13 Mar 2015 19:58 IST

Govt needs to push digitisation: Tata Sky chief



The direct-to-home service in the country has gone through a dramatic transformation over the last 10 years. From a handful to over six crore customers, the country’s six digital TV providers have been a part of this transformational journey even as all of them continue to bleed financially. BusinessLine spoke to Tata Sky Managing Director and Chief Executive Harit Nagpal on some of these issues the industry and the company face and the way forward. Edited excerpts:

You are going to market with 4k (ultra-high definition) technology now. What more can one expect from the Tata Sky stable?

There is always something new. Each year, we have done something new. The 4k technology was not an isolated journey. Customer needs are changing and technology is getting better.

We realised that the TV screens are getting bigger. You cannot take the same picture that you are showing on a 24-inch screen and show it on an 85-inch screen. The picture will become hazy. So, you have to give a better technology. After Standard Definition, High Definition caught up and now we have 4k.

Is the satellite capacity enough for you to launch such new services?

That’s not the question. We got to give what the customer demands.

The compression standards of transmission improve continuously. Even 4k, when I first saw it a year-and-a-half ago, it required one full transponder that could pack about 35 SD channels to transmit one 4k channel. Between then and now, it has already reduced to a quarter of what it used to be then. I am sure as time progresses, it will reduce further.

What are the revenues you earn from value-added services like catch-up television and video-on-demand?

Less than 10 per cent. The basic linear television (SD, HD and 4k) will always remain 90 per cent of the overall revenue. We don’t charge for recording apart from the money the customer invests in the set-top boxes that enable recording. The customer only pays extra for video on demand. When he is pulling content over the top, he pays extra for that movie like he will pay to the DVD library.

We don’t see them as huge revenue opportunities, we see them more as differentiation opportunities. We see them as an additional layer of service. These services help in improving customer stickiness.

With respect to STBs, there has always been a question of inter-operability (allowing customers to use one STB to switch between providers) ever since DTH firms started providing these services. For some reason, this never took off. What is your sense?

I am all for inter-operability. But circumstances on the ground are such. The fact is that STBs are highly subsidised.

The box is priced less than a third of what the customer pays during activation. So, inter-operability requires a customer to get a conditional access module (CAM).

The cost of that CAM, which the customer has to attach to the box so as to port to another operator, is slightly more than what it costs him to get a new connection.

So if he wants to migrate to another operator, it is cheaper for him to throw away the box or return the box that he has and go in for a new connection.

What are the major issues impeding the growth of the DTH industry?

A third of what we charge the customer is taken away by the Government. Before I see the money, a third is gone to the Government. Show me a category where a third of the revenue goes to the Government.

This is taxed at three levels – I pay licence fee and service tax to the Centre, and I pay entertainment tax to the State. All three put together is 34 per cent. When we started, there was only 10 per cent licence fee. Sales tax and entertainment tax were introduced later.

The Governments are hearing us and we are hopeful that things will improve. Currently, we are taxed at the rate of cigarettes and alcohol. We are not providing something contraband here.

When will Tata Sky turn profitable?

It’s difficult to say. This business is such that you have to invest upfront in subsidising the customer and hope to get returns in the long run.

We have to invest when the going is good and build assets for the future. When I convert a customer from analogue to digital, he starts paying the content provider and taxes to the Government.

The Government needs to encourage us to push digitisation (by rationalising taxes) which will increase the tax paying base for the Government.

We have been in the investment mode for the past 10 years, but the Government has been making money from us from day one.

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