India takes slow steps towards DTH

Radhakrishna Rao, Interspace’s correspondent in Bangalore, India, delivers a timely overview of the current prospects for DTH

India is not a newcomer to the area of direct satellite broadcasting technology. During 1975-76, using the ATS-6 satellite provided by NASA, India carried out the Satellite Instructional Television Experiment (SITE), hailed as the most ambitious satellite-based mass communications experiment carried out anywhere in the world at that time.

Under SITE, 2,400 augmented TV sets located in rural pockets spread over six Indian states received instructional programmes directly from ATS-6 nicknamed the “teacher in the sky”. And using the capabilities of the INSAT domestic satellite system India sustained the tempo of direct broadcasting for distance education, interactive training, e-governance and telemedicine.

INSAT went on stream in 1983 as a multipurpose space system providing telecoms, TV and weather monitoring services. INSAT-3B satellite, launched by Ariane in March last year is now used for interactive training, rural development, computer interconnectivity and data exchange services as well as telemedicine services in the eastern Indian coastal state of Orissa.

INSAT also enabled rapid expansion of TV coverage in India. Today about 85 per cent of the Indian population can receive TV. But it was the live telecasting of the Gulf War and operation ‘Desert Storm’ in 1991 by CNN that paved the way for the emergence of cable TV in India. However, it was Zee TV and its owner Subash Chandra, which catalysed the industry into a vibrant growth spiral when it initiated operations in 1992. Zee’s success tempted several other private players to enter the arena resulting in an overcrowded market.

The more recent attempts to usher India into DTH television has been marked by confusion and uncertainty and firmly blamed on the not so friendly DTH policy of India’s government. A more liberal DTH policy was approved by the Indian government last October.

The Indian Ministry of Communications issued a Gazette notification in January 2001, saying the previous prohibition on the establishment, maintenance, possessing or dealing with equipment capable of receiving Ku-band TV broadcasting signals directly from satellite had been lifted.

Sushma Swaraj, India’s articulate Minister of Information and Broadcasting (I&B), pointed out that the previous ban, in place to protect India’s culture, is no longer valid in view of the vast technological changes now taking place.

But the new legislation placed severe restrictions on investment ostensibly to bar monopoly and cross media holdings, and further inter-departmental squabbles between the Law Ministry and I&B Ministry, have combined to delay the convergence bill that would have brought into being a regulatory authority for DTH. The confusion, plus high tariff entry points, has conspired to dampen the initial euphoric spirit of the would-be DTH entrants.

It is little wonder that a majority of the outfits planning to enter DTH have neither announced a timeframe for launching DTH services nor are they clear about the investment they would make, or their preferred hardware. The most dispiriting feature of the DTH policy is the 20 per cent sector cap. This implies that no broadcasting or cable company would hold more than 20 per cent equity in any DTH venture. I&B Ministry sources say that this sector cap is essential to prevent the emergence of monopolies through vertical integration. As such the principal investors in a DTH enterprise will be IT or telecom players, or companies not directly involved in broadcasting or the entertainment business.

Dismayed over these conditions, the potential DTH players are now busy lobbying for the removal of “this highly discriminatory clause” in DTH policy. “In the existing scenario, companies offering telecom services in the country will be the most suitable partners,” says Raj Ratan Shah, CEO of Prasar Bharati, the Government of India body responsible for regulating the operations of All India Radio and TV network Doordarshan.

Meanwhile Subash Chandra, who is also the chairman of the National Media Committee of the Confederation of Indian Industry (CIIi), has described the 20 per cent sector cap as “impractical and objectionable”. Further, as in the case of the telecom services, the total foreign equity investment – including foreign direct investment (FDI) and investment by foreign institutional investors, non-resident Indians and overseas corporate bodies – is limited to 49 per cent. In addition, foreign direct investment by a broadcasting or cable company is limited to only 20 per cent.

However, licences for DTH service will be issued on a non-exclusive basis by the Ministry of I&B and will be valid for 10 years. Furthermore, an initial entry fee of Rupees 100 million (E2.31 million), in addition to an annual royalty amounting to 10 per cent of the total revenue collected by the DTH operators, has been fixed. The licensee would also be required to furnish Bank Guarantees of Rupees 400m, valid for the duration of the licence period. But the rider is that the applying company will have to be a company registered in India under the Companies Act of 1956, and whose management control rests with Indians. The enterprise must have an Indian CEO and a majority of Indian directors.

Moreover, the DTH licences do not cover Internet, voice, fax, data and communications services. It is little wonder there is widespread resentment among the potential DTH players for this restricted policy decision. They say that in this era of convergence, multiple services should be allowed on a single licence.

Uplinking for DTH broadcasting must (within 12 months) be from earth stations set up on Indian soil. This is a far cry from the earlier policy that barred private broadcasters from uplinking from India. Content will have to pass through the common encryption and conditional access systems. DTH operators will also have to follow the programming and advertising code of the I&B Ministry and desist from carrying ads prohibited by this ministry.

Of course, the new rules require DTH licensees to carry the Doordarshan channels on the most favourable terms. In other words, DTH operations may not be a money spinning enterprise. A report from Arthur Andersen has pegged the potential DTH subscribers at one million to begin with and five million by the year 2006. Right now there are around 30 million cable subscribers in India and the number of cable connections in the country has been growing at the rate of 20 per cent per annum. While a cable connection can be had for a monthly fee of around Rs 100, a DTH subscriber will have to spend an initial Rs 15,000 for hardware in addition to a monthly subscription of around Rs 750. As such it is envisaged that only a minority of cable subscribers in India will switch over to DTH.

As it is, Zee TV was among the first broadcasting outfits to have announced its plan to enter DTH sector in alliance with Chennai (Madras) based Sterling Infotech, which provides IT services. Before the announcement of the DTH policy, the alliance had hinted at providing set-top boxes for Rs 5,000. The Zee-Sterling alliance had also planned to hook up computers to DTH with DTV cards costing Rs 995.There are around nine million computers in India and DTH operators have an eye on this market segment.

In fact Sterling has already leased eight C and Ku-band transponders on Singapore Telecom’s ST-1 satellite. And at the height of the euphoria preceding the DTH policy announcement, the alliance had planned to offer 60 channels.

Interestingly, the Agrani satellite of Mumbai-based ASC Enterprise, in which Subash Chandra’s Essel Group holds a majority stake, is likely to give Zee-Sterling its initial DTH services. The 4,800kg tri-axis stabilised Agrani satellite, built by Lockheed Martin, will be launched by a Proton Breze M rocket next year.

Star India has not yet announced when it will launch the DTH services and what shape it will assume. But the company has hinted that Interactive TV will be a major component of its DTH operations. Way back in 1997 Star India had planned to launch a DTH service in India and had had even set up an infrastructure for the purpose.

UK-based Hinduja Group has also unveiled a plan to enter the Indian DTH market. But the plans, including partners and investment, are yet to be finalised. A P Hinduja of the group said, “We are only at the starting phase of the real growth. Carrying broadband signals into homes is part of the bigger offer we can make to our customers.”

Modi Entertainment is also planning a tie-up with Shinawatra Satellite Corp of Thailand for launching DTH services in India. Loral and Measat have also expressed interest in making available satellite DTH capacity. On another front, global satellite player Europe*Star is negotiating with the three Indian companies for leasing out up to six transponders onboard Europe*Star-1. According to Ravi Sharma, Europe*Star’s local manager, the company will lease out four to six transponders to the Indian company with which it will finalise the deal. Not to be left out is Globecast, which also says it will provide an Indian infrastructure platform.

The key DTH requirements

• No broadcasting or cable company can hold more than 20 per cent equity in any DTH venture.
• Total foreign equity investment including foreign direct investment (FDI) and investment by foreign institutional investors, non-resident Indians and overseas corporate bodies is limited to 49 per cent.
• An initial entry fee of Rs 100 million.
• An annual royalty amounting to 10 per cent of the total revenue collected by the DTH operators.
• Bank Guarantees of Rs 400 million, valid for the duration of the licence period.
• Uplinking for DTH broadcasting must (within 12 months) be from earth stations set up on Indian soil.
• The enterprise must have an Indian CEO and a majority of Indian directors.