Explained: Why AIDCF-EY’s ‘State of Cable TV’ report leaves industry unconvinced

New Delhi: The All India Digital Cable Federation (AIDCF) has once again put forward its longstanding demands through its latest report, "State of Cable TV Distribution in India," prepared in collaboration with EY. 

The partnership with a top-tier consulting firm was, presumably, intended to lend credibility and analytical rigour to the document. Further, the report with a foreword from the former I&B joint secretary Sanjeev Shankar may be used as a credible source to influence TRAI, which is holding a holistic review of the tariff regime governing the broadcasting sector.

However, the resulting report leaves significant gaps in both context and content. Gaps that, according to industry observers, border on being misleading.

Before delving into AIDCF’s seven-point reform plan, which is pitched as a pathway to boosting pay TV’s reach in India, the foundational content of the report itself warrants close and critical scrutiny.

The quality question

AIDCF’s report is quick to highlight what it sees as the declining quality of television content, but remains conspicuously silent on the operational shortcomings of Distribution Platform Operators (DPOs) and Local Cable Operators (LCOs).

There is not a word on whether these entities are meeting their obligations under the TRAI Quality of Service Regulation, obligations that include establishing 24x7 call centres issuing itemised bills to every subscriber. 

Consumer choice, the intended backbone of the NTO, remains elusive. Further, the regulator's efforts to empower subscribers through its channel selector app have proven largely ineffective. 

As a result, DPOs continue to wield disproportionate power when it comes to broadcasters and consumers, since they can decide whether or not a channel should be received by a subscriber, and if so, in what manner.

Moreover, the report omits discussion of chronic issues such as set-top box glitches resulting in poor signal quality, alleged deliberate delays in the mandatory audit process, or the rampant practice of under-declaration that continues to distort the market or paying taxes to the exchequer.

Furthermore, it would have been credible if the E&Y report also dwelt on the current status of the broadcasters’ longstanding demand before the Regulator for a comprehensive overhaul of the auditing and reporting regulations and its impact on the broadcasting sector.

These are not minor oversights; they are material to any objective assessment of cable TV’s state in India.

Contextual blind spots on NTO 2.0

AIDCF asserts that the withdrawal of the broadcasters’ Supreme Court case paved the way for NTO 2.0, which is factually correct but, again, context is sacrificed. 

The withdrawal was contingent upon assurances made by then-TRAI Chairman PD Vaghela, who promised fresh consultation papers to address grievances from both broadcasters and DPOs.

This crucial detail is missing, leaving readers with a truncated version of events that fails to capture the regulatory intent and industry dynamics at the time.

International comparisons with omissions

The report’s international comparisons are selective at best. While it draws parallels between the pay TV ecosystems of the USA, UK, and Australia, it sidesteps any analysis of the Average Revenue Per User (ARPU) earned by Indian DPOs, a critical financial benchmark for the sector.

Indian pay TV remains the world’s most affordable, a fact that should have been front and centre in any credible benchmarking exercise.

One is left wondering whether the AIDCF-EY team consciously avoided ARPU comparisons for fear of inviting criticism, especially given the persistent questions about what DPOs are doing to improve Quality of Service (QoS) in a highly cost-competitive market.

Investment claims

The report states that “billions of rupees” are being invested in broadcasting, implying significant contributions from DPOs.

In reality, the major capital outlay for DPOs is the one-time cost of setting up infrastructure required to carry content. The ongoing costs are largely operational, such as staffing and routine maintenance. 

For broadcasters, however, investment is a recurring commitment as each episode, every season, or sports cycle determined by the market, represents fresh capital at risk.

Like TRAI, the E&Y report also misses the point that an investment made in an intangible asset like a piece of content cannot be equated with an investment made in a tangible asset like infrastructure as intangible asset cannot guarantee success. 

In other words, unlike DPOs the broadcasters take risk in investing or acquiring fresh content on a weekly or monthly basis, year after year.

The ongoing nature and scale of broadcasters’ financial exposure dwarf the largely fixed costs borne by DPOs, yet the report makes no distinction between these fundamentally different investment models.

Red flags

At its core, the AIDCF-EY report raises a red flag, warning policymakers that jobs are being lost within the LCO community. 

Technological disruption is presented as a threat, rather than an opportunity for upskilling and sectoral evolution. 

History, however, suggests otherwise. Whether it was the post office, the landline, or the pager, industries have repeatedly adapted to technological change, workforces have upgraded, not simply faded away. 

The lament for job losses appears backward-looking at a time when forward-thinking is needed.

However, it doesn’t dwell on the major issue faced by the LCOs  - Consolidation and increasing market power of major DPOs.

The report’s headline figure of over 850 DPOs paints a misleading picture of a highly fragmented market. This number conveniently overlooks the significant consolidation that has occurred at the DPO level, particularly involving the prominent AIDCF leadership.  

It fails to account for numerous mergers and amalgamations, with industry estimates suggesting that 10-12% of these (smaller) DPOs may have already been absorbed by large players, including AIDCF’s own members. 

This omission appears to deliberately downplay the growing market power of major incumbents and misrepresents the true state of competition.

The seven-point reform agenda

1. Pay TV pricing:

The call for “differential pay TV pricing for different territories based on their ability to pay” is a reasonable one, echoing the logic of cross-subsidisation. 

In principle, it makes sense that a millionaire should not pay the same as a consumer in a low-income bracket. Yet, this demand is hardly new and has repeatedly surfaced in industry forums with little tangible action.

2. Level playing field across platforms:

AIDCF’s insistence on “enabling a level-playing field across all content distribution mediums -- Free TV, OTT, FAST channels, and pay TV -- while accounting for unique technological characteristics,” barely masks its longstanding agenda: to bring OTT under regulatory control.

If AIDCF truly seeks ‘levelling down’ (relaxing regulations for all), this could spur industry growth. But history indicates their preference for ‘levelling up’, increasing regulation across the board.

OTT’s current lack of regulation has not resulted in disputes or widespread consumer dissatisfaction, signalling that perhaps less, not more, regulation is the way forward.

3. Activating inactive set-top boxes:

The recommendation to “activate over 20 million inactive STBs” through incentives mirrors the sixth point, which proposes government-backed programs for free or subsidised distribution of TV sets and STBs, particularly in border or sensitive areas.

While attractive in theory, history, such as Tamil Nadu’s free TV scheme under Late M Karunanidhi and DD Freedish, shows that such initiatives are often derided as populist measures and face operational and political pushback.

4. Content windows for Pay TV:

AIDCF calls for “restricting or limiting the provision of live or delayed transmission of pay TV content for free on other platforms.” This is a valid concern, and the regulator has already acted to a certain degree. Content windowing protects pay TV’s commercial model but requires fine-tuning to balance consumer interests.

5. Hardware subsidies for cable-dark areas:

Proposals for providing hardware subsidies to increase TV penetration—especially in cable-dark areas—are growth-oriented, but, again, these must be evaluated in light of historical experience and actual stakeholder willingness.

6. Leveraging PPPs for TV penetration:

As discussed, leveraging public-private partnerships to expand television access, especially in strategic areas, echoes earlier suggestions. The policy’s effectiveness will depend on clear execution, robust accountability, and avoidance of past pitfalls.

7. Unified stand against piracy:

The call to “take a unified stand against piracy” and introduce stronger enforcement measures is, on its face, uncontroversial.

However, this demand rings hollow when DPOs themselves face long-standing accusations of piracy, including distributing unencrypted signals and operating mirror headends. Until DPOs address their own house, such statements risk being dismissed as mere rhetoric.

The most glaring oversight

The AIDCF-EY report, while presented with the veneer of analytical rigour, is not only riddled with selective arguments, contextual omissions, and self-serving demands, but it also conveniently ignores various critical legal, regulatory, commercial, and operational issues.

One of the most significant oversights is its failure to address the impact of treating commercial subscribers at par with domestic subscribers - a policy with far-reaching consequences for the financial health and operational dynamics of both DPOs and broadcasters.

As the report appears to reflect a particular perspective, it would be prudent for the government and regulator to review its findings with due diligence.

Click here to view the full report.