As per the Telecom Regulatory Authority of India (Trai) recommendations, the four metros of Delhi, Mumbai, Kolkata and Ch­ennai have to shift to digital add­ressability by March 31, 2012. Thirty-five cities with a population of more than one million in­cluding Patna, Chandigarh, Pune and Ban­galore will be digitised by March 31, 2013.

All urban areas are expected to shift from analogue to digital systems by November 30, 2014, and the rest of the country by March 31, 2015. The move to digitisation could potentially impact an estimated 78 million cable homes, 60,000 local cable operators (LCOs), over 200 broadcasters and more than 6,000 cable multi-system operators (MSOs) in the country.

Benefits of digitisation

At present, cable TV transmission in India is mostly analog and limited to providing only TV channels. Digital cable technology will allow cable providers to compress video so that it takes up less frequency space and helps them provide various two-way communication capabilities.

This means digital cable providers will be able to offer more channels, video on demand services (without use of a telephone line), telephone services, high-speed internet services, and interactive television services. In addition, digital cable technology ensures the quality of the received signal is high and is sent using a secure digital distribution system. Consumers can experience new, improved services with enhanced quality.

The onset of digitisation would mark a paradigm shift in the cable distribution landscape. The cable sector will get an industry status, attract institutional financing and become organised. Investment in the sector will help to upgrade existing infrastructure and provide value-added services to customers.

It will open up new growth opportunities for the Indian pay-TV content and distribution players because digitisation and addressability go hand-in-hand. When the industry — through digitisation — understands exactly the number of subscribers, it will lead to a better understanding of consumer activity. Simply put, digitisation encourages addressability, which in turn encourages measurability of the market.

New digital platforms would help cable and internet service providers to increase their subscription revenue and strengthen their competitive edge in the market. It will also enable them to increase their ARPUs by providing additional services.

The increased capacity of digital distribution channels is likely to spur greater investments by broadcasters toward niche, targeted and HD content and lead to diversification of their revenue streams.

Digitisation has potential benefits for all the stakeholders involved — cable service providers and broadcasters would benefit by way of increase in subscription revenues, government via increase in service tax collections, and customers from an enhanced television viewing experience.

Challenges en route

Huge investments in technology are required for upgrading to digital transmission, and last mile cable operators all over the country are being increasingly compelled to tie up with triple play service providers or multi-service operators (MSOs) to enable digital two-way interactivity.

While capital will indeed be invested in creating better infrastructure for digitisation, consolidation in the sector can provide scale required for attractive investments. In addition to consolidation, there is a need for a regulatory environment — factors like having a more liberal FDI policy for cable operators, a focused plan for digitisation, and a licensing framework for last mile cable operators to help the industry to grow.

Digitisation would also mean that customer expectations would increase drastically. From access to 30-40 odd channels via cable, customers would get access to 300-400 channels post digitisation, implying that the operational costs for the operator would increase considerably.

In order to bring down the costs, operators need to share back-end infrastructure (share transponder space) and beam channels to their subscribers. In the long run, this will help them overcome bandwidth scarcity and reduce further losses as they continue to subsidise acquisition of new customers.

The future

Consumer entertainment is a key segment in India and leading industry players have launched several initiatives to capitalise on this market. There are several innovations from consumer durable companies, broadcasters and even IT companies to enhance consumer experience; however, these innovations are feasible and can benefit the consumers only when the network is digitised.

Changing consumer preferences in the home entertainment segment are leading to increased demand for cable digitisation in India. This, along with the recommendations from Trai, can help the cable sector emerge as a very attractive market opportunity. They can help providers gain a clear edge over competition by offering enhanced services to consumers along with superior quality content and transform into lifestyle-experience providers. The need and time to transition is now. zz

The writer is senior vice-president, service provider, Cisco India and Saarc