Cable Loot

Is there any rationale behind what you are being charged by your cablewallah? Poonam Batth investigates the goings-on in the cable industry and finds that a lot is amiss.

AS you sit at home flicking channels and sink into the fluff of your pillow to follow soaps, little do you realise that you are actually participating in a sweepstake that is worth several thousand crores of rupees. And though you pay for it through your nose and are an active participant, you are never the winner. The cablewallah collects it all, never mind the occasional protest against the rip off.

A few years ago, for a mere Rs 75 (or at the most Rs 100), a whole range of TV channels was available to the viewer. But things have changed since then. Today, the viewer has to dole out anything between Rs 200 to Rs 300 for just a few more channels which are said to be paid channels. However, between what these paid channels actually cost and what the viewer pays lies the unregulated territory of underhand dealings between channels, operators and the middle men. Between them they allegedly make a quick buck at the expense of the TV viewer. But first, the basic facts:

• There’re five main pay packages — ESPN and Star Sports, Star, Zee, Sony and Modi Entertainment Network.

• The cable industry is worth Rs 40,000 crore approximately.

• Of the 70-odd million television homes, 42 million are cable and satellite (C & S) TV homes. There are over a lakh cable operators across the country.

• Some of the biggest global media companies like News Corp, AOL-Time Warner and Sony Pictures Entertainment have extensive interests in India.

Major mess

With big stakes and global players who are aided by street-smart local ones, the Indian cable television market could be expected to be an orderly one. However, this is far from true. In fact, the Indian cable market is one of the most murky ones and the mess suits everyone who operates in it. Except, of course, the viewer.

The situation has taken a turn for the worse with all three actors in the cable TV drama — the nexus of pay channels, the multi-system operators (MSOs) and the cable TV operators — trying to grab a bigger slice of the pie before the subscriber-friendly Conditional Access System (CAS) becomes operational in September in some cities. However, a combination of coercion, cooperation and competition is bound to continue in the CAS era, too. For example, the viewer is harassed by a constant rise in subscription fee and is made to pay for even those channels that he does not even have access to. The average subscription fee per month has risen by a 100 per cent — from an average of Rs 100/month in 1994 to Rs 200- Rs 250 in 2003. And as per industry sources, though at present an average C&S household receives some 65-80 channels, only 15 are actually watched. Thus, the consumer pays for all the other channels to which he either has no access or doesn’t watch.

The cash flow of the cable industry is decided by pay channels (broadcasters) who charge a fixed amount from the MSO. This amount is based on the number of subscribers to whom the signal is distributed directly or indirectly by the latter. Besides running his own cable distribution set up, where he directly delivers the signal to the subscribers, the MSO further sells the signal to the last-mile operator or the local cable operator.

The tussle starts from the point of origin of the broadcast. There has been a running feud between the MSOs and the broadcasters. The cable operators allege that the broadcasters frequently arm-twist them by raising the subscription, the latter complain that the MSOs give to them only 25 to 30 per cent of the actual subscription that they realise from the cable homes. In other words, as much as 70 per cent of the revenue is illegally pocketed by the cablewallahs. Broadcasters maintain that since they never get their due from the total revenue stream thanks to the rampant practice of under-declaration among cable operators, they have to hike up the subscription fee frequently to make up for the losses.

Cable operators, on the other hand, maintain that the entire exercise of wiring up homes till the last mile and providing round-the-clock services to the consumers is an expensive affair. They also have to deal with consumers not willing to pay fatter bills. Besides, consumers also shy away from paying the 8 per cent service tax. Put together, they say, these actuals eat into their margins. Hence, they claim to be not guilty of absorbing a chunk of the subscription fee and the poor service that they provide.

Chandigarh has about 1.5 lakh cable homes. The monthly revenue generated by the entire system is pegged at Rs 2.25 crore per month. Chandigarh has two MSOs — Siti Cable and Future Communications Network (FCN). Together, they command over 90 per cent of the market share. The market includes Mohali, Kharar and scores of neighbouring villages and colonies. Mohali, in addition, has an independent MSO — Punjab Cable Services. Panchkula, on the other hand, has three — Panchkula Cable Network, Krishna Cable Network and an independent operator. While Mohali has some 22,000 connections, Panchkula has around 25,000 cable homes.

Cable operators allegedly pay only a part of their total revenue to the MSO. The real subscriber list is never disclosed to the MSO. Haggling over the numbers, it is said, is part and parcel of the business and the subscription figure is generally an ‘understanding’ arrived at between the two. This practice has been going on ever since the first paid channel, Star Movies, came in. An average cable operator, industry sources said, with a subscriber base of 3,000 to 5,000 connections pays about 30 per cent of the total subscriber revenue to the MSO. On the other hand, a small cable operator with a base of 500 connections would be paying anything up to 50 per cent. Apart from forming a major part of the income of the cable operator, the under declaration of the subscriber base gives the operator a chance to charge different rates from subscribers at different locations.

The MSO, on its part, generally pays 25 to 30 per cent (depending upon the size of the MSO) of the money it makes to the pay channel. This number is also decided after due negotiations with the representatives of the pay channel. Interestingly, Siti Cable is the distributor for Zee TV, Sony and Modi Entertainment Network, while FCN is the main distributor of Star and ESPN. Sources disclose that an MSO operating from Chandigarh till recently was found to be paying for just 3,000 connections instead of the 22,000 connections.

According to available figures, the MSOs are at present paying Rs 260 per connection to the broadcaster. It includes Rs 228.55 as fee for pay channels, Rs 25 as service charges and Rs 5 as copyright charges for showing feature films. The MSO, in turn, is charging Rs 230 per connection from the cable operator, who fixes his own rates for the consumer.

While there are over 50 free-to-air channels, the subscription charges of five pay channel packages per connection per month as of today are: Star Package (Rs 60 ), Zee package (Rs 55), Sony package (Rs 55), ESPN and Star Sports (Rs 32), Modi Entertainment Network-DD Sports/Ten Sports (Rs 26.55). Among the free-to-air channels are MTV, Aaj Tak, NDTV India, NDTV English News, Headlines Today and other music and news channels.

Most of these pay channels, led by Sony TV, which had the exclusive rights to the World Cup (Set Max), had hiked their subscription rates this January in view of the World Cup mania gripping sports buffs. With each of these channels hiking the rates by anything between Rs 3 and Rs 15 per subscriber per month, instead of the usual 10 per cent annual hike, the resultant cable tariff hike in Chandigarh, Panchkula and Mohali was anything between Rs 40 and Rs 50 per month. The viewer had to shell out anything above Rs 200 (Chandigarh, Mohali) and Rs 275 (Panchkula) for getting his picture on the tube. In other words, the consumer had to bear the final brunt of Sony paying Rs 1750 crore for buying the exclusive rights of the World Cup.

Different sectors, different rates

From Rs 50 in neighbouring colonies and villages to Rs 300 in Sector 9, the cable rates vary from place to place. While those residing in Sectors 39, 40, 41, 38 (West), 45, 46, 47 besides Dadu Majra, Maloya, Mullanpur Garibdass and Dhanas are only paying Rs 75- Rs 100 for a connection, those in ‘posh’ sectors (8, 9, 12, 16, 18, 21) are paying between Rs 200 and Rs 300.

In contrast, the residents of Sectors 35, 38 and 23 watch the same line up of channels by paying Rs 150, Rs 160 and Rs 180, respectively. This is largely due to the competition between two cable operators who service these areas.

In Mohali the subscription rates vary between Rs 100 and Rs 125 when there are two or more operators in an area. It is over Rs 200 where there’s only one operator. Panchkula, thankfully, has a cable syndicate which has fixed the rate at Rs 275. The rates had earlier been hiked to Rs 325 per month following a steep hike in pay channel packages.

The cable TV system has become a necessity, particularly for the elderly, kids and housewives. In the absence of any regulatory mechanism to monitor the functioning of various satellite channels, the complaints of the consumers in the region range from arbitrary hike in subscription rates to channels going on the blink. "The service is so bad that if a cable boy was to enter my house he’d get a beating instead of payment,’’ fumes Harvinder Matharoo of Sector 30.

Cable operators allege that the MSOs create a monopoly by misusing their status and muscle power. Recently, a group of cable operators alleged that two MSOs were running the show in the city and surrounding areas and had been engaging in unethical businesses practices in a bid to take over their cable networks by underhand means. Owner of Punjab Cable Services Capt R. B. Singh alleges that the two pay only for 25-30 per cent of the total connections to the pay channels (of which they control the distribution), and they use the rest of the money to buy out other networks. "The modus operandi is to browbeat independent operators like us to either enter into partnerships or to sellout. They start harassing, snapping off signals for channels."

Justifying their strategy of understating their connections, Rajesh Sharma, a cable operator with a wide network says, "Multi-system operators charge Rs 230 per subscriber from us, and we, in turn, provide the service at about Rs 150-Rs 175. Besides this, we have to meet the office expenses, salary to employees, maintenance and upgradation expenses. We run into losses this way."

Residents of Sector 34 have taken the lead by taking up cable distribution services there. "We were getting fed up with the frequent exploitation, harassment and threats of disconnections from cable operators,’’ says Col D.R. Nijhawan, president, House Owners’ Residents Welfare Association. "All the three operators had suddenly decided to hike charges from Rs 150 to Rs 210 a day prior to the World Cup." The residents have entered into an agreement with Mohali-based PCN, which has agreed to provide the signal for showing 40-odd free-to-air channels at Rs 50 per month per subscriber.

Meanwhile, a Joint Action Committee (JAC), comprising six members of the Cable Operators Association, has been recently constituted to take care of this disparity and protect consumers’ rights. The Federation of Consumer Rights, Punjab, has also approached the Central Excise and Customs Department to ensure all cable operators in Punjab and Chandigarh pay 8 per cent Service Tax and reduce the monthly charges to below Rs 200. The Consumer Forum, Chandigarh, has also approached the Ministry of Communications to check the fleecing of consumers.

As a rescue act, the UT Administration has also asked the cable operators to furnish the details of the cost incurred on providing the service, the number of subscribers, the monthly subscription fee and the amount paid for pay channels. It needs to step in to check the monopoly of the cable operators.

The situation may ease a bit in the near future. According to K.S. Lamba, advocate, "Consumers are not at the total mercy of cable operators now. The Union Cabinet has already decided to bring all free-to-air channels under the purview of a uniform code of conduct by amending the Cable TV Networks Regulation Control Act, 1995. Besides containing the liability of the cable operators, the Act also provides some remedy in the form of punishment upon contravention of provisions. It can be an imprisonment for a term extending up to two years for the first offence or up to five years for the subsequent one, coupled with fines in both cases.’’ The Act is a step forward in protecting consumer interest, he adds.