India approves greater cable FDI

Move gives 125 million households cheaper TV options

NEW DELHI -- Indian digital cable TV distribution is set to get a boost thanks to a policy approved Thursday by the government which also welcomes more foreign investment into the sector.

The Headend-In-The Sky policy means that India's 125 million TV homes (of which an estimated 90% receive services via analog distribution) may get a cheaper option for digital television services compared to existing systems such as Direct To Home and Conditional Access System.

The HITS policy is based on recommendations by the Telecom Regulatory Authority of India following months of debate between industry players and the government. HITS enables the delivery of digital television signals directly to cable operators or Multi-System Operators via satellite who then pass on digital channels to consumers, using existing cable lines.

HITS is also seen as enabling more transparency in monitoring subscription revenues, while reducing capital costs for cable operators, who will only have to invest about $4,400 - $6,500 for a downloading device for the digital signals for further distribution to subscribers via their existing cable networks.

“HITS would not only help increase the penetration of cable market further into rural areas where it has been absent because of unavailability but will also help in further reduction of prices of set-top boxes and will also lead to further consolidation of the cable market,” Indian Information and Broadcasting minister Ambika Soni said, announcing the policy which awaits a final ratification by the Union Cabinet.

Moreover, while announcing the policy, Soni also said that foreign direct investment has been allowed up to 74% for HITS service providers, higher than the 49% cap for cable TV operators. (Government approval will be required if the FDI exceeds 49%).

Currently, Wire and Wireless India Ltd., (an affiliate of leading broadcaster Zee TV's Essel Group), and Noida Software Technology Park Ltd. shave permission to offer HITS services but they will have to comply and migrate to the new policy guidelines within three months, failing which their approvals could be cancelled.

Other potential players who have reportedly submitted applications to offer HITS include Digital Entertainment Networks, which also runs the STAR DEN joint venture, CTV and Digicable.

The HITS policy restricts cross-media holdings, whereby any person or entity holding more than 20% equity in a HITS license shall not hold more than 20% equity in any other broadcasting and/or DTH company and vice versa. “These restrictions have been provided to avoid vertical integration and to promote competition,” Soni added.

The policy also states that operators can only uplink from Indian soil, in both C-Band and Ku-Band (earlier reserved only for DTH services), and are not permitted to provide signals directly to subscribers.

Unlike DTH players here, which include News Corp.'s joint venture Tata Sky Ltd., who have to pay 10% of their annual revenues as license fees, the HITS guidelines only specify the government charging one-time “entry fees” of about $2 million from HITS operators to obtain a license.