CAS: Deeper Into The Mire

Raghu  

WITH national elections due in a bit more than a year, and elections to the Delhi Assembly less than a year away, the BJP is into full election mode. This has meant being driven by populism on all fronts, with policies and announcements earlier championed with a crusader's zeal by various ministers being rolled back on a daily basis. The latest potential victim is the Conditional Access System or CAS to regulate cable television services scheduled to come into effect in the four largest metropolitan cities of Delhi, Mumbai, Kolkata and Chennai on July 29 on "an experimental basis" prior to being introduced nationwide.

There is already a major public outcry against the system, which looks all set to cost the consumer dearly and to reduce rather than enhance her choice. Consumer concerns are being exacerbated by confusion on all fronts as to what CAS will entail in terms of costs, choice of TV channels, benefits or otherwise. Numerous different voices are being heard from Cable TV operators, broadcasters, consumer organisations and not least from leading lights of the ruling party who are getting increasingly concerned about a massive consumer backlash and its impact on the BJP's electoral misfortunes. Various BJP ministers and leaders are pleading with the prime minister and his Cabinet colleagues to step in and do something to allay consumer fears and reduce the inevitable financial burden on them. And last week the redoubtable L K Advani himself convened a meeting with the BJP president and the beleaguered I&B minister Ravi Shankar Prasad after which Venkaiah Naidu made clear that the BJP would insist and obtain a "consumer-friendly CAS"

The BJP has none but itself to blame for this mess and consumers would be entirely justified in turning their anger entirely against the ruling party. Everyone would recall how, just a few months back, cable operators had gone on prolonged strike demanding immediate passage of the CAS Bill by parliament with the full backing of the BJP whose Sushma Swaraj was then the high profile minister of Information & Broadcasting. With criticism being voiced by various consumer organisations and virtually the entire opposition the BJP first tried to hide behind the cable operators and then tried to pass the buck to the Opposition parties cynically calculating that public anger would turn against them. The Cable Operators too left no stone unturned and even threatened Opposition MPs with disconnection of cable services to their homes if they did not withdraw their resistance of the CAS Bill. In this charged atmosphere, with parliament itself being blackmailed by cable operators with the tacit support of the BJP, the CAS Bill was pushed through by the BJP. An article in these columns in PD had then discussed the pros and cons of the CAS Bill and the various forces behind its introduction and passage.

CONSUMERS: THE BIGGEST LOSERS                   

The conditional access system provides for transmission of an encrypted or scrambled signal by the cable operator to consumers who would receive unencrypted or normal signals on their TV sets through a set-top box which would unscramble the signal only for those channels for which the consumer has paid. In theory, CAS is supposed to widen consumers' choice by providing her only those channels which she wants and has paid for instead of the present system where she pays for close to 80 channels most of which she does not want. Again in theory, broadcasters would gain by having a more accurate idea of how many viewers they have through each cable operator and can therefore levy a more rational fee with the cable operator being unable to underpay as they do at present by under-quoting the number of subscribers serviced. Operators in turn sought to benefit by being obliged to deliver only those channels individual consumers pay for rather than being unable to recover costs from reluctant consumers while being compelled to pay the broadcasters for pay channels. In practice, however, as unfolding events are making clearer by the day, it is difficult to see who actually among these stands to actually gain and how.

Consumer choice is going to get narrower and at a higher price, certainly in the short to medium term. As of now, consumers have access to about 80 channels some of which are free-to-air and some pay channels. In most areas in the metros, cable operators charge around Rs 200, stray cases of overcharging excepted. With CAS, consumers will first have to acquire a set-top box earlier likely to cost between Rs 3000-Rs 7000 either on one-time payment or through a rental system with a fairly hefty deposit, and will then have to pay additionally for the channels she wants to view.

DESPERATE BJP    

In order to mitigate the clear and expected burden on consumers, and thus also mitigate their anger against the BJP-led government, the latter has announced several measures recently. Slashing of customs duties from 50 per cent to 5 per cent on the wholly imported set-top boxes --- there being no Indian manufacturers at present and the government being in an unseemly and unexplained haste to introduce CAS without waiting for indigenous manufacturing capacity to be built--- is expected to bring some relief.

Cable operators were pressured into declaring that they will offer a minimum of 32 free-to-air channels at a floor price of Rs 72 per month with consumers being able to choose and pay for additional channels as they please. However, it soon became clear that the channels watched by most consumers would not be covered under this scheme since they would come bundled together with other channels in a pay channel bouquet such as those offered by Zee, Star, Sony etc each of which would charge some hitherto undisclosed amount, only Zee which is also one of the major cable operators through its Siticable network having been obliged to announce a bouquet price of Rs 72. Other broadcasters are yet to announce prices and the government, shying away from issuing an official Notification as they had earlier said they would, merely written to all broadcasters to announce prices by June 10 and confirm unbundling of their bouquets by also specifying a la carte prices i e prices for each channel.

Under increasing pressure from consumers, government this week announced they had further persuaded cable operators to increase this basic offering from 32 to 45 channels with the minister informing the BJP president that consumers would receive about 75 channels at Rs 200 or less. If this actually comes about, this being roughly the present norm, then why was this complicated CAS introduced at all? If at the end of it all, the consumer pays less than at present, why are broadcasters and especially cable operators pushing for CAS which they clearly expect to bring in additional revenues? As the entirely CAS plan appears to be unraveling in the face of the BJP's nervousness about voter reaction, what are we missing?

BETWEEN THE LINES             

Some commentators believe that it is actually the broadcasters who have been the main lobby behind CAS. Broadcasters believe they are being cheated by cable operators who under-quote the number of subscribers and therefore pay them less than their due, making them rely too heavily on advertisement revenues. Broadcasters' revenue from operator subscriptions are believed to be in the range of 25-40 per cent and, so the argument goes, they would like raise this. On the other hand, broadcasters stand to lose on advertising revenues on pay channels with CAS since broadcasters will have a more accurate figure of viewers watching particular channels. It is well known that corporate advertisers have been unhappy at the rates being charged by broadcasters especially since they have no accurate means of knowing how many viewers actually see the particular channel, leave alone the particular programme, given the large-scale fudging of viewer figures by cable operators. Last year a major scandal broke out when it became known that viewership surveys were being doctored to suit particular broadcasters! Indeed, it was argued by the author in the previous PD article on this subject that corporate advertisers were among the major hidden forces pressurising the government to introduce CAS as the most effective means of regulating the cable TV industry.

A closer look would show, however, that there are other shadowy figures too lurking behind the scenes who are deeply concerned with the introduction of CAS.

It is the technology itself of CAS which should give us the clue. As in good mystery novels, look for the motive and you will find the criminal!

The long-term impact of CAS lies not in cable TV along but in multi-media, interactive information technology (IT) services. The key advantage which CAS brings with it is addressability, that is the ability of the (at present) cable TV operator to address each individual consumer with (at present) cable TV signals. With top-of-the-line set-top boxes having the ability to receive, distinguish and transmit TV, video, telephony, internet etc signals, this opens the door to the ultimate corporate dream of being able to deliver telephony, TV, internet and other IT-enabled services such as banking, shopping, utility payments etc direct to the consumer in her home. In today's IT environment in India there are two major categories of players in this game --- the cable TV operator and the basic telephony companies, with broadband connectivity companies being as yet minor players, all of whom have cables running right into peoples homes. Cable TV in particular has penetrated into roughly 35 per cent of homes in the metros and other major cities and towns. 

It is not for nothing that the once independent, small-time colony-level cable TV operator was soon gobbled up by large Cable TV corporates which enrolled the former as franchises rapidly converting a free-for-all market of small operators into a duopoly of two giant networks, Siticable belonging to the Zee network and Incablenet belonging to the Hindujas. Zee already has significant cross-holding in broadcasting, which many commentators feel should have been safeguarded against in the Broadcasting Act itself but was not and, if it enters into telephony and other IT services, would give it a strong entry position and edge in a potentially highly lucrative market of the future.

Of the basic telephony services, Reliance is currently way ahead of Tata with the other big player being the state-owned Bharat Sanchar Nigam Limited. It is interesting to note that the Hindujas were unable to enter the bidding for basic telephone services, on which they were very keen as they had already made substantial investments and entrenched themselves in the cable TV distribution business, only because they were enmeshed in several economic offense cases including the Bofors case. With broadband cables already reaching numerous homes, access to addressable set-top boxes in homes would enable basic telephony service providers to also provide other IT-related services.

LOOPHOLES IN REGULATORY FRAMEWORK

While none of these major players have made public any immediate plans to enter the TV business, Reliance spokespersons would only confirm this status "for the next few months". Meanwhile BSNL has started inviting proposals for franchises and Reliance has drawn up plans for entering the video business through interactive set-top boxes. With the introduction of CAS and the entry of set-top boxes into homes, the task of these telecom giants would be made considerably easier. In months to come, one is therefore likely to see some shake-ups in the cable TV distribution business involving tie-ups with or take-overs by telecom giants.

In typically short-sighted fashion, as pointed out in these columns while discussing the Broadcasting Bill, the government has not anticipated these developments and has left many loopholes in present legislation and regulatory frameworks which are being taken advantage of by large corporates such as Reliance and others to muscle in on uncharted territory, stake out a position and then present government with a fait accompli while pressing for concessions from this status.

The Broadcasting Bill does not deal properly with cross-holdings between content production, broadcasting and terrestrial distribution, nor does it deal at all with media convergence. CAS of course makes no mention of media convergence at all even though it provides the thin end of the wedge to prise open the market for convergent IT services to the massive advantage of entrenched players in the cable distribution and basic telephony businesses. And all this while there is yet another carrot being dangled for everyone to drool over, the Convergent Communications Bill which is pending before parliament which common sense would have indicated should have been considered and taken up first. The present maneuvering over CAS, the history of its introduction and the antics of the various lobbies behind it, as well as the clouded story of privatisation and "liberalisation" of the telecommunications sector will all unfold together in forthcoming episodes of this sordid drama over the next few months.