decide what the consumer's preferences are!

2. Lower monthly bill
a. All the consumers will have the choice of being able to pay Rs 72 pm and see only the free to air (FTA) channels.

b. The free channels are also quite good and will provide wholesome entertainment. Some of the free channels are mentioned below
i. Sahara TV and SAB TV, DD Metro,
ii. Aaj Tak, BBC, Headlines Today, Star News, Sahara Samay, NDTV 24 X 7, NDTV (Hindi channel).
iii. MTV, ETC channel, B4U music, Zee music, MCM
iv. Eenadu Marathi, DD Sahyadri, Sun TV, Asianet, Splash, SS Music.
v. Your cable movie channel & CVO and CCC.

3. Lower monthly bill continued - The pay channels.
a. A lot of the pay channels have advertisements. Channels are earning from both advertisements and subscription revenue. Advertisements are a bigger part of the revenue of channels (about 80 per cent of the revenue of a channel comes from advertisement). Some channels are likely to go free so that their viewership remains intact and they continue to get advertisement revenue. Channels will compete with themselves to remain on the customers TV screen.

b. This trend has already started. Star News has become a free channel after the entry of NDTV news and Sahara Samay. Aaj Tak and Headlines today have also become free. Zee News is expected to go free soon. Fashion TV is also rumoured to have become a free channel. Similarly, Star TV, Zee TV and Sony TV may become free channels to protect their advertising revenue. So the customer will get these also within his monthly bill of Rs 72.

4. No arbitrary rates
a. The rates for cable TV will be as follows
i. Rs 72 for service change for free channels
ii. For pay channels as per subscription taken

b. The rates for the pay channels will be widely published and known and have to be produced in writing on demand. This will be like a MRP on channels. So the cable operator cannot charge you a higher rate. That is a non-bailable offence that can be reported to the police!

c. Now the rates will not be set by your cable operator but by the channels. The rates will be uniform in all the parts of the city and the rates will not be high as the channels will want to be subscribed by the consumer so will keep their rates low die to competition.

5. Lower Pay channel rates as result of competition
a. After CAS, the consumer will be choosing and buying the pay channels? Last year the pay channel rates increased by over 50 per cent. And the customer had no choice but to 'buy' the channel. Now there will be competition among the channels to get chosen by the consumer. There will be a lot of free gifts and consumer promotional offers.

Whenever there is competition the rates will fall. Ever since competition came in mobile phones we have seen the way the rates of the mobile service have fallen. This will happen to the rates of pay channels also. Whenever a new channel is launched, the rates of existing ones may fall. The consumer will finally be king!

b. If the individual channel rates fall, then the total package rate will also be low.

6. Rate increases
If CAS is not implemented or postponed than more channels will become pay. Their rates will be even higher. And these will be pushed down the consumers' throat even if he does not want it! It is difficult to imagine what the rates will be after one year incase CAS is not implemented.

7. Freedom from MSO pay channel disputes
a. After CAS there will be freedom from MSO pay channel disputes. Today, almost all pay channels are off in InCable. This is because of some dispute between the MSO and the pay channels. But why should the subscribers suffer? The subscriber has paid his monthly bill, which includes payments for these channels. After CAS if the subscriber does not get the channel that he has chosen and paid for he can go to consumer court.

b. Post Conditional Access regime there will be freedom from such disputes.

Facts and Myths about CAS

The purpose of this write-up is to dispel a number of myths on the Conditional Access System (CAS) that are circulating in the media including those from a recent research report on CAS by Media Partners Asia Limited and present the actual facts.

Myth 1
CAS is bad for the consumer as he/she would pay more per month post-CAS compared to an estimated average payout of Rs.150 per month currently.

Fact
First it should be pointed out that the average price being paid by the consumer in the four metros where CAS will be introduced is about Rs 200 per month. In the current scenario, the consumer pays this Rs 200 per month irrespective of whether he watches a majority of channels or not.

Post-CAS, consumer will have the option to watch a minimum of 30 Free-to-air (FTA) covering all genres like general entertainment, sports, news, regional etc. for only Rs 72 per month (excluding taxes). Consumers who would not like to pay more than Rs 72 per month can take only these FTA channels.

Consumers can then decide which specific pay channels they wish to watch and based on their budget for the month, choose accordingly. CAS also brings in complete transparency in declaration of subscriber numbers and pricing of pay channels. Technically, therefore, it is possible for a consumer to select and watch just one pay channel over and above the FTA price!

Myth 2
Post-CAS, the consumer would need to pay between Rs 250 - Rs 450 per month to access cable television services.

Fact
This estimate is based on the wrong premise that an average consumer would like to watch and pay for ALL the channels that are presently available. The common complaint of the consumer in the current regime is that he is forced to pay for all channels offered by the MSO, a majority of which he would not like to watch and pay. But he is given no choice.

Post-CAS, the consumer will exercise a choice of which channels to subscribe and pay for and can avoid paying for all the additional channels that he is not interested to watch. An average consumer will pick and choose which pay channels he will subscribe to, in addition to FTA price of Rs 72.

There will be consumers who will pay only FTA bill of Rs 72 and there will also be some consumers who will subscribe to a large number of pay channels and may pay upto Rs 350 per month. But the 'average' consumer will pay Rs 72 for FTA and in addition will subscribe to a few pay channels of his choice so that total pay out towards cable subscription is about the same as it exists today.

Post CAS, the consumer need not subscribe for a pay channel throughout the year. Consumer can subscribe for a period of time and unsubscribe later. For example, during a cricket tournament like World Cup, the consumers pay for the pay channel broadcasting the matches and cut back on other pay channels keeping to a fixed budget.

Myth 3
Most MSOs are financially small and weak and not capable of rolling out high quality CAS services.

Fact
In the Indian cable industry, the size of investments by the organized sector represented by Multi System Operators (MSOs) is at least Rs 10 billion. History and track record of the MSOs shows that MSOs have set up and are operating state-of-the-art Hybrid Fiber Coaxial (HFC) cable TV networks in India whose quality is comparable to networks anywhere in the world.

Hence, Indian MSOs have the technical as well as the financial capability to launch high quality CAS solutions and in fact are in very advanced stages of implementing the Project.

Myth 4
The industry will need Rs 12 billion (US $255 million) to Rs 19 billion (US $ 400 million) for boxes. Most MSOs are unable to subsidize the cost of CAS for the consumer.

Fact
The above estimates are based on the premise that Set-top-boxes (STBs) would be given free of cost to the consumer. It is wrong to include STB cost under project cost with the presumption that they will be given free. Such estimates are totally misleading. Nowhere in the world, STBs are given free of cost; the cost of the box is collected from the customer directly or indirectly.

There are some markets where STBs are not sold to the end-consumer, but are given after collecting an interest-free deposit from the consumer. In a world controlled by market forces, there is no free lunch.

There are hardly any instances in the world where the cost of Conditional Access is subsidized. In fact the average cable subscription rates are much higher outside India (for almost similar content); in Asia Pacific region it is as high as $25-$30 a month and in the US and Europe around $50-$60 a month. The cable TV subscription rates in India are one of the lowest in the world at only around $4 per month. Hence additional subsidy on STBs is not warranted in India.

All the large MSOs have the funds to implement CAS and are in fact implementing the project at a rapid pace. All MSOs have contracted their CA solutions with world class vendors, for example, Hathway with NDS, Incable with Nagravision, Sun TV group with Irdeto Access and Siticable with Conax. All these CA systems will be supported by a comprehensive Subscriber Management System (SMS).

Myth 5
Volume led deployment of STBs is unlikely due to two key problems
1) Lack of funds by organized players such as MSOs
2) Inability of the consumers to absorb increase in cost.

Fact
1) As described in detail above, MSOs are technically competent as well as financially able to roll out CAS services. In fact, all MSOs are in advanced stages of implementing the CAS project. It is wrong and misleading to include free STBs as project cost and inflate the project cost because STBs are sold to the consumers as is the practice in most world markets and not given away free.

2) It is wrong to conclude that there will be a blanket increase in subscription rates post-CAS. A large number of consumers will pay no more than Rs 72 per month (excluding taxes) by going for FTA instead of paying the compulsory average rate of Rs 200 that they are paying in the current regime. Therefore an average consumer post-CAS will not be paying any more than what he is paying today. As regards the purchase of STBs, the purchasing ability of the Indian consumer is well demonstrated by the scorching growth of 30 per cent - 40 per cent a year seen in the cellular phone industry, consumer durables like TV, refrigerator , motorcycles etc. There will be adequate financing options available from third-party financing arms to support the rapid penetration of STBs.

In conclusion, it can be said that most of the issues with CAS that are being circulated in the media are actually myths and are nowhere near the truth. They seem to be deliberate attempts to mislead and confuse the public and seem motivated by vested interests set out to derail CAS. The above write-up, we hope, throws some light on the issues and attempts to illuminate the truth.

Onus on broadcasters:
Time is running out and the onus is on the broadcasters to quickly announce the prices of the individual channels. This will be the cue for the cable operators to approach consumer households and initiate the process of installing boxes. This process will also give us authentic on-ground data on the "demand estimation" process. Broadcasters must clearly spell out their pricing plans in order to enable us to commence the process of approaching consumers. The earlier they do it, the better.

In the post CAS scenario, broadcasters will have to contend with different revenue models in the FTA households and the pay TV households. Of course, there is no guarantee that pay TV channels will not hike their charges at regular intervals; but we don't believe that this will happen in a scenario where broadcasters will be fighting for point to point. Also, it is anybody's guess whether the cartelisation of broadcasters will take place in order to enforce rate hikes. But, we believe that the systematic approach post CAS will force broadcasters to reduce the bouquet prices.

Market forces will determine the pricing and any rate hikes of the broadcasters will dictated by competition.

Cable operators are the key:
The cable trade is well-equipped to do justice to the implementation of CAS. Indian cable operators have this amazing knack of entrepreneurship. We feel that the cable trade is well-equipped to convert customers. History will repeat itself and they will perform the same miracles that they did in the early 1990s.

Last time around, they did it without training or adequate support. This time, we shall support them with training in the form seminars and workshops. Moreover, they have gained in experience and business acumen. They will do a much better job this time around.

The commissions will be determined in close consultations between the broadcasters, MSOs and the cable operators. At Hathway, we are firm believers of the fact that each chain or link of the cable trade must get a fair share of the total revenues.

Hathway has one million subscribers in the city of Mumbai. We service them through 13 control rooms. Hathway has a presence in nine cities including Mumbai, New Delhi, Chennai, Bangalore, Pune, Hyderabad, Vijaywada, Ludhiana and Nasik. The company has 48 head-ends spread across nine cities with over 2.5 million subscribers. We have tested all the links in the chain and have empowered them to deliver.

Most of the Mumbai-based cable operators affiliated to us have robust systems and wouldn't have to invest much in the infrastructure to deliver digital feed. We have been offering 24-hour Internet services on our cable networks and that is a testimony to our state of readiness. Of course, we shall ensure strict compliance and do periodic checks to deliver quality services. We feel that the reception of FTA channels will improve post-CAS.

STBs and their pricing:
We are importing the STBs from abroad and all of them will conform to the BIS standards. It will be difficult to maintain the cost of the digital set-top box (STB) around the Rs 3,500 mark. In phase I, these will be basic versions and will have certain inbuilt value added features. The STB will attract a basic duty of 25 per cent with a CVD of 16 per cent and a SAD of 4 per cent taking the total customs duty to 50.8 per cent. In addition, in Mumbai, the additional duties including sales taxes will take the levies to around 82.5 per cent. It is estimated that the digital STB will cost around Rs 5,000 in a city like Mumbai.

Again, it depends on volumes. If volumes are high, we can look at a slightly lesser rate but currently, it is difficult to get a fix on the volumes due to the uncertain prevailing conditions. Demand estimation is the most important aspect of the implementation process. Several 'guess-timates' are floating around but the exact number will be clear once the cable operators start visiting households and getting on-ground feedback. Hathway will also be ready to buy back boxes at a subsidised rate. Of course, one will have to ensure that the technology is geared up to tackle the ground realities such as power fluctuations in different metros.

Our equipment can tackle heat, dust and temperature variation related factors. Also, we believe that the boxes will not be sold through dealer/retail chains of white goods. It will be through the cable operators.

Demand Estimation will be the key:
Some reports from TAM India and IMRB have indicated that the total number of boxes required will be 6.7 million in the four metros (Mumbai, Delhi, Kolkata and Chennai). However, these figures aren't accurate as the notification is very clear about the city limits factor. In Mumbai, areas such as Thane and Navi Mumbai aren't included; in New Delhi, Gurgaon and NOIDA aren't included; in Chennai Ambatur will not be included.

Industry estimates indicate that Kolkata and Chennai will require lesser boxes (as compared to Mumbai and Delhi) because the FTA channels Doordarshan and Eenadu TV) are highly popular amongst the viewers of television in these cities (as compared to Mumbai and Delhi).

Financing of the boxes:
There are several financial institutions including ICICI Bank Ltd which are coming forward to offer easy finance schemes. There are a lot of consumers who won't be inclined to pay for the boxes on an outright basis. We are working with the various constituents of the cable trade to ensure that we can provide a viable proposition to the consumers. However, we shall ensure that the interest rates aren't as high as the three per cent per month interest charged in the case of credit cards.

Will the cable trade provide more FTA channels post CAS?:
We believe that the cable trade (at least the big companies) will definitely provide for more than the mandated 30 channels - it could be anything around 50 to 60 FTA channels. The law says that the cable operator is not entitled to charge for the additional channels as it is a non-bailable offence. Consumers can register complaints against erring cable operators. Also, cable maintenance charges will be included in the cost determined by the government namely Rs 72 per month.

Will entertainment taxes reduce?
Currently, the entertainment taxes vary from state to state - in Mumbai it is Rs 30 whereas in Delhi it is Rs 20. However, several trade associations are in touch with the state governments and are pushing for a reduction due to the jump in collections during the post 14 July period.

Will MSOs become responsible for customer service?
Along with the cable operators, Hathway will also implement systems wherein consumer grievances can be addresses and sorted out in a mutually amicable way. Of course, we shall have our own systems to constantly keep in touch with the consumers directly.

Very soon, you will be hearing some announcements. Most of the complaints against cable operators are related to rates and pricing and the transparency in the post CAS era will render most of these issues inconsequential.

The cable trade will have to shape up as it faces a threat from new economy service providers such as Reliance and alternative options such as DTH.

Backend technology:
Hathway Cable and Datacom is fully geared up to do justice to our role as service providers that can deliver appropriate solutions to consumers. We also feel that we can deliver the solutions within the notified deadline of 14 July 2003.

The company has invested Rs 120-150 million per city in building conditional access related infrastructure - the back-end systems, the distributor support, the consumer interface.

Since the last two months, the Hathway team has started working closely with its technology partners and systems integrators such as NDS for back end technology; Mindport for billing systems; and Satyam Computers for software integration. On 30 April 2003, News Corp technology arm NDS had announced that Hathway Cable and Datacom has selected its systems to launch the MSO's conditional access rollout.

NDS is acting as prime systems integrator and technology provider for Hathway's digital network upgrade and will also oversee integration of the set-top box, compression systems and subscriber management systems.

Initially, Hathway will provide encryption on a basic system using sophisticated computer software and hardware systems. Our systems will be scalable and will be geared for any future upgradations. Most importantly, the system will provide security against the undesirable malice of hacking.

The subscriber management systems (SMS) have to be robust because customer satisfaction will depend on it. SMS will drive billing systems and what we call "provisioning correct service". Most of the cable operators will strive to ensure that invaluable customer related information (such as "billing related information" and "requests" aren't lost due to disruptions or crashing of the systems.

Digital cable technology for CAS:
On the NDS system: News Corp technology arm NDS announced on 30 April that Hathway Cable & Datacom has selected its systems to launch the MSO's conditional access rollout.

NDS will act as prime systems integrator and technology provider for Hathway's (in which Star India officially has a 26 per cent stake) digital network upgrade and will also oversee integration of the set-top box, compression systems and subscriber management systems.

The NDS end-to-end system includes StreamServerä digital broadcasting management, VideoGuard® conditional access and NDS Core middleware. These will be installed in the Hathway Cable & Datacom operation center in Mumbai, and in the regional headends in New Delhi and Chennai.

The EPG being customized for Hathway Cable and Datacom will be a portal for cable TV viewers to access program schedules, synopses and up to date information about upcoming programs in the digital line-up.

In a typical digital configuration, the following will be the system components:

Traffic and Playout: Main source of information about programming in the cable system. Playout automatically plays out pre-recorded and prepared programming material for broadcast

Subscriber Management Systems (SMS): manages subscriber accounts and provides CAS with the information to manage viewer entitlements. A proper SMS enhances audience reach and lowers operational costs. It has features such as entitlement, renewal, personal profile, flexible addressing and support.

VideoGuard Headend: The control centre for all conditional access functions including entitlements, security algorithm generation.

Compression and Multiplexing: Enables broadcast quality digital signals to be transmitted to subscribers.

Transmission: The central cable headend is connected to regional headend via a VPN. Each regional headend is part of an HFC network to subscriber homes.

STB and Smart card: The STB and smart card in the subscriber home decodes the transport streams.

Proper programme packaging can maximize revenues from programming content (either through subscription services and tiers) or future revenues streams such as OPPV, IPPV, PPV and reportbacks.

System costs:The system costs vary according to the complexity of system (dynamic SI); complexity of the features (interactivity); number of broadcast channels; transmission medium (transponder costs); set top box configuration; and number of subscribers.

Security is the key: A secure system keeps content more secure than analog systems and ensures honesty through control words, secure packets, electronic counter measures, smart card authentication, pairing, chaining, fingerprinting.

The operator controlled features include encryption levels, taping controls and backout. The subscriber controlled features include passwords, parental rating and spending limits.

Neeraj Bhatia, vice president, Hathway Cable and Datacom.

(The views expressed here are those of the author. www.indiantelevision.com need not necessarily subscribe to them).