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We have already invested USD 15 million on technology, business plans: Tony D’Silva

silva BWith an estimated 20 million C&S households in Phase II cities, 17 million subscribers were required to be digitised during Phase II. According to the FICCI-KPMG report for 2014, there is a requirement of nearly 65 million digital cable set top boxes to be rolled out in Phase III & IV areas across the country. How will the industry go about it?

 While everyone seems to have an answer of their own, Tony D’Silva, MD & Group CEO, IMCL is of the opinion that HITS technology and a prepaid model for consumers will help the industry through the Phase III & IV of digitisation.

 In conversation with IndianMediaBook, D’Silva chats about where the industry went wrong in the roll of Phase I & II. What can be the corrective measures now and how will IMCL move forward. Edited excerpts.

 MIB Minister, Prakash Javadekar has asserted the use of homegrown STBs by DTH service providers and MSOs. What are your views on it?

 Who in India is going to give me hundred and 20 million boxes or hundred boxes of 50 million boxes at one go. How is the quality and pricing of those boxes?

 When I buy a box in China let the whole R&D facility and quality system or process that simply take time tested boxes with different kind of quality or type of boxes either it’s a set top box or the  DVR box, it helps with Series of my requirements.

 These Chinese banks give you about two and a half to three years clean credit. Is the Indian manufacturer going to give me the same kind of credit? Where am I supposed to get the money from?

 Today in Maharashtra you collect INR 45 entertainment tax; you collect 12.3 per cent service tax, so it’s on average about INR 55, which comes to a yearly of around INR 800. The cost of a STB is INR 1600. In two years you recover what you’ve lost. So why are we being so shortsighted?

 For Indian box manufacturing we have to keep in mind the large quantity in that we need. For instance, somebody sets up a manufacturing facility to produce 5000 million and after two years you say digitalisation is over, what do we do? Shut down the factory?

Entertainment tax is said to be bringing down the profitability of MSOs. Please share your views on it.

 MSO is not collecting from the consumer directly; it’s the LCO who is collecting. The money is on the hands of the LCO, then how is an MSO responsible to pay the entertainment tax, so there needs to be an understanding of the ground realities. You have a complicated system for entertainment tax, and entertainment tax is not to be the burden of and MSO, then how does the MSO pay the entertainment tax if he cannot collect it.

IMCL is banking a lot on the prepaid mode. What exactly is the prepaid model? How will it function and how will IMCL and the industry benefit from it?

 In a prepaid model basically you have to upgrade your back end system to accept payments from a customer directly or from the LCO by all different means. So you can have a scratch card, you can have SMS, you can have banking, you can have internet, whatever it is. All the systems are integrated into our back end.

 The biggest task that we have before this is to make the LCO’s on the standard that is beneficial to him. The irony of the situation is for the last 20 years, LCO’s has been collecting money, and he doesn’t have the practice of giving money to anybody. Now you are saying a different story. Here is the customer paying X amount of money. Your share is what the government sets and the balance is mine, out of the balance X amount goes to the broadcaster, that is the system that has been put in place, so, we are trying to implement this system in phases.

 First, what we are trying to do is, add packs. The basic FTA pack and three to four other packs and then tell the LCO that these are my packs; this is the amount for the pack. Go out advertise it, promote it. The customer would be free to upgrade his pack, to downgrade his pack or to add, add-on’s to his pack. This model will hopefully help us bring the change.

 A popular magazine recently described you as the HITS Man. Why according to you HITS can change the face of Indian cable industry?

 The HITS model is nothing but the ‘Headend In The Sky’ model. In this model, we bring all the channels at one point and hit it up to the analogue station. We encrypt it and package it as per the requirement of the operator.

 The only way to digitalize Phase III and Phase IV is through hits model. The biggest challenge the LCO would face is how to manage my backend. With due respect, we have done a great fantastic job in managing the network, but when it comes to the head end and the back end, it is the technology. Subscriber management, call centre, billing, packaging, all have to be looked at and that is why he has an issue and a genuine issue, and that is why he needs support, and here we are seeing we will provide you complete services, for the cost that could be less than 50 percent that you normally incur.

 We are the white label service provider. We have common service for everybody. All the services are available to all operators, may it be LCO’s, MSO’s or anybody. In this kind of environment, this kind of a service model, why should a small MSO in a

 I am not entering in any game with the broadcasters, they will enter, and the reason being that in smaller towns, cities and villages, the requirement of the content is very different from Mumbai. I can facilitate the process and being a distributor for the broadcasters, I will inform them that this is the content this is the pricing and I will facilitate them, but I am not taking any responsibilities because it hits market.

 What kind of investment have you put in HITS so far?

 We have already invested USD 15 million on technology, business plans, and consultants. (Author’s Note: After this interview Hinduja Ventures paid a INR 10 Crore HITS license fee to MIB, which is not included in the figure mentioned by D’Silva in the interview.)

 When are we hoping to have the whole HITS model in place?

 In the six months we will set up all of it. We are geared up. I need a deadline date. Government must tell me. How am I supposed to invest the money without government telling me the deadline? I can understand the delay. The delay doesn’t bother me, but if you are going to postponed for two years then it bothers me.

 Customers, LCOs and MSOs, all were expected to benefit from digitisation. How much according to you has the entire chain benefitted from the process?

 The major mistake was that all thought digitisation is all converting an analogue field in to a digital field. Therefore, the first step where we have made a mistake is, we have not been able to be futuristic in our expectations about what the customer will expect in the lieu of the distinct future. For example, all over the world we are moving to HD, but if we look at Phase One and Phase II, 95 per cent of the boxes are SD boxes. So what happens? When the market starts moving to HD, will consumers have to buy a new box? What will be the process to replace 20 to 30 million boxes?

 The second thing I think is about the monetization of the set top box. Customer should have a choice, but the way to give him a choice depends on packaging, bundling. The way the whole system is implemented is devoid of the fact that the whole back end is not being the primary focus of ensuring the quality of service. So what has happened is you have gone out placing boxes but then you suddenly realise that now I have to control or try certain means to provide customer satisfaction, and then you try and get CRF forms, and then you threaten people that if you don’t get CRF forms, a customer requisition form will switch you off, but it doesn’t work that way.

How according to you the process of digitisation should have been rolled out?

 We should take a full state, maybe two in the south or the north or the east. If you take a whole state, it’s not that this side of the road is Phase III and that side of the road is phase II. In the full state everybody concentrates on the packages bundling and everything can be defined in the state.

 In Tamil Nadu, we need 14 million boxes. You don’t go where you don’t have boxes; you go where you have the services. You take Tamil Nadu and Andhra Pradesh or you take Karnataka and Kerala and then you take one or two states in the West and North or maybe North East. So you have a system to evaluate, there is a local authority out there and then the issue the entertainment tax becomes relevant, the issue of octroi becomes relevant and they have a task to achieve. The same thing is done in the U.S. They go state by state. Why can’t we do it?

 With inputs from Aniket More