digitalization & challenges1

Success ka digital highway

Digitalization

Vs.

MSO/LCO


• Simply, use of addressable STB for Cable TV services.

• No cable TV services will be possible without STB. (Cable or DTH)

• In 4 phase till Dec 31,2014

What is Digitalization & Deadlines

Success ka digital highway3

• Are Digitalization timelines firm?

• What is best option to GO DIGITAL

• How can I fight competition – DTH, Organised MSO etc.

• How and at what cost, pay content will be available.

• How to do DAS compliance. Is it very complex and expensive?

• Ownership issue of Network

• How Network can be monetized further. Broadband, VAS, HD etc.

• What is benefit of structured business.

• What is the best technical solution for STB, Headend etc.

• How customer will feel happy.

Key Concerns- MSO/LCO


• MSOs

• LCO Management

• Billing and Collection

• Network Management

• STB Management

• Customer Management

• Broadcasters

• Government and the economy

• Consumer choices

• Cable Industry & Transformation

Impact of DAS Regulation


MSOs

• Many of the large MSOs till now have remained heavily focused on inorganicgrowth (mainly through joint ventures with smaller MSOs) in a bid to acquirecontrol over the last mile.

• The MSOs now face the challenge with respect to customer retention.

• For a secondary point acquisition, MSOs face the risk of losing the acquiredLCOs to another MSO; and for a primary point acquisition, there is the risk oflosing the end-customer to alternate technology platforms like DTH , HITS,IPTV etc.

• With the necessary investments in digitization, MSOs get a direct access to thecustomer end. The direct access to customers effectively shifts thebargaining power from LCOs to MSOs.

• Lack of availability of funding for smaller and regional MSOs. A shift to digitizedregime will require large capital expenditure on digital head-ends, back-endinfrastructure, and STB installation. Regional and smaller MSOs, which accountfor more than 50 percent of the cable TV market, finding it difficult to raise therequired capital .


MSOs

• An MSO will have to redefine the potential role of LCOs in a digitised world.However, a key question will be of how willing LCOs would be to relinquish theirstronghold over end customers and what measures are agreed upon betweenMSO and LCO to protect LCOs existing income.

• MSOs will need to partner with LCOs for roll out of STBs, education of consumersand servicing customers.

• LCOs will also play a role in collections and increasingly ARPUs.

• MSOs can use digitisation as an opportunity to enter new markets, but first,they must protect existing markets from competition.


MSO-LCO Management

• MSOs will have to redefine the exact roles/responsibilities of LCOs and whatfinancial offers/ Revenue share to offer to them.

• How LCOs should be involved in billing (who prints and distributes bills), orcollections (physical vs online collection options), new customer acquisitions (andcorresponding commission to LCOs), the installation/activation/deactivation ofSTBs, handling of complaints (as a first point of call, as feet on-the-street to resolvea complaint and service charges), and what their share in various revenues shouldbe.

• MSOs will need to finalize the agreement required for new understanding madewith LCOs.

• MSOs need to identify the training needs of LCOs’ existing manpower to servicetheir customer base and develop the technical capabilities to deal with digitisation.The training aspects should center on the sale, installation, activation/deactivationand billing of STBs.

• They will also have to ensure that the LCO and his team are able to up-sell theirpackages and VAS offerings and defend their offerings from competition.


Billing & Collection

• Billing & collection would involve various strategic decisions around bill generation, bill printing,bill distribution, collection mechanisms and the updating of collections.

• MSOs will need to choose between a physical and virtual bill, depending on the associated costimplications. In case of a physical bill, options such as ads on the bills can be explored to offsetprinting and delivery costs.

• They also need to decide when to generate bills, where to print bills and if LCOs can handlethese aspects. Irrespective of strategy, MSOs would clearly be dealing with large volumes of billgeneration and distribution and, thus, will need to ensure timely and accurate bill generation.

• The collection of payments would constitute the next steps towards Tax compliances for STB,Subscription revenue etc.

• This would involve training all customer facing personnel and ensuring that the collection data isreceived in time and customer balances are updated on time when alternative payments/checks areaccepted, along with the timely transfer of data from credit card companies, banks .

• MSOs will also need to take decisions on the customer’s “my account” page, whether it should be onthe EPG, and what information should be shared on the page.

• Data security is very important in this operation as it would require dealing with customers’personal information and payment details, and MSOs would need to comply with data privacy lawsunder India’s Information Technology Act.


Digital Headend and Network Management

• Network management includes aspects such as Composition of Digital Headend,data security, future requirement, regulatory compliances. Such decisions wouldinvolve understanding if IT infrastructure and applications can support increasedvolumes, and accordingly upgrading IT capabilities (team, hardware, software andnetwork) vis-à-vis expected changes in transactions and volumes.

• MSOs will need to ensure that their existing reporting capabilities are enough toprovide timely and accurate data for management decisions & regulatory compliances

• They will also need to ensure the storage and security of private and confidentialdata,.

• MSOs need to have backup infrastructure ready in the case of system, location andcommunication downtime, and build adequate redundancies to ensure that thecustomer experience does not stop or deteriorate.

• MSOs will need to evolve from B2B to B2C business, which is a matter of scalingtenfold upwards from their present scenario.

• Lack of Skilled and experience manpower who can operate Digital Headend etc.


STB Management

• First step will be to manage activities related to the procurement, deployment and repairs ofSTBs.

• Closure of technical specification and BIS certification.

• MSOs will have to undertake procurement planning to decide how many STBs to purchase and when,along with delivery timelines.

• Perhaps, MSOs will need to de-risk their supply chain by splitting orders between differentsuppliers.

• MSOs will need to plan for storage and distribution and arrange for additional warehousingcapacity if required and decide if they need to pre activate STBs.

• The challenges involved would include ensuring the accurate disbursement and tracking of STBsto LCOs, along with the management of inventory and re-order levels across warehouses anddistributors, monitoring the activation of STBs and collection for installed STBs.

• They will also need to decide upon the insurance, warranty and maintenance plans. Thechallenge will be to deploy adequate personnel and resources to monitor the servicing, repair andreplacement of STBs, as required, and effectively managing reverse logistics. Such activity will alsoentail the adoption of efficient supply chain management practices.

• LCO in a city with an average base of 1,500-2,000 subscribers may need to seed around 10 to 15set-top- boxes every day. Most households would typically demand that the installation, whichtakes about an hour, be done during a limited time window of 6-8 PM on weekdays or duringthe weekends. This may lead to delays in the installation process.


Customer Management

• Customer management would involve interactions with customers following STBactivation.

• This will be particularly important during the first three months after activation, whenmost customer queries will arise and customers need to be educated

• MSOs will need to set up a call-center led service delivery, capable of handling expectedvolumes, which can be in house or outsourced, depending on the cost implications.

• They will need to decide on the languages that the call center would support. Theywould also need to develop back-end capabilities to effectively link call centeroperations to the CAS system, subscriber management system and various paymentgateways.

• MSOs could face challenges in ensuring that the service levels offered to customers arewithin the acceptable parameters in all spheres including TRAI regulations, includingpackage-change requests, revenue collection, the execution of VAS and the handling ofcomplaints.

• Another critical aspect will be the integration of the call center with offline operations,and ensuring that the change in the touch point from the LCO to the MSO does notadversely affect customer experience.

• MSOs will need to ensure KYC compliance within a reasonable time of activation andmanage document handling, storage and retrieval efficiently with the help of an adequateMIS.


Broadcasters

•This will increase subscription revenues for broadcasters.

•The increased channel capacity of digital system will motivate broadcasterstoward niche, targeted and HD content.

•The carriage costs paid by broadcasters in view of the limited bandwidth ofanalog cable, may decrease post digitization.

•MSOs will have to decide how to define carriage and placement charges afterdigitisation and re-negotiate existing deals with broadcasters.

•Renegotiation of content costs with MSO’s. Cost will significantly change basedon the strength and the audience of the channel.

•The broadcaster’s ability to push less popular channels will tend to reduce.

•Will seek frequently reports from SMS, CAS systems of MSO.


Government & Regulators

• Present Govt. loss on Taxes are approx 10,000 crs/ yearly.

• The government therefore has sufficient incentives to push digitization.

• Digitization will also help the government pursue India's broadband goals and thereby help to boost economic growth.

• Its already almost 3 years that Digitalization is in process. 42 big cities has already seeded arrox 40 mn STB.


Consumer Choice

1. Digital cable TV will improve the consumer experience and resolve legacy issues from analog cable services.

1. Consumers will gain access to a. More TV channels; b. Attractive packaging options with differentiated content across local,

regional and niche genres;c. A better viewing experience; Digital qualityd. Improved quality of servicee. Proper billingf. Customer care services


Cable Industry Transformation

• Some estimates expect a 6X (Times) increase in subscriber revenues forcable MSOs. Subscriber declaration levels are expected to increase from 15%currently to 100%.

• Additional drivers and differentiators will come from bundled broadbandand high-definition (HD) services.

• Broadband will reduce the payback period on digitization;

• The main challenges , apart from managing subscriber churn to DTH, areCarriage and placement (C&P) fees which will drop by about 20–50%; and

• Incentivizing revenue-sharing agreements have to be struck with LCOs inorder to drive digital into the home services.

• Automated compliances to various regulatory authorities will ensure thetransformation of MSO/LCO to structured company.

digitalization & challenges1

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