Broadband IP penetration pales in comparison to Cable and Satellite in India

Buoyancy in consumerism, 7-8% GDP growth, enormous appetite for media and entertainment, a booming telecoms sector, government supported broadband growth …all these factors suggest that IPTV will excel in India. By Ritesh Gupta

While the adoption of cable and direct-to-home (DTH) satellite television has hogged the recent headlines in India, especially in metropolitan cities, IPTV is slowly carving a niche there. But of the two pre-requisites for provisioning IPTV at the consumer end - a broadband connection and a viewing device - penetration of broadband access is abysmally low: currently hovering just over 2.3 million, or 2%; lower than China.

In contrast, India's 30,000 local cable operators already connect 71 million homes and are currently growing at an annual rate of 14%. At the end of 2006, almost 60% of households that owned a TV set subscribed to cable. In the DTH segment, Dish TV, owned by Mumbai-based Essel Group, has garnered 2.7 million subscribers in just a few years, while rival TataSky captured nearly 800,000 in its first nine months.

For more than decade and a half, broadcasters in India have suffered due to the under-reporting of homes connected to cable or satellite. It meant that less than 20% of subscription revenues went to the broadcasters. Many of the 30,000 cable operators historically have not paid for their content, which has caused a lack of transparency at the last mile of the distribution end of the cable business. Cable ARPU varies from US$2.20-$6.60 a month in urban households to as little as US$1.30 in rural and suburban areas. But now broadcasters are pinning hopes on managed services such as IPTV to stem these losses.

According to Siddharth Jain, Vice President of Distribution and Business Operations for India and South Asia for Turner International India Pvt Ltd (TIIPL), "IPTV is specifically to a TV (via a STB, not Internet TV to a PC). In my opinion, both BSNL/MTNL and private operators (such as Reliance Communications and Bharti Group, which will compete in the same territories) will have a sizeable consumer base, but a lot depends on the rapid increase of broadband connections."

"It's a bit premature to comment on the penetration levels," said Mr. Jain. "It is estimated that broadband will overtake dial-up in 2008-2009 and by 2009-2010 broadband connections will be 75% of the market so it's evident that IPTV will be a platform to reckon with for cable and DTH."

IPTV has the power to elevate the usage of Internet by TV-only homes by converting their TV into virtual PC. But Arpita Pal Agrawal, associate director, PricewaterhouseCoopers feels this could be challenging as TV, not the PC, is the household media centre in lower- and middle-class Indian households.

"If it doubles as a PC then it would be critical to provide a solution that will not require any kind of technical knowledge by the user, entail minimal additional device upgrade costs and will be easy to operate and maintain," she said.

Rajesh Jain, National Industry Director for Information, Communications and Entertainment at KPMG (India), also feels IPTV needs to gain mindshare to rise above competitors. "Consumers are already being bombarded with advertising campaigns, especially by DTH players. IPTV providers can't afford to wait and they need to be pro-active," said Mr. Jain, who added that four metro markets - Chennai, New Delhi, Mumbai and Kolkata -- presently account for 12%-14% or 9.5-10 million households of the total cable and satellite household's pie in India.

India's Ministry of Communications and Information Technology has set a target of providing nine million broadband connections by this year end and 20 million connections by the end of 2010. Sujata Dev, Managing Director and CEO of Time Broadband said, "IPTV technology will be a multi-pronged platform with broadcast channels and a bundle of other services. None of the other two systems (cable or DTH) can offer IPTV's range. Many of IPTV's features cannot be provided by either CAS or DTH." She feels all three platforms - IPTV, cable and satellite -- will each survive, addressing different niches in the consumer segment which will be determined by the expectation of the consumer.