When the conditional access system (CAS) was implemented in three metropolitan cities in India – New Delhi, Mumbai and Kolkata – on January 1, 2007, the Indian broadcasting industry entered a new era.

For years, the under-reporting of homes connected to cable or satellite meant that less than 20% of subscription revenues went to the broadcasters. Putting it mildly, there was a lack of transparency at the last mile of the distribution end of the business owned by 30,000 or so local cable operators (LCOs) across India.

The subscription per user varied from US$2.20-$6.60 a month per connected household in urban India to as little as US$1.30 in certain rural and semi-urban areas. But all this is finally changing.

The adoption of CAS will ensure that the revenue from paid channels will be split among broadcasters, MSOs and cable operators in the ratio of 45%, 30% and 25%.

Rajesh Jain, national industry director – information, communications and entertainment, KPMG (India) said four metro markets presently account for 12% – 14% or 9.5 – 10 million households of the total cable and satellite households pie in India.

“Consumers will get choice, broadcasters will get more revenue and the last mile operator (will be) adversely affected in the  long run. Broadcasters will benefit as they will overcome the problem of under-declaration, which is currently estimated to be 20%,” says Jain.

CAS was originally planned for 2003, but apart from the southern city of Chennai, attempts to introduce the technology foundered, whether it was due to political considerations or inadequate preparations on the part of the industry. With elections pending, the government postponed the introduction of CAS so as not to incur the wrath of people who would have lost access to some channels.

When the Delhi High Court gave its verdict to revive CAS two and a half years later in May 2006, there were obvious concerns about its implementation. Understandably, there was some confusion in metro areas in the first weeks of 2007.

Regulator Telecom Authority of India (TRAI) wielded its power by regulating the price of pay channels, with the monthly cost of each fixed at $0.11. Under CAS, subscribers pay US$1.70 for the total package of free-to-air channels.

According to the Ministry of Information and Broadcasting, 380,000 set-top boxes were purchased by subscribers in three metros – 165,000 in Delhi, 178,000 in Mumbai and 41,500 in Kolkata—through mid-January. 

Unlike 2003, consumers can now choose between CAS and direct-to-home. Tata Sky, an 80:20 joint venture between Tata and Star, which started its DTH service in August 2006, came up with an enticing six-month subscription-free offer for a limited period. A subscriber was required to pay US$67 for a set top box and US$22 for installation. The service offers more than 100 channels for US$6.60 per month. Tata Sky had more than 300,000 subscribers in January and aims for one million by the end of its first year.

The DTH sector, which includes other players such as Dish TV and state-run DD Direct, already boasts more than 3.8 million subscribers. Dish TV expects to have about 2 million by March.

“DTH is steadily gaining entry into the television distribution market today. At present, they are also out of the ambit of ‘price controls’ that are imposed on the cable television distribution services,” said Timmy Kandhari, Leader Entertainment and Media Practice, PricewaterhouseCoopers.