by Rahul Razdan

(Originally written in January 2004; extensively used by me in workshops; while some data may be dated, the issues remain the same; CAS: Conditional Access System)

————————————————————————————-

At the time of writing this one is not sure if the obituary letter for the much-maligned CAS has already been signed. However what is beyond doubt is the contribution of each and every stakeholder in the Indian television industry value-chain to the creation of this mess, either through commission, or through tacit omission.

Incidentally, these stakeholders include not only the oft-written-about troika of broadcasters, cable operators and the government, but also the advertisers, equipment manufacturers and last but certainly not the least, media commentators.

For a medium that is accessible through cable and satellite to around 40 million homes out of a total 75 million television owning homes, the consumers have remained remarkably passive even as they continue to get a raw deal from every one of these stakeholders. Whoever coined the phrase 'couch potato' perhaps had a profound insight!

And come to think of it, the arguments given in favour of CAS are supposed to benefit everyone including the consumers. But the moot point is – did anyone ever ask for it?

Cable Operators:

Ironically, with popular descriptions ranging from small entrepreneurs to erstwhile video pirates to organized cable mafia, these people have been the torchbearers of the cable and satellite boom in India. And what a boom it was! From the early 90’s till 1995 when the Cable Networks Regulations Act came into effect, these guys had a free-run of the urban landscape a la the Wild West! Having taken a five-year head start over the broadcasters, these organizations/individuals till today control the last-mile infrastructure and connectivity that broadcasters need for transporting their content to the consumers.

Having lost the strategic initiative in the initial years, the broadcasters tried to extract their pound of flesh by encrypting their satellite signals, which meant that the cable operators had to purchase proprietary decoders from the broadcasters. This incidentally was the first Conditional Access System to be deployed in the country, and it was certainly not done under the duress of any government legislation!

Cable operators were expected to pay a part of the subscription fees that they collected from cable-enabled households to the broadcasters. For some time this arrangement worked fine, with the broadcasters strategically pricing their channel offerings in bundles or bouquets to increase the number of households having access to less popular channels, even if they never watched them.

Broadcasters:

These are organizations that are commercially entitled to and legally liable for the content that they broadcast. Their revenues come from advertising and/or subscription fees. They have followed exactly the same model, which the print industry has worked on for years. Price your offering low to ensure greater audience penetration, thereby offering greater reach to the advertisers. Anybody who has spent some time in the media industry would know that this business is not so much about delivering content to the audiences, but about delivering audiences to the advertisers.

However when broadcasters started looking for other revenue streams, consumer subscriptions seemed a logical choice. In fact, many of the initiatives of those times appear quite logical. For example, the first channels to go pay were Star Movies and Zee Cinema and the sports channels. And to justify this new concept of subscriptions, Star Movies started broadcasting with a superior quality of reception and the movies were free of advertisement clutter, with just a few breaks in between. This was in consonance with the model followed in print as well, where publishers would maintain a judicious ratio of advertising and editorial content, and in case of publications with a higher cost of subscription, the ratio would be loaded in favour of editorial content.

With the revenues from advertising stagnating, things took a different turn when general entertainment channels (as against pure-play movie channels) in pursuit of TRP's started showing big-ticket movies, bought at astronomical prices from the producers. And to recover these costs, broadcasters committed the first breach of faith – making big money both ways i.e. through advertising as well as through subscriptions.

With the subscription pie becoming bigger and more lucrative, broadcasters then had a long-standing grouse of under-declaration of the actual number of subscribers by the cable operators. They claimed that they were receiving their share from only a very small fraction (20% approximately) of the total paid subscriptions. So what they should have done on their own initiative was to introduce another CAS system (remember they had already introduced CAS at the operator level), whereby it would have been possible to address the exact number of subscribers with a cable operator. But did that ever happen? No.

The reason was simple. Just as the cable operators under-declared the total subscriptions for a channel, the broadcasters too played a similar game with the advertisers – over-declaration of viewership. So if a channel had sold a certain number of decoders, they would multiply that five times and cite this to the advertisers as the reach of all their channels. And remember advertising constituted three-fourths of their revenues.

Advertisers:

These are the people who in effect fund the broadcast business. With annual ad-spends on television in excess of thousands of crores, one would assume that they would have evolved some meticulous metrics to measure their rupee and dollar return on investments on an ephemeral commodity like airtime. It is indeed hard to believe that they didn't!

Instead, they became all too happy to base their spending decisions on data gathered from a few thousand households, in the misplaced belief that their communication was reaching millions of households. They certainly could have pushed for a technology aided system like CAS which could give them a far more accurate indicator of programme popularity (as against the very limited sampling that happens in existing indices like TAM and INTAM), with only the ‘actual and willing’ subscribers of each channel being accounted for. They did not do so.

On the other hand, they willingly became partners in this bluffing game! What is worse is that, while the broadcasters and cable operators were bluffing others, the advertisers were bluffing themselves. And while it is easy to call others' bluff, it is indeed difficult to call one's own bluff! In a deliberate attempt not to upset this bluff-saddled applecart, they played a very subtle role in the scuttling of CAS implementation. It is an open secret that when the first of the CAS deadlines was approaching, most broadcasters had their advertising lifelines put on just a few days notice by the advertisers.

Consumers:

It was said that with CAS, consumers would have the option to choose channels they wanted to pay for and view, rather than receive the entire set of channels that the cable operator made available to them. Media commentators went to town with their calculators on how much the monthly cable bill would, or should come to. However, it became pretty evident that except for saving some money by dropping a stray FTV, people by and large, did not want to give up on any of the other pay channels they received. The economic compulsion of 'bouquet pricing' constitutes only half the story.

The other half concerns the fundamentally ingrained but vicariously exercised right of the consumer – 'choice'. And the way it works is like this. A consumer currently revels in exercising this 'choice' through 100 odd channels. Now with a reduced bill if this 'choice' is limited to just a dozen odd channels, which a consumer would receive, does the deal still look as attractive? Maybe a rhetorical 'yes', but certainly a considered 'no'.

So at some level it is essentially a trade-off between putting separate values to what a consumer actually sees and to what he or she potentially could, but actually does not, see. However, this introduces a softer, more complex dimension to the whole issue, which no one wants to get into. But then isn't putting a Rs.32 value to motley entertainment programmes equally complex?

Another softer issue that has very conveniently been forgotten is that in the early years of the cable and satellite boom, most households had televisions, which could at the most accommodate 10-12 channels. With the promise of a 100 channels, the local cable operators had even then (more than twelve years ago) started peddling what else but – set top boxes (STB’s)!

But how many of the 40 million cable and satellite households today have those STB’s and how many have television sets which come equipped with 100+ channels?

Equipment manufacturers:

Surprisingly, this segment, which at most times either rides on, or drives the aspirations of the great Indian middle class, has failed to see a huge opportunity for itself. In the entire history of public television in India, there have been just three watershed events, which resulted in a phenomenal growth in the sale of new television sets. First was the launch of colour televisions in 1982, second was the setting up of hundreds of low power transmitters (LPT’s) all over the country in the 80's, and third was the advent of cable and satellite broadcasting in the early 90's. The third event contained the biggest lessons.

If for a couple of thousand rupees a cable operator could provide households with access to 100+ channels, why is it that most people were still investing several times that amount in buying new television sets equipped with more than 100 channels? The answer is again a softer issue.

Television sets for the middle class are an essential part of their aspirational possessions. Ever walk into the living rooms of these people and see the pride of place a television occupies – both in terms of physical placement and the care bestowed on it!

An external, unbranded, made-in-China/Taiwan set-top box plonked on top of the SONY Wegas, LG Flatrons, and Videocon Bazoombas hits at the very heart of this pride. The STB in one stroke devalues the television. This is an issue that in my opinion is the biggest hurdle in implementing any new STB-based system. A more acceptable option might have been a Philips or a Samsung or an LG set-top box that a consumer could purchase himself from an electronics showroom, rather than an uninspiring box installed by an equally uninspiring cable operator, whose credentials were mentioned above!

Government:

In the cable and satellite rush of the early 90's, the government was the slowest off the blocks, and found itself totally excluded from the dynamics of the industry. It took the government nearly five years to come up with an official stand on this. By then, the industry had already moved in the broad direction of where it is today, with the government having a minimal role to play.

A few years later the government received a second jolt with, the 'airwaves are free' landmark judgment from the apex court, virtually excluding it from exercising any kind of dominant control on the industry. The government thus found itself without any regulatory controls in its hands. This, some people believe, was the main reason why the government was so keen to have CAS in place.

In all fairness, the issue of addressability through CAS could surely introduce some amount of transparency and accountability across the entire value-chain. It could cut down on the loss of revenue to the government through misreporting or non-disclosure or under-declaration of actual subscription figures. Above all, it could call everybody's bluff. And therein lies the problem.

Much before it came out with its CAS notification, the government had asked all the industry players for their respective stands on the issue. Rather than come forward and add value to the government's initiative on account of their deeper and better understanding of the industry and its issues, all the above stakeholders deliberately misguided the government about their stance on the issue. This was evident even during the meetings organized by the government later on, where it was reported that senior representatives from some of the biggest media organizations persisted with dilly-dallying rather than taking a clear stand.

And the chaos was perpetrated – with the government becoming everybody's fall guy. In my opinion the government had been ill informed about the commitment of the various stakeholders to CAS. And having started out on this faulty premise, that everyone was keen on having CAS; it kept on stumbling at every level. The worst was, rather than liberate the consumers from the grasp of the cable operators; the government unwittingly tied them up inextricably, by putting the onus of providing the STB’s on the cable operators.

Media commentators:

As if the confusing signals from the main players were not enough, self-styled subject experts in various media also pitched in with their two cents worth of din on the issue. Most media commentators failed to highlight the right perspectives of the problem, either out of malice or out of sheer ignorance. None of them cared to examine the issues in detail, which could have brought to light the real issues and the roles played by all the stakeholders. Instead, they chose to lay the blame entirely at the government's doorstep. While it is true that the responsibility for the fiasco lies with the government, the blame as discussed above, lies elsewhere also.

Way forward:

In the current telecom boom while the Airtels and Reliances are basking in the glory of adding millions of mobile subscribers, the role of the ubiquitous neighbourhood mobile shop owner is also noteworthy. However, unlike the neighbourhood cable operator, the mobile shop owner has no chance of pocketing the money a consumer pays to the service provider. That is the best way forward for the broadcast industry too.

The government should appoint an independent regulator like the Telecom Regulatory Authority of India, notwithstanding the criticism that some of TRAI’s actions might have evoked. This regulator should lay down the guidelines and standards to be followed.

Television manufacturers should invest some time and money in developing inter-operable slots inside new television sets. This would ensure fresh television purchases by most existing consumers.

The broadcasters (and not the cable operators) need to develop a customer/subscriber management system involving producing and issuing prepaid bouquet cards, very similar to the prepaid mobile cards or SIM cards or ATM-like smart cards. These cards could be of different values (much like the several plans offered by telecom companies). The onus of creating awareness amongst the consumers should be on the on the broadcasters.

Moreover, as and when value-added services like Internet access, gaming, pay per view, video on demand, and electronic programme guides are ready to be rolled out, they could also be made available to the customers using the same platform.

The consumer would then need to buy one or a combination of these cards, and put these inside the slots in the television set. Each card could be time-bound and entitle the consumer to view a certain combination of channels.

Apart from creating the brand pull, the broadcasters would also need to be a little enterprising and tie-up with banks and telecom service providers to enable recharging of their bouquet cards using their facilities like ATMs or SMS.

And who would be the retailers for these cards? Yet another ‘avatar’ of the neighbourhood cable operators of course!

January 07 2004

(Soon after, TRAI was made the regulator for television distribution / broadcasting too)