DTH industry has seen exponential growth in India but innovations in VAS leading to increasing ARPUs, and regulatory support, will define the path ahead.

The Indian DTH market, which has witnessed exponential growth over the last six years, continues to present high-growth opportunities for players in this arena with a subscriber base of over 16 million in 2008-09. Across all broadcast Pay TV delivery sectors, DTH alone accounts for over 87 percent of the digital delivery market in India.

The DTH industry started with players such as DD Direct, Dish TV, and Tata Sky, but last year the entry of three new DTH operators, doubled the number of players to six and resulted in an increase of about nine million net new subscribers by end-2009.

Though the market has expanded exponentially and most of the players have impressive numbers, the Average Revenue Per User (ARPU) has been very much less than par. This, combined with stringent Government regulations, and relatively high taxation, has led to considerable bleed among the players.

Therefore, in the current environment, operators are looking to value-added, revenue-generating services to help increase their ARPU. All the players have looked to innovations in VAS, not only to differentiate their services from their competitors, but also to broaden the revenue stream per subscriber.

The key challenge in the DTH industry is the competition from cable operators, who have already reached interior India but have an "unfair" edge on prices through under-declaration of their subscriber base. Added to these challenges are the high cost of DTH licenses and the huge cost of setting-up the services.

The effort to provide exclusive/niche content, under the VAS umbrella, is not proving to be as seamless as it should have been, and the regulator's short-sighted approach has not helped. Even the recent budget has adversely affected the industry - the play-on-demand content provided by the operators, which is one avenue for increasing ARPUs through VAS, have proved to be 10-15 percent more expensive. This is consequent to the latest Union Budget spelling out that per-view and on-demand services provided by DTH players will attract the levy of service tax.

Be that as it may, IPTV is emerging as a new entertainment option for the tech-savvy Indian TV viewers. With broadband penetration reaching seven million, India increasingly offers a niche market for IPTV services, at least in the urban areas. IPTV can be relatively cheaper for a customer who is already a broadband subscriber from the same service provider. Because the service is offered as a combined package along with broadband and/or landline, the company gains on operational expenses and is, therefore, able to offer the service for a lesser price.

At present, the policy structure is still deficient in the Pay TV industry. There is still no uniform policy for entertainment tax, and unlike other major countries, Government does not seem to be prioritizing digitalization in India. DTH services are also facing the issue of limited availability of capacity on satellites. The bandwidth requirement for high-definition programming, such as HD content, needs six-to-eight times more capacity when compared to an average standard definition channel.

The regulatory framework is not perceived as being farsighted and it is feared that, the over-competitive DTH industry will be forced to compromise with the quality and choice of content.

The six DTH-players are also encountering stiff competition from Doordarshan's (DD) free-to-air DTH platform, currently offering 59 channels, and planning to introduce another 100, in the first phase of expansion, using the maximum number of transponders - both in the C and Ku-band from the INSAT system. The DD Direct Plus is also leveraging benefits from the grant of exemption on acquiring DTH license, along with the exemption to DD's STBs from the mandatory-BIS norms.

A major share of Indian entertainment content comes from Bollywood and regional films. DTH-providers are entering into partnerships with movie/video distribution companies to provide their content on the DTH platform, as near as possible to their theatrical release. The day is not far, when a major Bollywood film will be released on the DTH platform in India, rather than in a theatre near you.

As technology constantly evolves, the set-top box architecture is becoming more sophisticated through the integration of new functions, features, and content protection systems. The introduction of a higher-range of set top boxes by equipment manufactures, including SD zappers, HD zappers and HD PVRs, will provide an entire new experience to the viewers. Infact, Videocon d2h connects the viewer directly through its latest product offerings. These satellite products receive DTH services directly, and do not need a set to box.

The increasing penetration of DTH services in India and the quest for profitability is sure to trigger innovations in the roll out of new services, content, and technology-led innovation.

Roshan D'Souza,
VP, Service Provider,
Cisco India & SAARC

On key trends most likely to sustain the business

Globally, the consumption pattern of content has been changing rapidly and consumers are no longer accessing in just the traditional ways, i.e., on their TV sets. Today consumers want to view content on the move and also on different type of devices - on their PC's, on personal media players, or their mobile phones. The fact that the IPL has partnered with You Tube this year for enabling viewers to watch IPL matches on the web, is testament to the recognition of the changing consumers habits, not just globally, but in India too.

Another trend which is being witnessed across the world, including India, is demand for time-shifted television - the ability to view one's favorite program as per one's convenience. These are some of the trends that have led cable and DTH service providers to innovate and adopt technologies that can enable them to meet consumer demand and maintain competitive edge.

Cisco is working with operators globally to build a hybrid device, a set-top which could receive broadcast DTH content and at the same time receive true interactive content on an IP/Broadband pipe. However, this solution is aimed at the mid-to-higher end of the market.

To operate in the lower end of the market, Cisco acquired DVN out of China. Through this acquisition, Cisco now has a play in entry-level set top boxes also, not just in the cable space but also the DTH segment.

On next big untapped opportunities

True interactive television (including time shifting), and HD, are two key opportunity areas that still need to be exploited in a big way. It, however, needs to be seen how ready the industry is for these products. Telecom service providers operating in the DTH space like Tata, Reliance, Bharti can provide a hybrid-box and leverage their fixed line and DTH business together on a common device. We are keen to explore such opportunities with these players.

Bundled services can be a key differentiator that creates stickiness with the customer. For vertically integrated players (bundling content and the STB's on DTH distribution platforms), managing margins remains much easier. Other players can leverage broadband connectivity and DTH and have a common device to offer bundled services.

On Government support to industry

As compared to cable, DTH segment is already enjoying several benefits in terms of higher FDI limits. However, we feel that the Government should have restricted the number of players operating in the DTH segment to prevent a price war which makes it difficult for service providers to eventually maintain the right quality of service. As the digital video business is a high-CAPEX business, maintaining profitability is quite a challenge. The operators often reduce prices to maintain a competitive edge but in that process quality suffers. Additionally, we also feel that the content should have exclusivity, as today the situation is that each of the operators distributes the same content.