TRAI's standard tariff order not a game changer

TRAI has issued a tariff order, prescribing standard tariffs for set-top boxes (STB) for digital cable and DTH subscribers. This specifies security deposit of `400-800 (refundable after three years) and monthly rent of `33-56 for cable TV subscribers for three years. For DTH subscribers, deposit and monthly rent is set at `500-1000 and `43-71, respectively. Besides, MSOs and DTH operators can offer additional tariff plans. They currently charge ~`2000 (non-refundable) for STB activation and no monthly rent. Current value of rent under standard tariffs is equivalent to these realizations. However, we find standard tariffs unattractive due to: (1) Lower upfront collections; (2) risk of default on rent, as subscriber churn rates in DTH are ~10% p.a; and (3) no protection from any increase in STB costs and INR depreciation Impact of the tariff order on DTH companies would depend on actual uptake of STB under the standard tariffs. We expect limited uptake due to likelihood of: (1) Lower promotion of standard plans; (2) customer resistance to monthly rents; and (3) unavailability of additional features under standard plans (recording facility, HD). They currently charge `800-1000 to end users (no rent); its realization is `500-800 after LCO commissions. These tariffs leave limited arbitrage vis-à-vis standard tariff plan.