by TM Arun Kumar

Evolve or Perish

Aug 26, 20135 mins

Proliferation of broadband technology has forced cable and DTH operators to face a Darwinian threat. Defeat is certain if they donu2019t up the ante before itu2019s too late.

Arun has covered the IT industry in India since the time 80386 was cutting edge, MS DOS was the predominant desktop OS, and Internet was still a few years away.

Currently, the situation in India is that both need each other to survive. While one has access to the customer, the other has the content, which makes them in a way mutually dependent.

Do you really need a cable or a DTH connection to watch television? Intuitively, one would tend to answer yes. But, think again, and one is more likely to say, perhaps not. Why? The answer is simple: Streaming video over the Internet. Video streaming, live or otherwise, has been around for sometime now. But, it has mainly been restricted to tech-savvy people having access to a computer and high-speed broadband Internet connection. Broadcast television, on the other hand, has been ubiquitous, at least for the last decade or so even in the developing world, and doesn’t require any high-tech knowledge. Just switch the idiot box on and use the remote. Simple. That is, up until now. But, as Bob Dylan wrote a long, long time ago, “the times they are a changing.” And, how relevant it is even now! So, what’s changing? The idiot box is becoming smarter and broadband Internet connections are becoming popular. Though broadband penetration in India may currently not be as high as in the developed countries, it, however, is poised for a huge growth. There are estimates that the number of broadband connections in India will reach about 600 million by 2020, up from about 20 million at present. That’s a staggering growth over the next seven years, which many may dismiss as impossible. But, when you think of how the mobile phone penetration grew in India over the past decade, who will bet against this projected growth? Imagine the options for broadband to be delivered—from fibre to the home to USB dongles to 3G and 4G services over mobile networks. On the other hand, the idiot box is becoming smarter. You can connect your TV—or should we simply call it a display—to the home router over Wi-Fi or through an Ethernet cable and on to the Internet. With mobile apps to control the TV, the smartphone or tablet doubles up as a remote and streaming becomes even easier. And in a few years, when gesture-based remote comes, imagine the possibilities. Now, combine the two—smarter TV and ubiquitous broadband—and you start wondering would television content in the future be delivered over broadband Internet rather than through the traditional cable or DTH. And if that were to happen, how are cable and DTH operators going to survive in the long run? Is their current business model of delivering television content to people’s homes going to go kaput sooner rather than later? So, in essence, will they end up selling calculators in an era of computers? Or to put it in a TV parlance, will they be selling 14-inch CRT-based black and white TV sets in an age of 51-inch flat screen LCD or plasma HDTVs? And what can accelerate this change is the conflict between the television broadcasters and the cable and DTH operators. As it is, there is enough amount of friction between the two over issues such as carriage charges, which essentially are fees paid by the broadcasters to the cable operators to carry their channel in the cable networks. Now, these carriage charges account for anywhere between 2 to 10 percent of a broadcaster’s cost, but are a major source of revenue for the cable operators. It’s an uneasy relationship at best and is tested repeatedly. Earlier in the year, cable operators Hathway and Gujarat Telelink stopped carrying a bunch of channels over their networks due to a dispute in the carriage fees. About a year ago, BBC pulled out two of its channels from India citing high carriage costs. And these skirmishes continue. Now, India is an exception where the broadcasters pay the carriage fees. Worldover, it’s the other way round—cable operators pay the broadcasters the carriage fees for the right to carry their content. Currently, the situation in India is that both need each other to survive. While one has access to the customer, the other has the content, which makes them in a way mutually dependent. But, what broadband is doing is that it’s breaking this mutual dependence by giving a new avenue for broadcasters to deliver their content to the customer. So, if the broadcasters start taking the new route via the Internet, where does it leave the Hathways, Siti Cables, Tata Skys, Dish TVs and their ilk? The bottomline is simple: A 10x force is hitting cable and DTH operators’ business. If they don’t quickly morph into ISPs who also offer cable TV services, their business may go the same way that pagers did. So, evolve or perish.