7.4.12

The Cable Television Amendment Act 2011



On June 30, 2012, television viewing in India is set to change forever. The Cable Television Amendment Act, 2011, will take come into force, making it mandatory for all cable operators in Delhi, Mumbai, Kolkata and Chennai to digitally transmit their channels. TV viewing will be sharper, a desire most Indians harbour. Not only will digitization ensure better viewing coupled with superior service, it will also put an end to an illegal nexus that has thrived for years. For decades, entertainment in India has been almost free. Cable TV, as it stands today, has a distorted business model. Subscribers pay roughly Rs 20,000 crore ($4 billion), of which only Rs 4,000 crore ($800 million) reaches broadcasters. Due to the absence of an addressable system, subscription revenue transaction between broadcasters, multi-system operators (MSOs) and local cable operators (LCOs) is undertaken either on a fixedfee basis or on the basis of a negotiated subscriber base. Considering the strong bargaining power enjoyed by LCOs who own the last mile, the distribution of subscription revenue remains heavily skewed in their favour. The LCOs today declare about 15% of their subscribers to MSOs and broadcasters. This not only deprives MSOs and broadcasters of their fair share of value, but also results in service tax leakage for the government. Media Partners Asia estimates the government’s annual revenue loss at a staggering Rs 5,000 crore. By some estimates, there are more than 60,000 unlicensed LCOs, ensuring a high level of fragmentation in the distribution of TV content. As a digital distribution ecosystem takes shape, a coherent licensing regime is required, anchored to full subscriber declaration and payment of taxes, as well as a stipulation that the billing of TV subscribers must move from unorganized LCOs to organized, addressable MSOs. This will help redistribute leaked revenues into the hands of broadcasters and MSOs to reinvest in new content and employment, as well as into the hands of authorities losing out on taxes. Achieving this could lead to substantial national benefit. In particular, TV could contribute as much as 5% of the national GDP by 2017 as the gross economic output from the TV sector tops Rs 6,50,000 crore ($130 billion). That’s why most countries around the world have already gone digital. The other reason countries have gone digital is that analog does not provide enough bandwidth to carry a large number of channels. In India, the government allows down linking to over 600 channels and there’s a backlog of another 100 applications. They too will obviously need down linking. If one presumes that the speed of launching a new channel will remain the same as it was in the last three-four years, then by 2015 the number will rise to 1,000-odd channels. The analog cable system can accommodate 60-70 channels. There are already 700-plus licensed channels in India, but not all of them are broadcast. With demand for content rising and more channels expected to launch in the next few years, only a digital platform can support this growth. From the consumer’s point of view, digital technology will allow transmission of channels with DVD-like image and sound quality. Growing sales of flatpanel TV, such as LCD, LED and plasma, has created a large and expanding market for HD services, which can only be shown in digital mode. Also, unlike in analog, digital cable TV will allow consumers to choose and pay for only channels they want. Globally, cable TV operators provide bundled cable, broadband and telephony services through a single connection. Digital addressable systems in India will also see cable companies offering broadband and tripleplay services with voice. Achieving these three goals could lead to substantial national benefits. The MPA report foresees Rs 4,50,000 crore ($90 billion) in employment income by 2017 and more than Rs 2 lakh crore (S$40 billion) in annual investment and revenue, including multiplier effects across related sub-segments in the content production, technology, TV distribution and broadcast sectors. Secondly, three million new jobs are estimated to be created by 2017 as increased investment provides an exponential multiplier boost to domestic content and technology sectors, as well as helping enrich the TV sector with talent across a wide spectrum of functions including distribution, IT and content production.

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