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Opposing any new technology is inevitable”  Shekhar Mennon on the delay in digitisation

Opposing any new technology is inevitable” Shekhar Mennon on the delay in digitisation

Bar & Bench

On June 20, 2012, the Information and Broadcasting Ministry decided to extend the deadline to digitise TVs in all four metros from July 1, 2012 to October 31, 2012. The Ministry stated that an assessment of ground realities had revealed that only 25% of TV viewing houses had installed set top boxes. Bar & Bench spoke to Shekhar Mennon, founder of Medialexicon and an industry veteran, on what this move means for the Indian TV industry, what customers can expect from digitisation and why has digitisation been met with such strong resistance. 

Bar & Bench: Were you surprised by the government’s decision to postpone digitisation?

Shekhar Mennon: Well, no prizes for figuring out the reason for postponement. Various litigations against digitisation already existed in the Bombay and Delhi High Courts and before the Telecom Regulatory Authority of India  (TRAI) as well. Also, the Government of India is facing problems in getting the required number of set top boxes and there are also problems over custom duty reduction. The Information and Broadcasting Ministry cited gross unpreparedness for installation of Set Top Boxes (STBs) as the reason for the postponement. Furthermore, there was also demand from local manufacturers to reduce the indirect taxes, demand that was incessant since the Act was amended.

Bar & Bench: And what has been the reaction of the involved parties?

Shekhar Mennon: Television broadcasters have expressed disappointment over the government’s decision to postpone cable TV digitisation in four metros till October, while multi system operators (MSOs) welcomed it saying it was a “sensible” move.

The Information and Broadcasting Ministry made the statement after a meeting wherein the Ministry heard the views of cable and MSOs seeking an extension to the June 30 deadline, as well as from the broadcasters who advocated for  “no delay” .

While some cable operators and state governments are seeking a six month extension, other MSOs are reportedly contesting that the deadline for the first phase of digitisation be moved to September 2012. Direct to Home (DTH) service providers are disappointed with the extension of deadline as they have already started investing on the process. This extension will place a strain on the financial health of the DTH industry due to additional inventory carrying costs and investments in infrastructure.

Bar & Bench: What do you think are the benefits of digitisation?

Shekhar Mennon: Firstly, the subscription revenue to the broadcasters will increase substantially and there will be transparency with respect to collection. It will help boost subscription revenues and reduce dependence on advertising. When the revenue increases, the collection of taxes especially service tax, will increase. The collection of direct taxes will also increase predominantly.

Secondly, technology-wise, digitalization is unbeatable as of now  and worth the money.

Thirdly, the consumers are likely to gain as well, in the following ways:

1.Access to multiple channel

2.Better viewing quality

3.Multi-tiered services and pricing

Consumers will also benefit from new and healthy competition as digitisation (in metros) will ensure that existing DTH satellite platforms (including free-to-air DD Direct) compete for customers with digital cable operators.

Last but not the least, the menace of carrier fees to distribute channels will completely phase out, and the broadcasters with lesser financial muscle can look forward to having more relevant content programming.

Bar & Bench: If there are so many benefits than why is it being so strongly opposed?

Shekhar Mennon: Opposing any new technology is inevitable since it stirs the equation of cost-benefit analysis for those who were in the business earlier. Cable operators would need to invest at least Rs. 25,000 crore for complete digitization. The ordinance is not expected to raise the Foreign Direct Investment (FDI ) limit adequately so then how will the funding requirements be met? Interestingly TRAI had recommended raising the FDI limit it to 74%.

The STBs which are being imported from South East Asia are more advanced technically and cheaper but supplies cannot meet the immediate dead line. If this gap is to be filled by local manufacturers, they will not be able to compete unless import duties are reduced. If import duties are reduced, then other economic problems will emerge. Therefore, the best option available is to extend the deadline and wait for the STBs.

Bar & Bench: If and when digitisation does happen, what do you think will some of the consequences?

Shekhar Mennon: The TRP ratings will be accurate and with that advertisers can allocate the marketing budget region wise and as per their product launch status. Up till now a homogenous sampling was done on the basis of an inaccurate subscriber database. This inaccuracy, due to the under declaration of subscribers, will be done away with post-digitisation. Most importantly, with the recent Copyright Amendment, the royalty collection tariff scheme by Visual Copyright Society (which is currently not  collecting any Visual Performance Licenses in India)  can be monetized to match the International standards.

Bar & Bench: Lastly, do you see the companies resorting to legal means in order to push through digitalisation?

Shekhar MennonSocial reaction is seen right from the invention of electricity, telephone , computers etc. When telephone-related legislation was introduced in Europe and the US in the 19th century , there were fears that other people could listen in on the conversations or that the sounds from telephone could make you deaf or insane. Telegraph companies filed various law suits alleging that telephones had such negative effects!

Now, we are at a stage of transformation, I see a plethora of petitions and suits being filed to stop the digitisation process of the Government. Primarily, the plaintiffs would be those who are afraid of competition or those with vested interests…..raising frivolous contentions such as the country is poor, the country has more black and white televisions, the GDP is low, imports shall hamper domestic employment etc.

In the end, I think that the merits of new technology (digitisation herein) are far more than we can visualise it today.