The Hindu Business Line : Conditional Access System

TELEVISONS in Chennai have, over the past week, dished out a fare that pales in comparison to what viewers have been accustomed to. Star Plus, Sony, Zee, HBO, Star Sports, ESPN and Cartoon Network, to name a few, have been yanked off the air. As has been the case over the past two-and-a-half years, they are available for viewership on payment basis. But there is one difference: Under the Conditional Access System (CAS), introduced in Chennai from September 1, you need a set-top box (STB) to receive pay channels. This is a big change as far as TV viewing habits go. It also comes at a stiff upfront outlay to install the STBs.

Three other cities — Delhi, Mumbai and Kolkata — where the CAS was to be launched, have had what appears to be a temporary reprieve. Eventually, the CAS will be rolled out across all major cities and towns. We take a look at the options before TV viewers as far as pricing and financing options of set-top boxes go. The accompanying piece looks at whether you should go for CAS or not, depending on channel viewership preferences.

Set-top box cost

To acquire one is the major outlay that stares TV viewers in the face. You will have to fork out Rs 4,000-5,000, depending upon the specifications of the STB. This price tag includes installation charges and the cost of a smart card. The latter is the key, as it gives a unique identity to each viewer. The smart card ensures viewers are billed only for the channels they watch.

In Chennai, so far at least, only digital boxes are on offer. Analogue boxes, which can cost 40-50 per cent less, are not on the shelves. Reception-wise, the difference in quality may not be significant.

The poor quality of the last-mile wired into your home also affects the reception quality and reducing the incremental benefits that the digital STB offers. Unless a sizeable mass of STB users emerge, multi-system operators (MSOs) — the lynchpin intermediary — are unlikely to invest in upgrading quality.

The difference between the two is that the digital STBs hold scope for such services as interactive TV, Net access and games, to name a few. These are not likely to be prime factors for a very large number of buyers. You have no choice but to buy what your cable operator offers you. In Chennai, the MSOs who control the cable operators are Hathway and Sun Cable Vision. The former offers a lower-priced STB that will more than adequately serve your needs. But because the other MSO has a stranglehold of over 80 per cent of the market, you have to pay for the frills of an STB that can provide you 104 channels (few would need that many).

Will prices dip? If you are hoping that prices of set-top boxes would drop substantially, it may be a fairly long wait. The prevailing price is after the recent Customs duty cut of 50 per cent. With the duties at 5 per cent, expect no more concessions from the government to lower the STB cost. The only leeway may be from a reduction in State-level taxes, which appears unlikely.

Are there other triggers that could lead to lower STB prices? In our view, prices can decline under the following circumstances:

If, and when, STB volumes attain a critical mass across the country, it is possible that aggressive pricing strategies may be adopted to lure more viewers into the CAS fold. This may not be different from the manner in which mobile phone prices have dipped over the past five years;

If broadcasters and/or MSOs step in to foot a part of the bill, as a one-time move to enhance the market for the CAS. So far, they have been cagey on this score. This would not change, unless CAS is rolled out in many areas. If, and when this comes about, it may be confined to select markets; or

If lured by the possibility of a large market, import prices of the STBs dip. This is likely when would-be suppliers from abroad are sure that there will be a large number of takers for the STBs at lower prices.

Better financing options

What may happen over a period is that even if prices do not decline by much, easier financing options may become available. These may ensure that the initial cost is spread over one or two years, and the monthly burden is kept to between Rs 150 and Rs 400, depending on the timeframe of the financing plan. However, the availability of such plans may hinge on the intensity of competition among the MSOs. If it is a Chennai-kind of a situation where one operator dominates the market, choice may be restricted.

There could be a situation where multiple MSOs have networks in the same area, which will foster competition and enhance consumer choice.

This will be similar to the broadband telecom networks built by a number of players in many cities. But the market for such cable networks may not be attractive enough in most areas. Only select cities, such as Delhi, Mumbai, Hyderabad and Bangalore, may prove viable options for such competition to emerge.

What to do

In this backdrop, viewers may be better off waiting for three-four months to see the how the CAS game pans out. Unless you are at the upper end of the economic bracket where such costs do not matter, do not rush to purchase a set-top box.

Once you invest in the STB, you are stuck with it, and even if you shift residence, you have to invest afresh in case there is a change of the MSO. So think long and hard before biting your cable operator's bait.

Yes, this would mean missing out on some of your much-preferred TV programmes for some time. It may well be worth the wait to avail yourself of more competitive pricing, and financing options that do not pinch much from your purse on a monthly basis. A clearer view may also become available on superior TV-viewing options such as Direct-To-Home (DTH), and Digital Subscriber Lines (DSL) through broadband, which telecom majors such as Reliance, Bharti and Tatas may offer.

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