HITS

Submitted By: Syndicate 11

HITSy Headend in the Sky is Broadcasting service y Multichannel downlinking, distribution and

transmission technology that enables all pay channels to be downlinked at a central facility and then again be uploaded by the HITS operators to its satellite after the encryption of channels. y Operates on Ku band & C bands

HITS system architecture

Modes of operationMODE 1

MODE-3MODE-2

The combination of two

Existing cable systemy There are around 6000 estimated MSOs across India,

who are catering to the need of around 60000 cable operators in the country who in turn are transmitting the TV signals to 71 million cable TV subscribers. y In a typical analog transmission platform, 65-70 channels can be delivered to the consumers. This capacity can increase nearly ten times if the system is upgraded to provide digital transmission.

Benefits to Cable Industryy The licensed HITS operator is allowed to directly contract with various broadcasters for buying their content. y If implemented in the country, all the MSOs, Broadcasters and Cable Operators become part of a single group that controls the whole business of Cable television in the country. y Set-top-boxes will be standardized and subscriber would be able to take them anywhere in the country and use them, overcoming the problems of proprietary system. y Improve penetration of cable television to rural areas y Verifiable number of subscribers

Advantage to Usersy Wider choice of digital channels to subscribers y Better reception quality y Interactive system where user can watch programmes

of his choice at convenient time y Value added services like running searches, pay-per view and blocking programming by title, channel or rating at affordable prices y Help reduction in prices of STB y Lead to further consolidation of cable market & enable better services to consumers

Definition of HITS Operatory As per the Telecommunication (Broadcasting and

Cable Services) Interconnection Regulation 2004 (13 of 2004), the present definition of HITS operator is as under; y headend in the sky operator means any person permitted by the central government to distribute multi channels TV programmes in C band by using a satellite system to the intermediaries like cable operators and not directly to subscribers.

Recommendationsy headend in the sky operator means any person

permitted by the central government to distribute multi channels TV programmes in C band or Ku band by using a satellite system to the intermediaries like cable operators or its own cable network (after first downlinking the signals at its terrestrial receiving station ) and not directly to subscribers.

Definition of MSOy Similarly, the present definition of Multi system operator (MSO) is as under: y multi system operator means any person who receives broadcasting service from a broadcaster and/or their authorized agencies and re-transmits the same to consumers and/or re-transmits the same to one or more cable operators and includes his/her authorised distribution agencies. y The proposed definition of Multi System Operator (MSO) is as under: (proposed amendment underlined)

Recommendationsy multi system operator means any person who

receives broadcasting service from a broadcaster and/or their authorized agencies or from a HITS operator and re-transmits the same to consumers and/or re-transmits the same to one or more cable operators and includes his/her authorised distribution agencies.

y Provided that for the purpose of re-transmitting the

signal, multi system operator can also use the infrastructure facilities of HITS operator.

Are the proposed amendments to the Interconnect Regulations to implement HITS policy in order? What further amendments are required to implement HITS policy ?HITS should not be allowed in Ku Band. If TRAI permits Ku Band for HITS, they should automatically permit all DTH operators who are already on Ku Band to become HITS operators. TRAI should bring Unified license for HITS, DTH and other access platform.

Airtel

Digicomm, Home Cable

The HITS definition should be modified to be consistent with the Cable TV Act,1995

IMCI

HITS can be used for digitalization only. There should be an additional license, if HITS operator wants to operate li e an infrastructure supplier to one or any number of MSOs

Introduce tax breaks for HITS operators, as it is also one of the infrastructure forms that will lead to increased digitization at low cost Permitting HITS operators to provide infrastructure services to more than one MSO Making it mandatory for signing of back-to-back agreements where MSOs are using passive HITS

NDTV

infrastructure to carry signals from broadcasters Recognize HITS operators as authorized MSOs in CAS areas Freeing HITS from tariff regulations, and instead making it totally market driven for both business and consumers

No broadcaster should not pay license fee as he is only delivering content to MSO/cable operator in regular way. It is possible if CAS pricing is uniform throughout the country.

Starcable

Possibility of passive infrastructure sharing

It should be made mandatory for HITS operator and MSO to regularly share the subscriber data in compliance with SMS (Subscriber Management System).

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Tariff Issues Wholesale & Retaily The tariff dispensation for distribution of signals includes determination of wholesale price i.e. the rate charged by the broadcaster from the distributor(s) and the retail price i.e. the price at which the TV channels are made available for viewing to the subscriber. y The content supplied by broadcaster(s) is distributed to subscribers through different distribution platforms. These significant platforms include cable services in notified CAS and non-CAS areas, Direct to Home (DTH) services and HITS services. y The channels supplied by broadcasters are of two categories i.e. Free-to-Air (FTA) or Pay TV channel.

Airtely The wholesale tariff of HITS should be decided keeping in mind the

market structure which includes the Non CAS, CAS, DTH and IPTV operators. y As the Broadcasting access services using CAS, Non CAS, DTH and IPTV are the competing services and are very close substitute of each other. So the retail tariffs of each of these services remain competitive.

NDTVy The ideal retail tariff in the HITS model has to be forbearance, as it

should be for all distribution models. The consumer is intelligent enough today to decide when to pay or not to pay for a particular service. y Shift towards improving the quality and scope of services rather than continuing on the same old business model, y The wholesale tariff model for HITS services does not need to be fixed as a percentage of that in non-CAS areas. The preferred mode for tariff administration for wholesale should be mutual negotiation between broadcasters and the HITS operators.

DishTVy The Tariff model for HITS services cannot be directly based on the CAS

model. First of all, the CAS model provides for the carriage of analog channels, owing to which 30-50% of the cable bandwidth is used up by the analog services. Moreover such services do not generate any revenues for making the HITS operations financially viable as there are three intermediaries to share the revenue viz. HITS operator, MSO & LCO apart from the Broadcaster. y Accordingly, with the additional stakeholder in the chain of HITS delivery system i.e. MSO/cable operator, to ensure the financial viability of HITS and to ensure that HITS as a cable digital platform takes off, it is just & proper that the wholesale rates for HITS platform should be lower than the rates which are applicable for DTH platform. It should be between 35% - 40% of non-CAS rates. y Digicable y Retail tariff for pay channels should be same as cable tariff in CAS notified areas.

Channel Pricing Issuesy The pay channel tariff ceiling in the notified CAS areas at present

is Rs.5.35 per channel per subscriber per month (excluding taxes). The same was arrived at based on the information provided by the stakeholders during the process of consultation, data from interconnection agreements between broadcasters and MSOs, data from CAS areas in Chennai etc.

y The basic tier comprise of at least thirty FTA channels at

monthly subscription rate of Rs.82/- (excluding taxes). Earlier, the cable operator could keep the charges collected against basic service tier. As per Hon ble TDSAT Order dated 12th May 2009, in the case of M/s WWIL vs TRAI, it shall be shared between the MSOs and the LCOs as per mutual agreements.

Digicabley

The basic tier should be same as CAS applicable for FTA channels at Rs 82/- per month to be shared between MSO and LCO equally. We propose to follow the cost plus model for the HITS operators as well as the broadcasters. TRAI may define a ceiling tariff to be charged by the HITS operators for each channel. Each HITS service provider should publish the RIO. However, subject to the ceiling prescribed in RIO, the services providers should be allowed to opt for a mutually negotiated contract. Price cap of Rs5.35 to be reviewed Same as CAS

Airtely

DishTVy y

COFI

A-la-carte & Bouquet RatesThe broadcasters have to provide their channels on a-la-carte basis to the distributors of channels including HITS operators. The rates of pay channel on a-la-carte basis and rates of bouquets shall be subjected to the following condition, namely:y The sum of the a-la-carte rates of the pay channels forming part of such a bouquet shall in no case exceed one and half times of the rate of that bouquet of which such pay channels are a part; and y The a-la-carte rates of each channel, forming part of such a bouquet, shall in no case exceed three times the average rate of a pay channel of that bouquet of which such pay channel is a part of.

Digicable Recommendationsy The HITS operator/ MSO in this case should be given the option to

bundle the channels and create their own package to benefit the subscribers

Revenue Sharing Issuey Distribution of channels using HITS platform has many attributes of CAS cable system as well as that of DTH platform. y As far as HITS and DTH services are concerned both are digital satellite based addressable services with all India presence. Both the systems involve content aggregation, compression, encryption, digital modulation and uplinking/downlinking through satellite. The difference in the supply chain is that DTH operator s signal reaches directly upto the subscriber whereas in HITS, an additional distribution entity i.e. cable operator carries the signal from HITS operator to the subscriber.

y Supply chain in HITS is similar to CAS system with the

difference that the signal from HITS operator to MSO/cable operator is carried through satellite in HITS as against fibre/cables in CAS system. The business model of CAS cable system is based on revenue share across the supply chain and the share arrangement for the pay channel subscription is 45:30:25 in respect of broadcaster, MSO and cable operator.

Recommendationsy HITS being a satellite based service with nationwide footprint is

easily accessible across the length and breadth of the country giving digital signals to the subscriber served through the cable operator. Also the quality and reliability of signals is likely to be better. Moreover, the HITS operator has got the responsibility of making available the set top box to the subscribers. These may prompt HITS operator to claim more revenue share as compared to corresponding MSO s share in CAS areas. y On the other hand, cable operators has the subscriber base which provide the ready market for the HITS operator, thus, promising a low risk proposition to HITS operator for its investment. In case the HITS operator is using Ku band the reliability may not be very good during rains. Thus, cable operator may claim more revenue share as compared to corresponding cable operator s share in CAS areas.

NDTVy Platform Agnostic y incentives for operators to expand the services y completely market driven model

DishTVy The revenue share should be in the ratio of 40% to

broadcaster, 35% to the MSO (including HITS operator) and 25% to the last mile (Non-CAS)

COFI (Cable Operator Federation of India)y Broadcaster: HITS operator: LCO should be 30:35:35

Digicabley We suggest LCO, MSO and broadcasters to equally share the

subscription revenue.

Issues of Rates of Contenty One of the stakeholder has mentioned that some of the

broadcasters are supplying signals to HITS operator at the same rate as that for DTH operator. However, the stakeholder goes on to say that HITS operator should get content at lower price compared to DTH operator as in the case of HITS there is one more entity i.e. the cable operator, in the supply chain. Further, this may enable HITS services to compete effectively with the other addressable services and bring-in early roll out of digitalisation of TV services largely transforming the existing analog connections to digital addressable system. This will also enable MSO/Cable operators to give additional value added services on cable thus achieving a larger goal of quick digital transformation of existing analog cable network. So this stakeholder suggested view is that HITS operator be entitled to receive content at discounted price for its catalytic role in the digitalization process of non CAS areas.

y From broadcasters perspective the counter view could

be that as compared to DTH setup, the HITS operator does not have the burden of maintaining the operational field staff for upkeep of its services as this aspect is taken care off by the respective cable operators. Thus the HITS operator saves on operational expenses, and so should share a part of its revenue with the cable operator (the additional entity in the supply chain) without affecting the revenue share of the broadcaster.

Transponder Capacity Issuey In any satellite based system the availability of transponder capacity y y

y y y

puts a constraint on the number of channels that can be carried. Since there is large number of channels present in the market, this could lead to a situation of demand-supply mismatch. Even DTH operators have been queuing up at ISRO for transponders to accommodate television channels. The satellite agency can give them space on its own satellites, or lease transponders on international satellites for DTH operators. But at the rate at which new channels are being launched, it will be hard to accommodate transponders on lease. So it was suggested by ISRO that DTH operators should pool their resources. In such a scenario, the HITS operator may charge carriage and placement fee for channels to be carried on their networks.

y Efforts were made for using MPEG 4 compression technology to create

more bandwidth to ensure that increased demand is met for accommodating channels. y With more players competing in the DTH space and a resource crunch in the transponder space, the Indian Space Research Organisation (ISRO) has urged all DTH operators to pool resources as the demand for transponders has grown manifold. y However HITS operator is required to provide commercial interoperability with respect to its set top boxes so that if the subscribers decide to switch over to any other service provider or platform they should be able to do so at least cost. y Commercial interoperability here would mean that in addition to offering the receiver set on an outright purchase basis, subscriber should also have the option to purchase it on a hire-purchase basis or rental basis with a provision to return the set top box on such terms and conditions as may be laid down by regulations issued by TRAI.

Carriage & Placement Feey In such a scenario, the HITS operator may charge

carriage and placement fee for channels to be carried on their networks. The argument in favour of control of carriage fee could be that the rapid increase in the carriage fee leads to high cost of entry for new/small channels. The argument against control of carriage fee could be that it is dependent upon multiple parameters which differs in each transaction.

Eligibility Criteria for HITS operators The applicant for HITS services should be a registered company in India

under Companies Act, 1956.

The Co. should have a minimum net worth of Rs. 10 cr and it should be certified by the Statutory Auditor of the Company.

Total direct and indirect foreign investment including portfolio and FDI shall not exceed 74% at the time of application and during the permission period. The company will be required to disclose the status of such foreign holding and certify it on yearly basis.

FDI upto 49% will be through automatic route. If a company has a overall ceiling of 74% than approval of FIPB (Foreign Investment Promotion Board) id required.

The company shall make full disclosure of all agreements finalized or are proposed to be entered into at the time of application. If there is any subsequent changes, it would be disclosed to Ministry of Information and Broadcasting within 15 days.

HITS permission holder should not hold or own more than 20% equity share in a broadcasting company or DTH licensee co. Also any person holding more than 20% equity in a HITS company shall not hold more than 20% in any other Broadcasting Company or DTH Licensee Co. except financial institutions.

There would not be any restriction on equity holdings between a HITS permission holder company and a MSO/Cable operator company.

Number of Permission y There will be no restrictions on the total number of HITS permissions and it can be issued to any co. which fulfills the eligibility criteria Period of permission

The permission for providing HITS service will be valid for a period of 10 years from the date of issue of wireless operational license (WOL) by WPC.

The permission granted shall be non-transferable except with specific and prior approval of the government.

Fees There is a non-refundable entry fee of Rs. 10 Cr but no annual fee.

The permission holder also need to pay the license fee and royalty for spectrum usage as prescribed by WPC.

Transponder Capacity Issuey Availability of transponder capacity puts a constraint on the number of y y

y y y

channels that can be carried Large number of channels present in the market Demand-supply mismatch. Queuing up at ISRO for transponders to accommodate television channels. a) The satellite agency can give them space on its own satellites b) Lease transponders on international satellites for DTH operators But at the rate at which new channels are being launched, it will be hard to accommodate transponders on lease So it was suggested by ISRO that DTH operators should pool their resources HITS operator may charge carriage and placement fee for channels to be carried on their networks

y Efforts were made for using MPEG 4 compression technology to

create more bandwidth to ensure that increased demand is met for accommodating channels. y With more players competing in the DTH space and a resource crunch in the transponder space, the Indian Space Research Organisation (ISRO) has urged all DTH operators to pool resources as the demand for transponders has grown manifold. y However HITS operator is required to provide commercial interoperability with respect to its set top boxes so that if the subscribers decide to switch over to any other service provider or platform they should be able to do so at least cost. y Commercial interoperability here would mean that in addition to offering the receiver set on an outright purchase basis, subscriber should also have the option to purchase it on a hirepurchase basis or rental basis with a provision to return the set top box on such terms and conditions as may be laid down by regulations issued by TRAI.

Carriage & Placement Feey Argument : HITS operator may charge carriage and

placement fee for channels to be carried on their networks. For: The rapid increase in the carriage fee leads to high cost of entry for new/small channels. Against: It is dependent upon multiple parameters which differs in each transaction.

Eligibility Criteria for HITS operators The applicant for HITS services should be a registered company in India

under Companies Act, 1956. Minimum net worth of Rs. 10 Cr and it should be certified by the Statutory

Auditor of the Company.

Total direct and indirect foreign investment including portfolio and FDI shall not exceed 74% at the time of application and during the permission period. The company will be required to disclose the status of such foreign holding and certify it on yearly basis.

FDI upto 49% will be through automatic route. If a company has a overall ceiling of 74% than approval of FIPB (Foreign Investment Promotion Board) is required.

The company shall make full disclosure of all agreements finalized or are proposed to be entered into at the time of application. If there is any subsequent changes, it would be disclosed to Ministry of Information and Broadcasting within 15 days.

HITS permission holder should not hold or own more than 20% equity share in a broadcasting company or DTH licensee co. Also any person holding more than 20% equity in a HITS company shall not hold more than 20% in any other Broadcasting Company or DTH Licensee Co. except financial institutions.

There would not be any restriction on equity holdings between a HITS permission holder company and a MSO/Cable operator company.

Number of Permission y There will be no restrictions on the total number of HITS permissions and it can be issued to any co. which fulfills the eligibility criteria Period of permission

The permission for providing HITS service will be valid for a period of 10 years from the date of issue of wireless operational license (WOL) by WPC.

The permission granted shall be non-transferable except with specific and prior approval of the government.

Fees There is a non-refundable entry fee of Rs. 10 Cr but no annual fee.

The permission holder also need to pay the license fee and royalty for spectrum usage as prescribed by WPC.

Issue 1 :y y y y y

Regulation of carriage and placement fee Availability of transponder capacity puts a constraint on number of channels that could be carried. It leads to demand-supply mismatch. So HITS operator may charge a placement and carriage fee The argument in favour of control of carriage fee : The rapid increase in the carriage fee leads to high cost of entry for new/small channels The argument against control of carriage fee :It is dependent upon multiple parameters which differs in each transaction.

Stakeholder s Say & Final recommendation: Airtel:y No regulation required on carriage and placement fees. The carriage fee should

be left to the mutually negotiated settlement between broadcasters and distributors of channels unless a suitable arrangement for sharing of advertisement revenue is in place.

Why there is no case of regulation on carriage fee:y For a broadcaster, after producing the content, it is imperative that he ensures the reach of its channels to maximum population or its target audience. The maximum reach ensures excellent revenue, thus, the carriage fee may be viewed as a distribution cost. y Content carriers / broadcasters have agreed to pay carriage fee so that they get good TRPs which in turn will get them better advertisement pie. y Carriage fee is being paid from the advertisement revenue and there is no control on ads being broadcasted . y If there is a control on advertisements to be carried on pay channels or carrying an advertisement on free to air channels, they will not pay carriage to the distributors of channels since they will have no reason to pay placement fees. If broadcasters get more advertisements on their networks by virtue of being available on good frequencies / bands, the distributors of channels have every right to seek a part from that revenue. y The concept of carriage fee is a reason for demand and supply. If a particular channel has immense popularity, there will always be a high demand from the customers to include such channels and in such a scenario; the Broadcasters will not be required to pay any carriage fee. y In light of the above, it is submitted that Market forces are sufficient to bring necessary correction in the carriage and placement fee and also the popularity of the content in itself will impact the carriage and placement charges. Hence, there are enough checks and balances in the market and regulatory intervention is not warranted.

DISH TV: y Attempt to regulate the carriage fee will not be realistic so as to ensure the advertisement revenue of the channel. y There is no regulation/restriction on the advertisement appearing on a TV channel or the rates thereof. These are governed by the market forces of demand and supply and also on the popularity and reach of the channel. The popularity and reach on the other hand depend upon the visibility of the channel. The regulation of carriage fees are based on following factors: 1. Bandwidth allocated to channel in Digital mode and MPEG2 or MPEG4 carriage. 2. Mode of carriage on Cable networks 3. Placement of channel in the EPG and/ or Frequency 4. Carriage fees depend on the LCOs on the network, areas covered and the connectivity count. However such figures change very rapidly in the cable industry.y According to Dish TV a cap on carriage fees will be impractical. y This is owing to the limited resources on networks in general and the need for

new channels, which are launched to find space. y However the TRAI can regulate the periodicity of agreements to be a minimum of one year, subject to a certain minimum connectivity being maintained.

parameters, including but not limited to: - Number of subscribers in network, and per subscriber rate - Ratio of actual subscriber base to declared subscriber base - Number of channels in a genre - Broadcaster performance in terms of viewership over the last 1 year - Investment in digitization and growth in the number of subscribers/ MSOs serviced over the previous year y Carriage fee revenues from analog networks should be capped at certain levels till the time the operators do not achieve a threshold level of HITS subscribers. y A cap can be placed on the quantum of carriage and placement fee, and it should be linked to digitization.

y NDTV: - It says that carriage and placement fees should be regulated. y In addition, carriage and placement fee should be linked to

y COFI: y It says that carriage and placement fees should be regulated. Carriage fee as well as placement fee do not reach the LCOs. Hence there should be regulations to share this revenue with the LCOs who make these channels reach the subscribers. y This needs to be done keeping in mind that all platforms like DTH and cable networks demand carriage fee. It has to be linked toArea of operation Type of network, digital or analog The channel frequency in an analog network. No cap is required on on the quantum of carriage and placement fee.DIGICABLECOMM: y Since carriage is demand supply driven it is not recommended for regulation. y No cap is required on on the quantum of carriage and placement fee.