The battle lines are drawn

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The battle lines are drawn

Telecom and broadcasting companies are banding together to offer broadband services. But cable operators and ISPs are forming alliances too, reports Surajeet Das Gupta

Published : February 25, 2004

India’s cable operators are in for a huge fight. Telecom companies plan on leaping into their turf by distributing television programmes to homes through telecom broadband networks.

The bad news for cable operators is that the telecom companies are poised to strike an alliance with – surprise, surprise – broadcasting companies.

They’ll still use cable operators, but will also join hands with the telecom companies to offer broadband services – something that’s a long-term threat to cable operators.

But cable operators are not exactly sitting idle either – they’re in the process of tying up with internet service providers (ISPs). On the anvil are joint ventures with ISPs.

Indeed, the battle lines are being drawn in what will be a fiercely fought war. On the one side will be telecom companies like Reliance Infocomm and Tata Telservices. On the other will be the cable operators. Both are furiously seeking allies.

The jack in the box here is the coming regulation by the Telecom Regulatory Authority of India (TRAI) of convergence of carriage, which is throwing up new possibilities.

Star TV is already in dialogue with Reliance on coming aboard its proposed broadband offering: connectivity through the ethernet to homes.

Star TV CEO Peter Mukherjea will not divulge details but he points out : “I think convergence will ensure that customers will get a better quality product, ensure transparency and eventually reduce tariffs.” A Reliance Infocomm spoksman declined to comment on all this.

But Sony TV head Kunal Das Gupta says: “What the government through the TRAI is trying to do is to ensure more competiton in the last mile. That is good for everyone, especially customers.”

But cable operators have an ally – ISP companies that offer high speed internet access to homes. Leading ISP companies are already looking at alliances and joint ventures with multi system operators (MSOs).

That’s because ISP companies need to acquire customers quickly to offer always-on internet access. And cable operators, with their ability to tap into over 40 million homes, can offer them just that.

The telecom companies can offer comprehensive broadband services (TV programmes, the internet and voice). So cable operators and MSOs will have to offer customers value added services, primarily broadband.

But to do so and ensure quality (telecom companies are using the latest fibre and cable which promise high speeds and better picture quality), they have to upgrade the quality of their cable (from a coaxial cable to a CAT 5 cable). That’s why ISPs and cable operators are closing ranks.

Says B Ramraj, managing director of Sify Ltd, the ISP company: “We are in dialogue with cable operators to form alliances to offer internet and TV channels together by upgrading the cable. That is the future.”

The company has already tied up with some cable operators to offer internet services, with both sides sharing the revenue (at the moment Sify offers broadband through wireless and the last mile is connected through an ethernet by a CAT 5 cable which is laid alongside the cable operator’s coaxil cable).

Why do the broadcasting companies want to partner the telecom companies? Executives at most broadcasting companies privately say that cable operators are under declaring the number of subscriber homes. So broadcasters are losing revenue and don’t have a clear understanding of who their customer is.

That problem will get resolved if they tie up with telecom companies. “Out of 40 million cable homes, we get paid for only 5 to 10 million homes. So if a telecom company comes offering me complete transparency and has 15 million customers, I would offer it content at a lower rate because my recovery is 100 per cent,” says a top executive at a broadcasting company.

But won’t the conditional access system (CAS) ensure that the number of subscribers can’t be under-declared? Not so, say many broadcasters.

That’s because subscribers will not invest in a set top box if they are getting nothing extra in return. Says a senior broadcasting company executive: “They were already getting all the pay channels in any case. So why should they invest in CAS and pay more?”

The only reason, he says, they will do so is if they’re offered new value added services (internet, video on demand, better quality pictures, video streaming, interactive TV, better customer services, among others). But to offer these services cable operators have to invest substantially, which they are not willing to do.

Still, private telecom companies and broadcasting companies face one hitch in their effort to sideline the cable operator. They don’t have last mile access to over 40 milion homes – the state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) do, thanks to their copper wire connections.

And they can’t access BSNL’s and MTNL’s connections, though they’d like TRAI to ensure that they can. Says an ISP company executive: “There are only two alternatives – either the incumbent pushes broadband on its own or lets others have equal access to its infrastructure.”

But why should BSNL or MTNL allow others to use its lines? Asks a senior executive at a state-owned company: “Why should I allow you access to my infrastructure in which I have invested money? Do you allow competitors to use your infrastructure?” Good point.

For all the looming threat that the telecom companies pose, ISP companies are not having sleepless nights. They think that Indian customers still prefer separate service providers for voice, telephony and data.

Secondly, the interests of cable operators and the ISPs are clearly merging. “Earlier we paid the cable operator a part of the revenue to ensure that he did not cut the CAT 5 cable line which we laid to the customer’s premise. But now they see broadband services as an integral part of their business model.”

Cable operators, meanwhile, tend to downplay the broadband threat. “Cable has grown and will flourish like everywhere in the world. And broadband is still a new technology that’s in the experimental stage when it comes to offering TV programmes,” says the CEO of one of the country’s leading cable operators.

But cable operators also sound a warning note: they will fight the telecom companies fiercely, if push comes to shove. Clearly, the mother of all battles lies on the horizon.

[hovs 0]

As it is cable tv has become an addiction with most of Indian homes. Several instances of being forced to satiate the greed of cable operators have been reported in the media. The fight between the cable operators has been bloody and gruesome at times. I wish that at least this time there will be some order in the war and the consumer is not the idiot. Most importantly, going by what the TRAI has done in the past, i am very skeptic that it will be able to ward off the possible difficulties. Perhaps it needs more manpower and other resources.

[Chirag 5]

As it is cable tv has become an addiction with most of Indian homes.

i dont agree to this... Its simply the ignorance of individuals thts led to this kind of a thinking... I've never had Cable TV at my home, and for the last 6 yrs, i dont even have a TV !! no one believes it unless, they check it out themselves! haha... doesn't really matter! am happy tht i n my family dont have to spend time in front of that idiot box!! we rather get together and discuss, debate and get some peace (since theres no noise bcoz of it)!!

I would challenge anyone to take this up and remove their cable connection for a month and see the difference in the home atmosphere! Pretty difficult???

[hovs 0]

Congrats. Many homes (perhaps overwhelming majority of those who can afford) are really addicted to TV. Atleast this is what I perceive from the way the cable operators hike their subscription at will and still have their way. I will make an attempt to reduce the TV usage time. I think I will not be successful, because everybody will retort that I am addicted to internet and computer.