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Digitalisation of Cable – Clear view

What is the Digitalisation of Analogue Cable System Ordinance?
The ordinance, passed by the Cabinet last week, makes mandatory the digitisation of the distribution of TV signals by cable operators. TV signals are distributed to households through various platforms such as cable, direct-to-home (DTH), internet protocol TV (IPTV) and headend-in-the-sky (HITS). Cable is the largest platform, followed by DTH.

Cable TV distribution broadly involves three phases: broadcasters encrypt their signals and transmit them to a satellite; multi-system operators (MSOs) download these signals and pass them on to local cable operators; these LCOs then carry them to consumers through co-axial cables or optical fibres.

DTH eliminates the need of an intermediary between the MSO and the consumer. The consumers have to install a small satellite on their rooftop and can download the signals transmitted by MSOs. A set-top box decrypts the signals and viewers can watch channels of their choice.

DTH signals are transmitted through a wireless technology and the system is digital. IPTV uses broadband and is also digital.

The ordinance mandates that all cable TV households in metros will have to be digitalised by March 2012 and in the rest of the country by December 2014. This will necessitate conversion of analogue systems into digital systems; consumers will have to install a set-top box.

Why digitise everything?
Analogue systems have several limitations. For one thing, it is difficult to ascertain how many households are using cable services. The actual number is known only to the local cable operators who also work as bill collection agents. Telecom regulator TRAI had mandated that revenues gathered by cable operators should be split 45:30:25 among broadcasters, MSOs and LCOs. According to a report by industry lobby FICCI and management consultancy KPMG, in 2010, a total of Rs 19,400 crore was generated through subscription fee paid by consumers but only around 20 per cent of this was declared by cable operators.

In developed markets, advertising and subscriptions contribute evenly to a broadcaster’s kitty. There are some channels that survive entirely on subscriptions and carry no advertisements. In India, because of rampant under-declaration by cable operators, broadcasters have had to mainly depend on advertising to sustain themselves.
On an average, most broadcasters earn 80-85 per cent of their revenues through advertising. Once the system is digitised, every household accessing signals will be accounted for and cable operators will be forced to share their collections with MSOs and broadcasters.

Again, though close to 600 chanels are available, analogue systems do not allow operators to carry more than 100-150. They charge hefty carriage fees from broadcasters that want to ride their distribution pipe or secure a favourable placement on it. Digital networks can carry around 500 channels; hence, broadcasters may no longer be at the mercy of cable operators.

How do consumers benefit through digitisation?
Besides a better viewing experience and access to a larger number of channels, there are no major benefits for consumers. They may, in fact, have to shell out more money to have set-top boxes installed in their houses. While the issue of pricing has not been delved upon yet, some observers say household bills may go up 25-30 per cent as cable operators may charge more for giving viewers a larger number of channels and better quality service. Some operators might also use their efficient network to give consumers value-added services such as broadband over their network.

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