Published: The Hindu Business Line, September 11, 2003

By Pradeep S Mehta, Rajan R. Gandhi

SINCE June, consumer groups have been cautioning against the implementation of Conditional Access System without adequate safeguards. A Cuts (Consumer Unity and Trust Society) survey of six Indian cities revealed the existence of monopolies and cartels among service providers and a serious level of dis-satisfaction with the last-mile cable TV operator. At a CUTS-sponsored National Seminar in New Delhi on July 1, speakers cautioned against the hasty imposition of Conditional Access System without putting in place a regulatory mechanism.

For reasons not very clear, the Ministry of Information and Broadcasting stuck to its implementation plan and sections of the service providing industry were chortling at the thought of getting their hands on a slice of the Rs 10,000-crore pie. The arithmetic behind this.

There are about 80 million TV sets in the country. Considering that some households do not have access to cable TV or that there could be more than one TV set but only one cable subscription there would still be 48 million cable TV connections, and with each subscriber paying Rs 175 a month it is easy to see why the industry is drooling — at stake is Rs 10,000 crore.

This, of course, is not incremental value. Rs 10,000 crore is the existing value of cable TV subscriptions. The bulk of this — say, 70 per cent — is simply not accounted for by cable TV operators. As there are some 40,000 of them, the revenue is not that difficult to conceal.

One of the declared aims of the CAS is to do away with this under-declaration. To what extent this objective will be achieved remains to be seen. In New Delhi, the existing rates of tax are 8 per cent service tax and Rs 20 per subscriber per month as entertainment tax. Applying these rates to the estimated 48 million cable TV subscribers throughout India, the Central and State governments between them stand to earn close to Rs 2,000 crore. Since this is not a specific cess and the Government is not obliged to do anything at all in return, this is a highly productive method of raising revenue.

Thus far, the arithmetic yields Rs 2,000 crore for the Government and Rs 10,000 crore for the service-providers, at existing rates. Nothing except market forces can prevent broadcasters from raising prices. While there may be a limit to the price, events such as the cricket World Cup could lead to opportunistic pricing. The consumer has been protected from this so far by the much-reviled cable TV operator who will have neither the motive nor the means to do so after CAS takes effect.

The CAS was supposed to be “consumer-friendly” and even the Prime Minister has gone on record affirming this. What is emerging presents a terrifying picture of what can happen when the Government uses its muscles with the favour dispensers.

The Government has all along been saying that no broadcaster would be allowed pricing that permits more than 10 per cent difference between the prices of a `bouquet’ of channels (a bundled price) and the aggregate of all the channels priced individually. Thus, if a broadcaster offered five channels at a bundled price of, say, Rs 100, the total outlay of each channel when purchased individually should not exceed Rs 110.

But consider this: Star TV has priced its `bouquet’ of nine channels at Rs 50, while the a la carte rates for its nine channels totals Rs 110; not a 10 per cent but a 120 per cent price differential.

And, now, consider this: Cable TV operators have agreed, with great reluctance, to relay 30 FTA channels at the base price of Rs 72 per month plus taxes. There are, however, some 60 FTA channels. The law is silent on whether or not the cable TV operator can levy a charge for the FTA channels in excess of the bare minimum 30 channels.

Yet, the worst transgression of consumer rights possibly lies in the stipulation that consumers must compulsorily purchase a Set Top Box (STB) if they wish to watch pay channels. It cannot be forgotten that CAS originates from disputes about the actual revenue and the sharing of the spoils between the service-providers — the broadcasters, the multiple system operators and the cable TV operators. The viewer is being asked to pay for resolving this dispute, which was not his own making! The position should be the exact opposite: The service providers should actually pay the viewer for keeping track of his or her viewing habits.

Local vendors of STBs have tried some not-too-subtle-moves to create a demand for their products and obfuscating the issue. The truth is that the STB has no built-in circuitry to enhance picture and sound quality. No service provider has announced the provision of value-added services such as video games for which customers will have to pay separately anyway. The customer will also have to invest further in an input device such as a joystick or keyboard to play video games. Picture and sound quality depend on the broadcast and the transmission cable, not on whether an STB is digital or analogue. For political reasons, the implementation of the CAS has been put off in Delhi at least till end-December. Service-providers and the I&B Ministry are too scared of the Shiv Sena to push CAS through in Mumbai, and a sort of uneasy calm prevails. The West Bengal Government has stalled CAS saying that it had not been adequately consulted or briefed. So Chennai becomes the “guinea pig”.

At first, multi-system operators (MSOs) in Chennai spoke of the “outstanding success” of the scheme, attributed to the fact that there were only two MSOs and most of the regional language channels were in any case FTA. However, even two MSOs could not form a viable cartel. One of them — SCV — is part of the Sun group and offers Sun’s pay channels free. The other MSO, Hathaway, has countered by offering Star TV channels at a highly discounted rate. Thus, on the day that CAS was implemented in Chennai, only 2,000 STBs were sold.

Will the service-providers ever be able to sort out the mess? Most unlikely. Broadcasters blame the MSOs for not settling their overdues or paying on time, and the MSOs the broadcasters for making repeated verbal agreements, but putting nothing in writing, and backing out of commitments. The MSOs also accuse cable TV operators of under-declaring their subscriber base. Consumer groups have repeatedly approached the I&B Ministry and even the PMO. Their reservations are not against CAS per se, but in the way it is being introduced. They see the STB as an unfair financial imposition and have urged the Government to put in place a regulatory mechanism whereby they can be assured of four basics.

First, that the service-providers must pay for the cost of installation and maintenance of the STBs. Second, that the total financial outlay on cable TV subscriptions should not exceed their existing expenditure, even if it means that they will have access to fewer channels than before. Third, that quality of reception must at least be maintained.

And, fourth, that their complaints are promptly and efficiently attended to. Had the Convergence Bill been finalised, it would have been possible to address these concerns along with a host of technical and non-technical issues simultaneously. In its absence, and considering the monopolistic nature of the cable TV industry, an independent regulatory authority seems essential if there is to be no further strife. Simply passing the buck to State governments, as is being contemplated, will just not. Kaun Banega Crorepati? As it stands, no-one.