Confusing signals

The government, which is in a hurry to introduce the CAS, finds itself cornered by broadcasters and cable operators. It appears that the TV viewers' interests have been sacrificed in the process.

THE CAS - Conditional Access System - circus continues to enthral television watchers in India. Having cracked the whip at satellite TV broadcasting companies and the cable TV operators in the run-up to the July 15 deadline for the implementation of the CAS regime, the Central government finds itself painted into a corner by these very interests. Having kept the nation agog for months, the government beat a retreat on July 11, by issuing a notification for a partial zone-wise implementation of CAS from September 1 in the four metros, where CAS is to be implemented. In effect, after months of bluster, the ringmaster found himself cornered in the ring by the two belligerent sets of participants - broadcasters and the bigger cable TV operators or Multi System Operators (MSOs).

The government had raised the CAS issue to a feverish pitch in the last few months, promising to liberate viewers from the caprices of the satellite TV broadcasters and cable TV operators. In particular, it had promised that CAS would be "consumer-friendly", implying that TV viewers in the four metros would not see their monthly bills shooting up under the new regime. With the impending elections to State Assemblies - particularly Delhi - providing the political angle to the drama, the government has clearly been caught on the wrong foot. After having assured the viewers that it will protect their interests, the government now finds that it does not have the basic weapons, particularly in the shape of legal instruments, necessary to ensure that the powerful broadcasters and cable TV operators fall in line. After more than a month of haggling over the prices for TV channels, which involved not just Union Minister for Information and Broadcasting Ravi Shankar Prasad but also the Prime Minister's Office, the government found itself being held to ransom by the two competing lobbies in the face of the fast-approaching deadline.

The pressure on the government increasingly gave rise to speculation that the government was acting as a broker between the two warring sides. Moreover, the cable TV operators' rejection of the Rs.72 a month tariff for viewers who subscribe to the basic minimum fare of free-to-air (FTA) channels, which had been agreed months earlier, also gave rise to the perception that the government was in danger of being unable to fulfil its promise of being a custodian of consumer interest. The government's handling of the affair also gave room for allegations that it was favouring particular broadcasters and cable TV operators. In particular, the leeway given to international media baron Rupert Murdoch's Star News channel to flout regulatory and ownership norms that govern foreign-owned news channels gave rise to doubts that the government favoured certain parties.

In mid-June, when the three-way dialogue among the government, the broadcasters and the cable TV operators, gathered momentum, officials of the Ministry of Information and Broadcasting assured viewers that the prices of pay channels would be "at rock bottom" levels. As the talks continued and as broadcasters announced their prices, it became evident that the price of a basic bouquet of FTA and some pay channels of various genres would be substantially more than the Rs.200 a month that the government had promised. Moreover, this price did not include the cost of set top boxes (STB), which consumers had to buy under the CAS regime. Consumer organisations have pointed out that even in the "mature" CAS markets the cable TV operator provides the STBs to viewers. They are likely to cost Rs.3,000-7,000 despite the government's announcement of concessions in import duties on STBs imported until the end of July.

The talks quickly degenerated into a farce. The government realised that its commitment to provide a basic cable TV fare of Rs.200 a month would be impossible in the face of the demands that the broadcasters and cable TV operators were making. The broadcasters bundled their channels in a manner that enabled them to push their low-viewership channels along with their premier channels. Moreover, the target price of Rs.200 was unachievable unless cable TV operators sacrificed their margins. The gap between the two sides widened as broadcasters such as the Star TV insisted on a maximum distribution margin of 15 per cent, while the MSOs and cable TV operators insisted on a margin of a whopping 70 per cent. In effect, this meant that the monthly bills of viewers would be two or even three times more than the price that the government had promised.

Caught in the crossfire between the two sides, and having entered into the negotiations without adequate preparations, Pawan Chopra, Secretary in the I&B Ministry, threw up his hands at a hurriedly convened press conference in New Delhi on June 18. He accused the broadcasters and the cable networks of using the negotiations with the government "to protect their own individual territories". He threatened that the broadcasters would "not be allowed to operate after July 15", although to more perceptive observers of the media scene it was not clear whether the government had the legal weaponry to back such a threat.

As the talks stumbled on, the government made the rather desperate suggestion of a dual feed system - encrypted for the pay channels and unencrypted for FTA channels. On July 1, the cable TV operators upped the ante, obviously instigated by the government to counter the broadcasters, by threatening to increase monthly subscription rates to Rs.500 if CAS was not implemented by July 15.

A desperate government, caught in the middle of a high-stakes battle, with damaging political consequences as well, took the issue to its highest level for a solution. The Prime Minister's Office now became involved as Brajesh Mishra, Principal Secretary to the Prime Minister, and Sudheendra Kulkarni, Officer on Special Duty at the PMO (Additional Secretary in the PMO, and media adviser to the I&B Ministry), spent several hours with representatives of broadcasters and cable TV operators on July 2. There were reports that the government mooted the idea of an "introductory offer" at the meeting, whereby pay channels would remain FTA for a limited period.

It soon became clear that the government, despite deploying its top bureaucrats, had been unable to resolve the issue, which would enable the government to save its face while making a retreat on CAS. On July 4, Ravi Shankar Prasad announced a zone-wise rollout of CAS in the four metros, leading to a complete implementation of CAS in these cities by December 1. Although this plan remained at the core of the notification issued by the Ministry on July 11, there was some sabre-rattling in the interim, an obvious attempt at saving face for the government. A meeting of the Union Cabinet on July 10, while resolving to move ahead with CAS from September 1, also apparently discussed the legal options to bring pressure on the broadcasters. The government realised, rather belatedly, that in the absence of any penal provisions for broadcasters under the Cable Television Networks (Regulation) Act, it could do very little to protect consumer interest. There were reports that the Cabinet discussed the possibility of introducing an ordinance to rectify this obvious imbalance, but dismissed the idea as being an affront to democratic practice as Parliament was due to assemble shortly for its monsoon session. The government's critics, however, pointed out that an amendment to the Act in the monsoon session would be virtually impossible because of its short tenure.

IN the face of the cacophony on CAS over the past few months, confused TV watchers have wondered why the government is bent on an immediate rollout of CAS, when there are so many unresolved issues. Two broad sets of factors probably explain the hurry. One is obviously political. As Sashi Kumar, chairman of Media Development Foundation, pointed out in a recent interview to Frontline, the Bharatiya Janata Party-led government, it appears, is wooing cable TV operators in view of the elections, not only to four Legislative Assemblies later this year but also to the Lok Sabha in 2004. Although this would appear an attractive proposition, it is not without risk. These risks are related to the way in which the cable TV business has evolved in India and the characteristics that mark its structure.

Starting as a ramshackle operation about a decade ago, the cable TV revolution took the TV to every nook and corner of the country, relying on the innovative genius of the small cable TV operator. That is a far cry from what the "industry" is now. With the proliferation of channels, the small operator was no longer able to gather the signals required for all the channels for distribution to viewer households. This enabled the entry of the MSO as a business entity, an operator often backed by a corporate entity, and, even more often, backed by a broadcasting company. Thus, Star TV has a 26 per cent stake in Hathway, a leading MSO in Chennai and Delhi, and with a smaller market share in Mumbai; Zee controls Siticable, which has a substantial share of the Delhi market; the Hindujas control Incable, which has a large share of the Mumbai market; in Kolkata, RPG and Manthan enjoy overwhelming dominance; and in Chennai, two operators, Sun Cable Vision and Hathway, have been in cut-throat competition, a saga which is now a part of the city's political folklore.

The stakes are no doubt high in the metros where CAS will be implemented in Phase One, which is to cover parts of Mumbai, Delhi and Kolkata (regarded to be the affluent areas of the cities) and the entire Chennai metropolitan area. A mere half a dozen MSOs control the cable TV market in these cities, where the number of cable and satellite TV-connected homes is estimated to be about 6.7 million. Thus, the cable TV business, which about 10 years ago was considered to be chaotic and run by small players, is now a high-stakes one in which big companies have entrenched themselves. The consolidation in the industry implies that those at the tail-end of the network, the small cable TV operator and the TV viewers, are increasingly vulnerable.

These elements of the cable TV business mark it out as an industry in which the notion of "competition" or "competitive practices" have limited value, what in other words would be described as a classical oligopoly.

Frightening as this situation already is, it is exacerbated by what lies in store as convergence takes place in the days ahead. MSOs, in the era of convergence, would be suppliers of not merely TV channels, but other forms of interactive IT services. Addressability, which is what makes CAS possible as a means of delivery for a price, also makes it an ideal vehicle to carry other IT services. A broadband cable service for Internet access is just another service that can be delivered through a CAS-enabled system. Indeed, telephony, TV-on-demand, shopping, e-banking and a plethora of services can all be carried on a CAS system.

The mind-boggling range of possibilities that CAS promises for commercial delivery to subscribers indicate what is truly at stake under a CAS regime. It is in recognition of these possibilities that the telecom companies have started aligning with MSOs. The recent agreement between Bharti Teleservices and Hathway, enabling Hathway to use the private telecom company's optic fibre network in Delhi, is but an indication of what lies in the days ahead. The possibilities too are obvious for other telecom majors such as Tata Telecom, Reliance and even Bharat Sanchar Nigam Ltd (BSNL) to be ignorant of them. Indeed, another round of consolidation, marked by the entry of the telecom companies into the MSO business may well be around the corner. The CAS regime's failure even to recognise, let alone address, these issues is not a mere lacuna. Indeed, more stringent critics of the government would argue that such loopholes in the regulatory framework could well be designed to protect entrenched monopoly interests.

The battle among the broadcasters also came to the fore with some of them, notably Star, in favour of a postponement of CAS, and Zee in favour of its implementation right away. The industry has been abuzz with rumours that the two main broadcasters were ranged against each other on the CAS issue. Although both of them were well on the way to developing media cross-holdings by acquiring their own MSO operations, Star's tie-up with Hathway for its cable operations is still not developed. Star is believed to be betting strongly on the DTH (direct to home) platform while Zee, through its own MSO, Siticable, which uses the Head-end in the Sky (HITS) method for its cable network, is regarded by industry sources as being desperate that CAS takes off immediately. (Incidentally, Zee has also been issued a letter of intent for its DTH operations.)

The government has only itself to blame for having burned the goodwill that it had when it set out to implement CAS. There is general consensus that the cable TV industry needs to be regulated and made more accountable to viewers. It is common knowledge that there is an utter lack of accountability in the industry, in its present form. Broadcasters have been inflating their viewership to claim higher tariffs from advertisers; the MSOs have been under-declaring the number of connections to broadcasters; and, the local-level cable TV operator has been doing the same to the MSOs. CAS promised to rectify this situation, making it more transparent, while providing a means by which viewers could see only what they wanted in their homes.

Instead of approaching the issue in a step-by-step manner, after first ensuring that a regulatory framework was in place, a key feature of which would have been the curtailment of monopolistic turf-grabbing behaviour by firms, the government has acted in haste and allowed itself to be pushed around by these companies. Although the Rs.72-a-month cap for the FTA channels is likely to be in effect until the CAS rollout is complete, media observers reckon that the government may not be in a position to control cable TV rates after it is completed in December.

In effect, post-CAS, TV viewers will remain as vulnerable as they have been to the whims and fancies of the broadcasters and cable TV operators. The only thing that is definite is that they will have to pay much more for their favourite channels.