DTH TV: A pie in the sky?

Why DTH television may not take off with the conventional business plan. Only a whole new approach will ensure success

This article was published, in edited form, in the September 2005 issue of the Karachi-based "Spider," (www.spider.tm) the leading Internet magazine of the country.

The Government issued recently licenses for satellite-based Direct-to-Home (DTH) television service to two private companies and the Pakistan Television. None of them may be able to get its service off the ground. Deep pockets will not ensure success. A large market share at present may not be much of an advantage. Aggressive marketing will only make matters worse for all. However, there is a way out, a viable solution that will create a level playing field for all.
DTH will be a better alternative for the unhappy customers of cable networks. Even the largest cable operators do not always provide satisfactory service. The channels may not have uniform sound and picture quality. The sequence of channels may be altered arbitrarily. Some channels may go off for days or even weeks, leaving (literally) black holes. The choice of channels is not wide if you have no liking for pirated films and puerile con-tent. There are disruptions due to power as well as network failures. Then there is the devil called “loop-holder,” the link between the cable operator and its customers, a sort of local dealer. He may feed into the system what-ever he fancies, from pirated films to local ads, even blue films late at night, if he can get away with it. He may run commercials that are some times as long as half an hour.
DTH can eliminate the problems that cable networks face. It will make the location of the user irrelevant, cutting the umbilical cord, so to speak, of the cable system. You will get the same service whether in a posh urban locality or a village in a remote area. All channels will be digital, giv-ing high broadcast quality. The choice of channels will be extremely wide. Internet will be a great attraction as it can provided as a part of the package. (Cable operators offer Internet as a separate connection.)
DTH will be a distinct improvement over present cable television but may not necessarily be a completely satisfactory alternative on its own. The receiving equipment, consisting of a small dish and a receiver, will require a substantial initial investment for the customer. The cable operators often waive the connection charges.
A DTH operator will have to add a set-top box to the receiver to create different categories of service if many customers want more than the free-to-air package. He can then offer not only paid channels to those who ask for them but also pay-per-view channels to those who want first-run films and live coverage of sports. The set-top box will mean additional cost for the customers or an increase in the monthly payment if it is on lease.
The three DTH services will find it difficult to meet a major requirement of their licenses. Every one is required to provide at least 50 channels in the beginning and increase the number to 300 within three years. That many satellite television channels may not be available over our horizon, at least for the time being, after excluding the undesirable ones. Even if they do become available in the near future, every DTH service cannot offer all of them exclusively. (It will be a logical impossibility.) And if all of them are going to have more or less the same channels, why have three services in the first place?
Three players in the field will make life difficult for the customer also. Everyone will provide its own receiving equipment. If a customer is not happy with one operator, it will be difficult to switch to another service as it will involve payment for new equipment on the one hand while, on the other hand, the present equipment will become useless. The double whammy will prohibit switch-over, putting the unhappy customer in a bind. (The mobile phone users, by contrast, can change the company any time. Next year, they will be able even to retain their phone numbers when they go to another service provider.)
The payment of monthly subscription will be difficult both for the operator and the customer. The use of prepaid cards, like those of mobile phone companies, will require an expensive dealer network all over of the country. Credit cards are increasing in popularity but most customers will not have them for quite some time. By contrast, the cable operators can afford to make door to door collection because their customers are concentrated in small areas.)
It may not even come to collecting subscriptions at all, even if the operator can manage it. To offer the ultimate in piracy, better than even the illegal DVDs, satellite receivers are available in the market that can decode any encryption that the paid channel may have. With two 8-ft dishes, you can get 300-400 channels free of any monthly payment. The cost of the package comes to about Rs 10,000. With an option like that, who will be willing to pay the DTH service several hundred rupees month after month? The feasibility and the business plan may turn into just a sheaf of papers.
Is it possible to overcome this devastating handicap? Yes. Facing the same problem, Doordarshan, the state-owned Indian television, neither sells receiving equipment, nor collects any payments from its DTH customers. That is simplicity itself. The equipment is supplied by dealers of manufacturers. The cost of the system (a receiver and a dish of less than 50cms) is less than Indian Rs 3000, depending on the brand and model. The customer buys the equipment, the dealer installs it on the roof or even a window sill and that’s all. All channels are free.
But then the problem of choice starts. Doordarshan provides 19 channels of its own and a dozen audio channels of state-owned All India Radio. There are only 14 private television channels, all Indian, except BBC World. If a customer does not find much attraction in the state-owned television and radio channels, he will not have much choice.
A free DTH service on the lines of Doordarshan can survive only if it provides virtually unlimited choice of channels. Is it possible? It certainly is but will require thinking out of the box, treading a virgin path off the beaten track.
Look at an example first that will help in understanding the concept. The Civil Aviation Authority builds an airport, provides all required services and maintains all its facilities. Then it opens it to all airlines for their flights. Every airline pays for the airport services according to its number of flights. (The bus stands in cities operate on similar lines, providing common services at a single place to all transporters.)
DTH needs a similar level playing field. The three DTH licensees should abandon their plans to go it alone because they will be only burning their money into smoke. (According to Frost & Sullivan, a respected research organization, no service provider in the Asia Pacific DTH markets has yet attained profitability, despite continued subscriber growth.) Instead, they should join all other licensees of television channels, private as well as public, to form a cooperative, to be called “National DTH Service.” It will provide a common platform, not only giving equal access to all of them but also the maximum possible number of channels (up to 500, possibly even 1000). The cooperative will set up and run the DTH service, with all members sharing the expenses equally.
The members of the cooperative will soon increase far beyond the present about dozen or so satellite channels. Many more are already in the pipeline. Virtual University and Allama Iqbal Open University may have more channels to increase the number of their courses. So may major public sector universities, with a grant from Higher Education Commission to promote distance education. Their students will find it easier and cheaper to study for their degrees through television. (Broadband for Internet is not available to most students even in cities while DTH will reach the remotest places.)
The federal and provincial governments may lease channels to broadcast all their official events live, including the proceedings of Parliament and Provincial Assemblies. They may devote some channels to the Local Gov-ernments also to promote development activities. Ministries, such as those for travel, culture, health, foreign affairs, may like to have their own promotional channels. The sports organizations, especially for cricket, hockey and football, may have their own channels to keep the entire advertising revenue and also broadcast live many more matches.
The lower cost of joining the DTH bouquet will open the door for many more new channels, both public and private. It will be cheaper and much more convenient to provide a terrestrial link (such as optic fiber) to the DTH station than to lease a satellite transponder and use its uplinking facilities. It will be a good bargain for the channels that want to target only the audience in the country and the neighborhood. Every new member will mean reduction in the share of every present member in the expenses of the cooperative.
That will not be all. There are many free-to-air channels already beaming to our area. These are mostly state-owned and will be happy to join to get their message to a much larger audience.
The foreign paid channels will also pay to join the DTH bouquet. The logic is obvious. If the domestic channels will pay to join the cooperative to offer more viewers to their advertisers, there is no reason why the foreign channels should not do the same. The cable operators charge subscription and hence pay the foreign channels. DTH channels will not charge the customers anything and will, thus, pay them nothing. If some foreign paid channels are unwilling, PEMRA may ban their present operations in the country, depriving them of all subscription and advertisement revenue that they get through the cable networks.
In addition to membership dues, the DTH service may get substantial revenue from an unusual source. Every one will be keen to have as high a position as possible in the sequence of channels. The positions may be auctioned, with the channel paying the highest amount will be accessible by pressing just 1 on the remote control, the second by pressing 2, and so on. Some channels may like to have, through the auction process, favorite positions such as 22 or 222 that are easier to dial. A similar plan already gets millions of rupees for the Punjab Excise and Registration Department through the auction of registration numbers for cars in every new series. Besides lower digits, there are other favorites such as 786 (the numerical value of the letters in Bismillah.) Gauhar Ayub Khan, a former National Assembly Speaker, is said to have pulled strings to get GAK1 for his car in the K series of Gujranwala (GA) district.
The proposed DTH service will solve the censor problem. Some foreign channels broadcast content that is objectionable for us. PEMRA has been so far unable to enforce its code, especially in case of small cable operators. In case of DTH bouquet, PEMRA will allow only those channels that are not against our religious, moral and cultural values. That will be an effective defense against foreign cultural invasion. In addition, it may require installation of equipment that delays the broadcast signal for, say 5-15 seconds, so that scenes with sex, violence and other objectionable content may be easily censored in the approved foreign channels.
With hundreds of channels, no monthly subscription and receiving equipment costing no more than an ordinary mobile phone, the DTH service will attract millions of customers. It may even dry up the market for cable networks, which cannot survive without charging monthly subscription. And we shall have a national DTH service that will be a model for other countries.