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Vol.
XXVII No. 24
June 15,
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CAS: Deeper Into The Mire
Raghu
WITH
national elections due in a bit more than a year, and elections to the Delhi
Assembly less than a year away, the BJP is into full election mode. This has
meant being driven by populism on all fronts, with policies and announcements
earlier championed with a crusader’s zeal by various ministers being rolled back
on a daily basis. The latest potential victim is the Conditional Access System
or CAS to regulate cable television services scheduled to come into effect in
the four largest metropolitan cities of Delhi, Mumbai, Kolkata and Chennai on
July 29 on “an experimental basis” prior to being introduced
nationwide.
There
is already a major public outcry against the system, which looks all set to cost
the consumer dearly and to reduce rather than enhance her choice. Consumer
concerns are being exacerbated by confusion on all fronts as to what CAS will
entail in terms of costs, choice of TV channels, benefits or otherwise. Numerous
different voices are being heard from Cable TV operators, broadcasters, consumer
organisations and not least from leading lights of the ruling party who are
getting increasingly concerned about a massive consumer backlash and its impact
on the BJP’s electoral misfortunes. Various BJP ministers and leaders are
pleading with the prime minister and his Cabinet colleagues to step in and do
something to allay consumer fears and reduce the inevitable financial burden on
them. And last week the redoubtable L K Advani himself convened a meeting with
the BJP president and the beleaguered I&B minister Ravi Shankar Prasad after
which Venkaiah Naidu made clear that the BJP would insist and obtain a
“consumer-friendly CAS”
The
BJP has none but itself to blame for this mess and consumers would be entirely
justified in turning their anger entirely against the ruling party. Everyone
would recall how, just a few months back, cable operators had gone on prolonged
strike demanding immediate passage of the CAS Bill by parliament with the full
backing of the BJP whose Sushma Swaraj was then the high profile minister of
Information & Broadcasting. With criticism being voiced by various consumer
organisations and virtually the entire opposition the BJP first tried to hide
behind the cable operators and then tried to pass the buck to the Opposition
parties cynically calculating that public anger would turn against them. The
Cable Operators too left no stone unturned and even threatened Opposition MPs
with disconnection of cable services to their homes if they did not withdraw
their resistance of the CAS Bill. In this charged atmosphere, with parliament
itself being blackmailed by cable operators with the tacit support of the BJP,
the CAS Bill was pushed through by the BJP. An article in these columns in PD
had then discussed the pros and cons of the CAS Bill and the various forces
behind its introduction and passage.
CONSUMERS: THE
BIGGEST LOSERS
The
conditional access system provides for transmission of an encrypted or scrambled
signal by the cable operator to consumers who would receive unencrypted or
normal signals on their TV sets through a set-top box which would unscramble the
signal only for those channels for which the consumer has paid. In theory, CAS
is supposed to widen consumers’ choice by providing her only those channels
which she wants and has paid for instead of the present system where she pays
for close to 80 channels most of which she does not want. Again in theory,
broadcasters would gain by having a more accurate idea of how many viewers they
have through each cable operator and can therefore levy a more rational fee with
the cable operator being unable to underpay as they do at present by
under-quoting the number of subscribers serviced. Operators in turn sought to
benefit by being obliged to deliver only those channels individual consumers pay
for rather than being unable to recover costs from reluctant consumers while
being compelled to pay the broadcasters for pay channels. In practice, however,
as unfolding events are making clearer by the day, it is difficult to see who
actually among these stands to actually gain and how.
Consumer
choice is going to get narrower and at a higher price, certainly in the short to
medium term. As of now, consumers have access to about 80 channels some of which
are free-to-air and some pay channels. In most areas in the metros, cable
operators charge around Rs 200, stray cases of overcharging excepted. With
CAS, consumers will first have to acquire a set-top box earlier likely to cost
between Rs 3000-Rs 7000 either on one-time payment or through a rental system
with a fairly hefty deposit, and will then have to pay additionally for the
channels she wants to view.
DESPERATE
BJP
In
order to mitigate the clear and expected burden on consumers, and thus also
mitigate their anger against the BJP-led government, the latter has announced
several measures recently. Slashing of customs duties from 50 per cent to 5 per
cent on the wholly imported set-top boxes — there being no Indian
manufacturers at present and the government being in an unseemly and unexplained
haste to introduce CAS without waiting for indigenous manufacturing capacity to
be built— is expected to bring some relief.
Cable
operators were pressured into declaring that they will offer a minimum of 32
free-to-air channels at a floor price of Rs 72 per month with consumers being
able to choose and pay for additional channels as they please. However, it soon
became clear that the channels watched by most consumers would not be covered
under this scheme since they would come bundled together with other channels in
a pay channel bouquet such as those offered by Zee, Star, Sony etc each of which
would charge some hitherto undisclosed amount, only Zee which is also one of the
major cable operators through its Siticable network having been obliged to
announce a bouquet price of Rs 72. Other broadcasters are yet to announce prices
and the government, shying away from issuing an official Notification as they
had earlier said they would, merely written to all broadcasters to announce
prices by June 10 and confirm unbundling of their bouquets by also specifying a
la carte prices i e prices for each channel.
Under
increasing pressure from consumers, government this week announced they had
further persuaded cable operators to increase this basic offering from 32 to 45
channels with the minister informing the BJP president that consumers would
receive about 75 channels at Rs 200 or less. If this actually comes about, this
being roughly the present norm, then why was this complicated CAS introduced at
all? If at the end of it all, the consumer pays less than at present, why are
broadcasters and especially cable operators pushing for CAS which they clearly
expect to bring in additional revenues? As the entirely CAS plan appears to be
unraveling in the face of the BJP’s nervousness about voter reaction, what are
we missing?
BETWEEN
THE LINES
Some
commentators believe that it is actually the broadcasters who have been the main
lobby behind CAS. Broadcasters believe they are being cheated by cable operators
who under-quote the number of subscribers and therefore pay them less than their
due, making them rely too heavily on advertisement revenues. Broadcasters’
revenue from operator subscriptions are believed to be in the range of 25-40 per
cent and, so the argument goes, they would like raise this. On the other hand,
broadcasters stand to lose on advertising revenues on pay channels with CAS
since broadcasters will have a more accurate figure of viewers watching
particular channels. It is well known that corporate advertisers have been
unhappy at the rates being charged by broadcasters especially since they have no
accurate means of knowing how many viewers actually see the particular channel,
leave alone the particular programme, given the large-scale fudging of viewer
figures by cable operators. Last year a major scandal broke out when it became
known that viewership surveys were being doctored to suit particular
broadcasters! Indeed, it was argued by the author in the previous PD article on
this subject that corporate advertisers were among the major hidden forces
pressurising the government to introduce CAS as the most effective means of
regulating the cable TV industry.
A
closer look would show, however, that there are other shadowy figures too
lurking behind the scenes who are deeply concerned with the introduction of CAS.
It
is the technology itself of CAS which should give us the clue. As in good
mystery novels, look for the motive and you will find the criminal!
The
long-term impact of CAS lies not in cable TV along but in multi-media,
interactive information technology (IT) services. The key advantage which CAS
brings with it is addressability, that is the ability of the (at present) cable
TV operator to address each individual consumer with (at present) cable TV
signals. With top-of-the-line set-top boxes having the ability to receive,
distinguish and transmit TV, video, telephony, internet etc signals, this opens
the door to the ultimate corporate dream of being able to deliver telephony, TV,
internet and other IT-enabled services such as banking, shopping, utility
payments etc direct to the consumer in her home. In today’s IT environment in
India there are two major categories of players in this game — the cable TV
operator and the basic telephony companies, with broadband connectivity
companies being as yet minor players, all of whom have cables running right into
peoples homes. Cable TV in particular has penetrated into roughly 35 per cent of
homes in the metros and other major cities and towns.
It
is not for nothing that the once independent, small-time colony-level cable TV
operator was soon gobbled up by large Cable TV corporates which enrolled the
former as franchises rapidly converting a free-for-all market of small operators
into a duopoly of two giant networks, Siticable belonging to the Zee network and
Incablenet belonging to the Hindujas. Zee already has significant cross-holding
in broadcasting, which many commentators feel should have been safeguarded
against in the Broadcasting Act itself but was not and, if it enters into
telephony and other IT services, would give it a strong entry position and edge
in a potentially highly lucrative market of the future.
Of
the basic telephony services, Reliance is currently way ahead of Tata with the
other big player being the state-owned Bharat Sanchar Nigam Limited. It is
interesting to note that the Hindujas were unable to enter the bidding for basic
telephone services, on which they were very keen as they had already made
substantial investments and entrenched themselves in the cable TV distribution
business, only because they were enmeshed in several economic offense cases
including the Bofors case. With broadband cables already reaching numerous
homes, access to addressable set-top boxes in homes would enable basic telephony
service providers to also provide other IT-related services.
LOOPHOLES
IN REGULATORY FRAMEWORK
While
none of these major players have made public any immediate plans to enter the TV
business, Reliance spokespersons would only confirm this status “for the
next few months”. Meanwhile BSNL has started inviting proposals for
franchises and Reliance has drawn up plans for entering the video business
through interactive set-top boxes. With the introduction of CAS and the entry of
set-top boxes into homes, the task of these telecom giants would be made
considerably easier. In months to come, one is therefore likely to see some
shake-ups in the cable TV distribution business involving tie-ups with or take-overs
by telecom giants.
In
typically short-sighted fashion, as pointed out in these columns while
discussing the Broadcasting Bill, the government has not anticipated these
developments and has left many loopholes in present legislation and regulatory
frameworks which are being taken advantage of by large corporates such as
Reliance and others to muscle in on uncharted territory, stake out a position
and then present government with a fait
accompli while pressing for concessions from this status.
The
Broadcasting Bill does not deal properly with cross-holdings between content
production, broadcasting and terrestrial distribution, nor does it deal at all
with media convergence. CAS of course makes no mention of media convergence at
all even though it provides the thin end of the wedge to prise open the market
for convergent IT services to the massive advantage of entrenched players in the
cable distribution and basic telephony businesses. And all this while there is
yet another carrot being dangled for everyone to drool over, the Convergent
Communications Bill which is pending before parliament which common sense would
have indicated should have been considered and taken up first. The present
maneuvering over CAS, the history of its introduction and the antics of the
various lobbies behind it, as well as the clouded story of privatisation and
“liberalisation” of the telecommunications sector will all unfold
together in forthcoming episodes of this sordid drama over the next few months.
