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Work in progress but digitisation of Phase IV is easier said than done

As major broadcasters shut their analogue beams with the government declaring a war against analogue signals, spoke to stakeholders to understand the challenges in the implementation of Phase IV and repercussions on the business front

It was on December 23 that the Ministry of Information and Broadcasting announced March 31, 2017 to be the sunset date for Phase IV of digitisation. This meant that all of India, the metros, urban, semi-urban, smaller towns and villages had to digitise their cable TV connections before March 31, 2017.

Keeping its word, the ministry issued a circular on March 30, asking all the broadcasters, multi system operators (MSOs) and local cable operators (LCOs) to ensure that no analogue signals are transmitted over the cable networks in Phase IV areas after March 31, 2017, failing which action would be taken against defaulters as per provisions of the Cable TV Act/ Rules.

The same circular mentioned, “The Cable Television Networks (Regulation) Amendment Act, 2011 has made it mandatory for switch-over of the existing analogue cable TV networks to digital addressable system (DAS) in four phases. Digital switch-over has already taken place in Phase I, II and III.

While it looks and sounds quite simplistic that the fourth phase of digitisation will be implemented and completed as the first three phases were done, it’s not really so. Phase IV implementation is easier said than done.

Consider this, Phase I of digitisation mandated the TV households in the four metros (Mumbai, Delhi, Kolkata and Chennai) to be digitised, Phase II focused on the 38 top cities with a population of one million plus and Phase III focused on the rest of urban India. But Phase IV, the trickiest one, deals with the most complicated and unorganised part of the country -- the villages.

As per the MIB, the 2011 census report had suggested that the Phase IV will cover approximately 61.08 million TV homes across the country. These include the biggest TV market Tamil Nadu (8.15 million homes), Andhra Pradesh and Telangana (7.6 million homes), Kerala (4.77 million homes) and Karnataka with 3.8 million TV homes. The five Southern states have 24.32 million households to be digitised.

Uttar Pradesh, the most populated state in the country, has about 6 million households waiting to be digitised in the final stage.

The latest data from Chrome Data and Analytics states that Phase IV has 89.5 million households to be digitised. As per Chrome (Subscriber Establishment Survey (SES) with a field period from October to December, 2016, 70 per cent of rural India had already been digitalised. But the major delay was by Tamil Nadu and Andhra Pradesh, left with 30 per cent analogue homes which accounts for 27 million households.

With major broadcasters shutting their analogue beams and the government declaring a war against analogue television signals, spoke to stakeholders to understand the challenges in the implementation and repercussions on the business front.


As vast as an ocean

The common consensus across cross section of the industry is that the expanse and vastness of the region has made it difficult for the implementation of digitisation, though the industry has come together like never before.

Anuj Gandhi

Anuj Gandhi, Group CEO, IndiaCast, said, “We have switched off the signals for the complete analogue market. In all phases, it takes some time to supply boxes and seed them. However, Phase IV is the toughest, especially in terms of topography and expanse. It’s a sheer logistics issue to reach people, convert them, cable the homes and activate the digital signals. For DTH too, to reach far flung areas is tough.”

While everyone we spoke to agreed about the expanse and geographical complexity of the region, there were few striking challenges and struggles pointed out by some of them.

Anil Malhotra

Anil Malhotra, COO, Siticable, said, “Phase IV has picked up for us. We have seeded a number of STBs. There are active analogue signals in a lot of areas, which is a huge struggle for us. But overall, the implementation has started. It’s a three step process -- delivering the STB, installing them at subscribers’ houses and activating them. Unless the third step is completed, seeding of STB is not finished. The first and second steps are underway.”

One of the industry observers suggested that about 60 per cent of the Phase IV markets have been digitised, while 40 per cent is still waiting. However, the data from Chrome Data and Analytics suggests that the number is 70 per cent for the digitised homes in Phase IV.

Harit Nagpal

Harit Nagpal, MD and CEO, Tata Sky, said that it is too early to even guess the extent of digitisation in these areas and denied giving any numbers from Tata Sky. He explained, “We don't have much information on it yet. Don't expect Phase IV to be a fast-paced implementation like Phases I and II. It is on a slow burner. The region is too vast and spread out. We don't even have exact data on how many cable subscribers were there in these areas. We only have estimates and the figure is highly under-reported. We don’t know the extent of underreporting. I feel we will know the exact situation in a year. Or even more.”

As per latest Chrome SES, 50 per cent of rural India is dominated by DTH players, while 20 per cent by digital and 30 per cent by analogue players. MSOs definitely see a drop in subscribers as DTH is taking up shape in rural India. Free Dish dominates rural India with more than 23 million subscribers (25 per cent market share) and it might come up as the biggest gainer during cable dark period. Broadcasters are expected to see a drop in viewership contribution by rural India but as per ground movement, within a month analogue HHs will move to either digital or DTH. As per Chrome, this is an opportunity for DTH players and a challenge for digital players.

Pankaj Krishna

Stating the challenges, Pankaj Krishna, Founder and CEO, Chrome DM, said, “As per Chrome DM’s White Paper on high definition broadcasters in India, 'Now Playing: HD', infrastructure and logistics are the key challenges that are causing sluggish digitisation. However, this can be an ideal opportunity for DTH players to grow in Phase IV markets."


Infrastructure Sharing: Too late to come in?

Tony D'Silva

A seasoned professional in the television and distribution space Tony D’Silva, former MD and CEO Incable, feels that the government was little late in implementing TRAI’s recommendation on infrastructure sharing. “Infrastructure sharing is to be done immediately, it is not yet done. TRAI has recommended it but the two bodies (TRAI and I&B Ministry) are still going back and forth on it. The problems of Phase IV, i.e. connectivity, will get resolved through satellite communication, HITS and cable operators. The smaller LCOs can't afford to put big digital headends. The bigger players will have to do it and extend infrastructure sharing.”

D’Silva pointed out that the lack of clarity on the tariff order is also creating confusion, hindering the mission of complete digitisation. “There is no tariff order in place. We already know there is a huge price gap in various phases, especially Phase IV, so how is that going to be managed when all the boxes get encrypted. The various stakeholders are still engrossed in those discussions trying to find a way out.”


Un-uniform Markets? How long?

A lot of time, it has been said, “India changes every 10 kilometres as one travels in the interiors of the country.” While the cosmopolitan urban India behaves in a more uniform and balanced manner, the rural India has a mind of its own. Everything starting from the fundamental human behaviour to the huge buying patterns changes after every few kilometres and so do the digitisation trends.

Gandhi says Tamil Nadu and Andhra Pradesh are the toughest states, “Arasu, for example, in TN has just got their DAS licence. For them, to order the boxes, seed them and activate them will take time, also to reach every village and operator, it might take a year. The whole TN is connected by them. My sense is that procuring STBs alone might take about three to four months. Andhra Pradesh too is a huge and a tough market. While, on the other hand, Punjab might happen in next two months. It’s a highly digital market.”

Gandhi also suggested that DD’s Free Dish is expected to take up a large share in the northern HSM markets. A lot of people, along with the Chrome DM study, agreed to this prediction.

D’Silva pointed out a few other variations among the Indian states waiting to be digitised. He said, “In the election states -- Manipur, Goa, Uttar Pradesh and Himachal Pradesh -- the progress of digitisation was very slow. Only after the results came out, some action was seen in these markets. Now these markets will have to be covered up immediately. On the other hand, many markets are in complete confusion. Like, Tamil Nadu and Andhra Pradesh are in confusion over fibre optics. For all this to get sorted out, and for the country to get completely digitised, I think at least five to six months are required.”

Also, the classic problem of shortage never ends in India. According to Krishna, "In states like Madhya Pradesh and West Bengal, there seems to be a shortage of set-top boxes, which is slowing down the process of digitisation. Tamil Nadu, on the other hand, has always been sluggish towards digitisation. Besides, some of the interconnect agreements between MSOs and Broadcasters remain pending.”

Chrome also suggested that parts of Tamil Nadu, MP, Chhattisgarh, Andhra Pradesh , Orissa and Haryana still have active analogue signals, especially in rural.


Measuring analogue

When we talk about the business of television, ultimately advertising is the main driver and viewership is what drives advertising. So, if a sizable number of homes remain TV dark, the viewership ought to be affected. Most people suggested that this impact is close to 2-2.5 per cent, which is minimalistic.

A planner suggested, “There is a 2.5 per cent drop in viewership in the first week’s data released last Thursday. It is too small and we don't know whether this change will be consistent. Advertisers are not really taking note of this change. It is too early to worry about the viewership.”

BARC India’s measurement universe has about 40 per cent of analogue homes while 60 per cent of it is digital homes. A broadcaster, on condition of anonymity, said that BARC is soon going to stop measuring the analogue homes.

Gandhi said, “The pain is only for a few more months. I also think that the broadcasters are prepared that they will have to bear this for some time. If the second set of data that comes today (Thursday, April 20) doesn’t show some drastic changes, then people will forget analogue.”

Another expert suggested that since the loss of 2 per cent is across all channels, it's not much. “If any one player had not switched off signals then this 2 per cent would be too much, but otherwise the whole category has come down, which is marginal.”

On concluding note, when questioned about the financial implications, Gandhi said, “Financials are not much pain. The basic parameter is that I must be paid for each household that watches my channel. If I have switched off analogue, and digital hasn't reached a village, people will not declare that number to me and I won't get the money. It’s okay, but as soon as digitisation happens, I will get paid. Also, broadcasters are patient through the transition periods. They sustained demonetisation and even this will pass.”

D’Silva suggested that an extension of two to three months by the government would have been a better decision.

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