Cable TV has to go the prepaid way for ARPU Improvement

The -Indian Media sector started getting lot of interest from global and regional investors when the Indian regulator decided to pursue digitisation in four Phases across 2-3 years. So far, DAS has been implemented in phased manner across 40 cities/32 m households over the last two years. However, except for implementation of set top boxes, there has been hardly any benefit as MSO and LCOs have been struggling among themselves over revenue share and subscriber ownership issues. That said, as an interim solution, LCOs have agreed to pay a part of the ARPU to MSOs (referred as gross billing), but this approach has failed to expedite progress on subscriber segmentation and billing.

We highlight the two potential risks gross billing suffers from. Firstly, gross billing based revenue accounting is no way suggesting that cash collections will be at the same rate and MSOs suffering with bad debts over a period of time is not ruled out. The second risk that a gross billing-based approach suffers from is keeping the model on a flat fee structure for long and limiting upsides for all the stakeholders. The large part of the growth for Digital Cable is going to be a function of ARPU improvement. As such, ARPU has to be in link with the content being consumed, suggesting that there has to be a significant amount of focus on subscriber
segmentation and there have to be systems in place that can drive this. Today, there is not much pressure on the LCOs to hasten up subscriber segmentation and drive ARPU improvement.

To sum up, we are of the view that if Cable TV goes the prepaid way, all the above issues could be resolved and subscriber segmentation can be achieved in a more a scalable manner as there will be only a small amount of management bandwidth focussing on collections/bad debts