Published: The Hindu Business Line, May 04, 2004,

By Pradeep S Mehta

The culprit is not CAS per se, but the way the Government went about implementing it.

WHEN the Conditional Access System (CAS) for cable television was deferred in Delhi ahead of the Assembly elections last year, the Government did not offer any reason for doing that. It only said that the CAS was being put off. However, this time, the Government played safe. The Information and Broadcasting Ministry consulted the Law Ministry to ensure there were no loopholes in its order to scrap the controversial CAS.

CAS, which the government had mandated last year in the interest of the consumers, has been withdrawn. The Telecom Regulatory Authority of India (TRAI), the designated regulator for broadcasting and cable services, had recommended that the July 10, 2003 notification on CAS be either de-notified or put on hold for three months. In this period, TRAI would finalise the CAS regulations based on a final consultation paper. The Government accepted the proposal to put CAS on hold. The Government notification does not mention any timeframe by when the system will be back. However, even after such a detailed process one is not sure that a solution will emerge.

CAS, a system that required television viewers to access pay channels compulsorily through decoders or set top boxes (STBs), is on its way out just after six months in only one of the four cities in which it was originally envisaged. Chennai alone, out of the four metros, implemented CAS on D-day. Probably by default as the city did not witness the kind of political uproar as seen in other centres. A part of Delhi introduced the new broadcasting regime late last year. But even there the implementation was not complete. The big question for the industry now is: Will CAS come back?

The Madras High Court, however, has stayed the Centre’s decision to roll back CAS in Chennai and South Delhi. The interim order was issued following the filing a batch of petitions by consumers, cable TV operators and multi system operators (MSO’s). CAS was implemented only in Chennai and South Delhi following widespread opposition from consumers and political parties. Meanwhile, TRAI has set up a committee to put in place regulations on cable TV services. The panel will look into the problems faced by the four State governments in implementing CAS, its acceptance level among subscribers in these States and competition in cable TV services business.

It will also examine such issues as channel pricing and the introduction of direct-to-home (DTH) and broadband services.

CAS, which was debated at the highest political levels for more than a year, has been ironically disposed through a three-page notification by the Ministry. The cable industry is said to have spent around Rs 300 crore towards CAS, which was made mandatory by the Government in all the four metros. The Government Notification, however, is silent on the subscribers of Chennai, who were happy to view free-to-air channels at Rs 72 plus taxes a month or those who had purchased set top boxes (STBs) in Chennai and Delhi.

The culprit is not CAS per se, but the way the Government went about implementing it. First, it erred in making it mandatory and then getting into pricing of the channels, these were best left to the market.

Instead of offering it as a value-added service to those who wanted high quality picture and sound through an STB, the government opted to use the route of compulsion. The increasing wrath of the consumers generated some delayed reactive action in the government circles by the issue being brought under TRAI’s purview. Though CAS failed in its first attempt, the aim of TRAI to have a more mature look at the industry deserves praise, because only proper regulation can prevent chaos.

Further, the Government should only play the role of a facilitator in future. The government has really no role in regulating prices. The pricing of individual channels is best left to market forces by encouraging competition. Channel pricing depend on various issues and no standard pricing formula can be applied. Only if the government wants to protect economically weaker sections, it can regulate the basic tier.

Now the challenge before the broadcasters and the MSOs is to use their investments in the CAS infrastructure and the STBs to provide premium services that will attract new subscribers. In the event that there is a market-led demand for decoders or the STBs in the future, the government should only play the role of a facilitator.

The denotifying of CAS to view pay channels brings to an end a year of confusion surrounding the cable TV industry in the country. The decision, however, raises a host of issues that the broadcast regulator TRAI have to address as it considers a new scheme for television. TRAI is to look at the full spectrum of issues involved in broadcast and cable regulation in the coming months. It must also deliberate on alternative delivery mechanisms, such as DTH, to ensure that market forces too favour a rollout of CAS. That alone will go a long way in ensuring a consumer-friendly CAS regime.

TRAI’s analysis of the cable TV sector confirms the view that the subscribers have suffered from a lack of competition. Part of the solution lies in ensuring fair competition in the television sector either through increase in the number of local cable operators or the use of alternative technologies such as DTH and broadband, or both.

This will offer the consumer a choice of technologies and services. Such competition has developed the television markets internationally. Tariffs fixed by operators came under market pressure in such a situation and TRAI as a regulator could concentrate its efforts on ensuring competition rather than trying to manage prices at micro level.