Industry reacts to the extension of the sunset date

The extension comes a mere 10 days ahead of the deadline, and all the stakeholders are taken aback by it. Though a part of the industry was hoping for the extension, there is a lot of inconvenience to the other stakeholders. afaqs! finds out the different views.

Ministry of Information and Broadcasting has announced the extension of the digitisation deadline on June 20, a mere nine days ahead of the original deadline. It seems that almost all the stakeholders will have to bear some losses as a result of the sudden announcement.

The ministry has extended the deadline by four months and the new sunset date is October, 31. Due to the delay in issuing the tariff orders and regulations by the TRAI, the complete process had to be postponed. The ministry has admitted that the assessment of these ground realities compelled it to set a new deadline.

It must be noted that task forces were constituted at the time of the announcement of the deadline in December, 2011. These task forces were supposed to monitor the progress of preparations by the various stakeholders. A major doubt arises about why the lack of preparedness was not pointed out a little earlier.

As per the industry experts, the broadcasters will have to compromise on the carriage fee for four extra months, while the DTH players, which had worked to stock up their inventory, will have to wait longer to get it encashed.

The government, too, will have to do away with the service taxes that it would have collected from 125 lakh digital homes till November 1.

The industry also has its own doubts on the stability of the new deadline.

The extension comes a mere 10 days ahead of the deadline, and all the stakeholders are taken aback by the decision. Though a part of the industry was hoping for the extension, there is a lot of inconvenience to the others. afaqs! finds out what the stakeholders have to say about it.

LCOs and cable operators are happy with the extension

Roop Sharma, president, Cable Operators Federation of India, says, "The extra time given by the I&B Ministry is still not sufficient, given the amount of workload involved in this transformation from analog to digital. The deadline should have been December, 31. The ministry has issued the licenses to the independent MSOs only yesterday. Subsequently, there are STBs to be purchased, which are obviously ordered from China or Japan and cannot be procured in such a short time period. Plus, the digital head-ends needed to be installed and tested for at least a week."

Sharma adds that there is nothing much being done on the consumer awareness part by the government. It takes a lot of time to convince a consumer about the pros of installing an STB. She feels that there has to be wider touch-points through campaigns involving RWA (resident welfare associations) and other such federations.

"The major issue is that none of the people involved in the complete process is trying to understand these ground realities about the transformation. It's not just about seeding the STBs. There has to be a complete setup ready before that," she further adds.

It must also be noted that TRAI issued the tariff norms and other regulations in April and May, respectively. These were supposed to be out in January, because the regulations mention the negotiation period of 60 days between the MSO and the broadcaster.

S N Sharma, CEO, Den Networks, says, "I believe it is good for everybody. We welcome the extension, keeping in mind the huge transformation that is required. The process is started and this extra time will help to accomplish the task in a better way."

He also mentions the preparations required, which include installation of digital head-ends, their testing, streamlining the delivery of the channels and other engineering aspects. He adds that a lot of work is needed to be done to maintain the quality, since the number of channels has to be increased from 100 to 200+, and later on, 500.

"Also, the revenue sharing model was not clear until late May, when the TRAI regulation came out and announced 42 per cent sharing. The wholesale rate (the price broadcasters charge) of channels for DAS has been fixed at not more than 42 per cent of the non-CAS area rate. Average content cost for analog comes down to about Rs 2,000 per month, of which about Rs 900 was being reserved," he adds.

Sharma's only concern is that the government shouldn't extend the deadline any further since that would affect the preparations to a larger level. He mentions that mostly the operators have started their groundwork for Phase 2 as well.

Broadcasters, DTH players and experts feel that the extension jeopardises the digitisation process

Anuj Gandhi, group CEO, India Cast, says that the move is very disheartening and that it will increase the costs for the broadcasters. He adds, "All the broadcasters were ready for the digitisation and the extension will force us to shell out the carriage fee for the next four months, which was not to be."

He also mentions that most of the MSOs are ready with the infrastructure and inventories since they knew the June 30 deadline. The only thing left was seeding the boxes. He says, "Setting up the back-office, the customer care system and other logistical preparations can be done in due course of time."

He further states that about 25-30 per cent of the target is fulfilled and that the remaining 40-50 per cent will be done soon. He believes that 100 per cent transformation will still take time.

A media expert, on condition of anonymity, shares his fear of another extension and says that 100 per cent transformation may never happen. He adds, "Turning around at the last moment has made things go haywire for almost all the stakeholders. While the smaller ones will lose little, the bigger ones will lose a lot."

He explains that a significant chunk of revenue is never reported and the broadcaster loses that chunk. With the sunset date settled at June 30, the broadcaster fraternity had managed their revenue projections on the basis of digitalisation and the accompanying benefits from each household.

Due to this unexpected extension, the complete calculation has gone haywire. Plus, those MSOs and other operators who were really serious about the move will lose out since the preparations they made, will not be encashed so soon.

"I feel that since the beginning, the deadline set was incorrect. Understanding the ground realities and working accordingly should have been done in the first place, and not 20 days prior to the deadline," says another industry expert, who doesn't wish to be named.

It seems that the broadcaster and the DTH players are the worst hit by this extension. Harit Nagpal, CEO, Tata Sky talks about the losses borne by the DTH players. He says, "In order to be prepared for the deadline, we had put together a large inventory of STBs at a cost higher than the normal ones. Plus, to be ready for the extra demand, we also hired installers and engineers for seeding the STBs in individual houses. All these costs are lost for the next four months."

Apart from this, he seconds the media experts by mentioning his doubts about whether the next deadline will be the final one. "I have a speculation about the new sunset date, too. If the extension can be announced a mere nine days ahead of the deadline, they may again extend it a week before the next one," he says.

He mentions that this will definitely affect the revenue projections of all the stakeholders, including the government. "Whenever there is a digital connection, the service tax is applicable, which goes into the government's pocket. With this extension, that share has been postponed," he concludes.

It must be noted that compared to a requirement of 12.5 million digital set top boxes(STBs) across Delhi, Mumbai, Kolkata and Chennai, only 2.9 million STBs were actually seeded till June. Among these, Mumbai has the highest penetration of digital STBs, while Kolkata fares the worst (47 per cent and 19 per cent, respectively). Delhi has 24 per cent cable homes, and Chennai is yet to start with the process.