Conditional Access System (CAS) is the new buzz doing the rounds of cable TV industry these days. While it is expected that this new system will change the way cable TV industry was operated hitherto, whether it will really benefit broadcasters, consumers and cable operators, only time will tell.
For starters, the topic revolves around the theme of addressability, which is called conditional access. It is the power of choice to decide what you wish to view (in terms of channels) and what you want to avoid.
Let us understand first, what is the objective behind this new regulation. Presently, there are about 38 m, cable and satellite (C&S) homes in India. Local cable TV operators charge consumers exorbitantly for the channels, which they do not view. At the same time, they under declare the fees collected by them to multi system operators (MSOs). Consequently, to protect consumers, to control spiraling cable TV fees and eliminate under declaration of subscribers by the operators (it is estimated that out of 38 m subscribers only 6 m are reported), the government propose to introduce a new regulation, CAS, in the existing Cable Television Regulation Networks Act, 1995.
CAS: Will it achieve its objective
* Indicates broadcasters' share
|C&S homes (m)
|Avg. declared pay homes (m)
|% of total C&S homes
|Pay charges per month (Rs)
|Of which FTA charges per month (Rs)
|Total pay revenues (Rs m) *
|Total FTA revenues (Rs m)
|Total consumer spend on C&S (Rs m)
There was a time when watching TV was simply to surf channels and view only those programs, which you fancy. But times would be changing now. The government has dictated that cable TV delivery will be segmented into atleast 2 tiers. A basic tier is to carry only non-pay channels and would be delivered to all homes, even those who do not opt for any pay channels. The government has however, not hinted at any specific pricing or minimum number of channels. Thus, the proposed amendments guarantee all cable networks minimum revenue, in the form of basic tier monthly revenue. On the other hand, it will become mandatory for pay channels like Zee, Star, Sony and others to be available through set-top boxes or satellite receivers.
With the introduction of CAS, the cable subscriber would have to buy a set-top box (costing about Rs 3,000) to view pay channels such as Sony, Zee and Star Plus. It would allow the cable TV operator to control the viewer's pay TV signals and give him only those channels that he has paid for. Even if 50% of the 38 m cable homes opted for a set-top box (STBs) priced at around Rs 3,000, it would amount to Rs 57 bn worth of STBs. Providing 38 m cable homes with STBs is however a tough task. The government has therefore probably planned to introduce the compulsory use of set-top-boxes initially in the metro cities only, followed by a phased introduction across the country.
The critical index for success of CAS lies in implementation. If CAS is to emerge a winner, the dynamics of technology, investment requirement and time involved in implementing the system have to come together in a cohesive manner.
But before CAS is implemented, in the short run, several issues need to be solved. Lack of a technical standard (whether to implement analog or digital STBs) for set-top box is also a concern. Due to unavailability of enough STBs, pay networks may have to go free-to-air, thus sacrificing their subscription revenues.
Subscribers may not agree to invest Rs 3,000 for STBs at a stretch, which would force channel networks to give financing option to subscribers. The consumers will also have to pay a higher monthly fee for receiving the pay channels and also for a set of free channels that will be decided by the government. While most subscribers would be regular viewers of just a few of these, they would end up paying for all those that they do not see at all. This is due to the fact that broadcasters would bundle several channels together and offer them as a `bouquet'. You cannot get Discovery channel unless you pay for the entire package of Sony, which include channels like AXN or CNBC, which few subscribers watch.
In fact, the present tariff revision may not be the end of it. Subscribers across the country could be paying Rs 300-Rs 400 as the monthly subscription in the near future, the tariff that has been agreed upon by broadcasters and MSOs recently. The fee charged by broadcasters has gone up steeply in the past two years. In January, the Star group hiked the rates for its seven pay channels, from Rs 28.5 to Rs 41.5, while ESPN- Star Sports upped its rates from Rs 16 to Rs. 24. With Sony also charging Rs 40 for its six-channels and Zee Turner fixing Rs 42-50 for its 18 channels from April 1, cable operators had no other option but to go in for tariff revision.
It is also not a win-win situation for cable operators. They will have to invest a minimum of Rs 250,000 in the subscriber management system to control the set-top boxes and Rs 50,000 to decode the pay channels. They will be also required to submit detailed records of the subscriber base to the central government. This would restrict the exponential profits recorded by them until now by under declaring the number of subscribers.
Notwithstanding the short term hiccups which are due to lack of clarity of the bill or due to technical or financing problems which are likely to come up, CAS does offer certain long term advantages. Firstly, broadcasters would be paid for every subscriber who watches their program. Advertisers will also have another measure of reach apart from TRPs, for deciding the ad-rate. Consumers could however, end up paying higher tariffs. But considering the fact that Indian subscription charges are one of the lowest in the world, they will have to now gear up for pay up more for receiving quality entertainment.
While the CAS debate continues, some broadcasters are looking at direct to home (DTH) television service as a complementary service to CAS. Many players are negotiating with the government to relax DTH regulations for its smooth implementation.
Even though a DTH project entails an investment of around US$ 400 m, broadcasters are considering it to get a direct access to the end-consumer, bypassing cable operators. This is due to the fact that it is difficult to monitor CAS, since signals can be stolen from analog boxes easily, reaching end-consumers through an alternative pipe. While making the implementation of CAS compulsory, the government should also relax the DTH policy to create a competitive environment with the CAS. However, currently the policy is unattractive owing to the government regulations on equity participation in DTH. According to current regulation, no broadcasting or cable network company shall own more than 20% equity as a DTH licensee.
For the moment, the critical issue is whether the CAS bill will serve public interest. In the short run, consumers will feel the pinch. From paying an average of Rs 150 a month for 60-75 channels, they will have to start paying Rs 5 for each free-to-air channel and the pay channels will cost extra. Also, the bill might get subdued support from cable operators who will be required to make higher investments for making CAS operational.
Lets summarize this in snapshot
Real viewership figures for broadcasters, advertisers
Rational cable TV bills for viewers
More revenues for government
Cable operators will become more viable
Will set top boxes be digital or analog?
Will the box work everywhere?
Will the box be readily available and at what cost?
Will pay channels be forced to turn free?
Will cable operators accept new technology?
Will consumers accept higher tariffs?