Tag: Hathway Cable and Datacom

Star India on watch as Hathway implements RIO TDSAT order

MUMBAI: The seven month long battle between multisystem operator (MSO) Hathway Cable and Datacom on one hand and Star India and Taj Television on the other, finally ended last week, with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) directing Hathway to execute an interconnect agreement based on Star’s Reference Interconnect Offer (RIO).

The TDSAT had directed the two to sign the interconnect agreement in its current form and approach the Telecom Regulatory Authority of India (TRAI) in case of any objections with parts of the RIO. “We have signed the RIO in its current form and have sent it to Star,” informs Hathway Cable and Datacom MD and CEO Jagdish Kumar.

But, having said this, Star still seems to have some concerns. “As of today, the Star channels have been dropped on Hathway in Mumbai, Delhi, Kolkata and Ahmedabad. So while channels like Star Movies, Star World have been switched off from the Mumbai headend, in Ahmedabad, except Star Plus and Star Movies, all the other channels from the network have been dropped,” says a industry source close to the development.

According to the same source, Hathway, fundamentally has been offering less channels at a higher price to consumers, as compared to the other MSOs or DTH operators in the same market.

“Currently, the MSO has shown a consistent behaviour and pattern of taking on the broadcasters. It has been dropping channels and moving them to a la carte and has been depriving a significant number of consumers of good content,” he further adds.

The network is looking forward to the way the changes will be communicated by the MSO to the customers. “The consumers will have to call the MSO and find out how they can subscribe to the channels as it is no longer available in the packs. And so communication is crucial,” the source informs.

According to Hathway’s Kumar, with the court ordering the MSO to follow procedures from 1 October, it is doing everything they can to inform their subscribers. “We are using various means of communication. So while the first thing we are doing is communicating to our local cable operators, we have also put tickers on our channels, informing consumers that Star channels will be available on a la carte, henceforth. This apart, all the MSOs together are coming up with a press release in order to inform the consumers about the change,” says Kumar.

Kumar says, that Hathway will continue to inform its LCOs and subscribers, even after the initial phase.

Hathway will be providing non-sports channels of Star at Rs 10 each, and sports channels for Rs 20 to its consumers.

The MSO believes it can still make a good profit margin at these rates, even though this looks challenging, considering the range of RIO pricing for the Star package is from 52 paisa for Channel V to Rs 17.39 for Star Sports2 and Rs 2.36 for Star World.

“But we didn’t want to confuse our customers with so many price points, and so came up with this plan. So while we expect to make a good margin for Channel V, the margin for Star Plus which is for Rs 9 will be small. But overall, we hope to make a good margin,” ends Kumar.

October 1, 2014
TDSAT directs TV9 to stop airing defamatory and inflammatory programmes

MUMBAI: The Telecom Disputes Settlement Appellate Tribunal (TDSAT) has disposed off the case between Associated Broadcasting Companies (ABC) that runs the channel TV9 and multi system operators (MSOs) Hathway Cable and Datacom and Siti Vision Digital Media regarding a show that had been telecast on the channel which had made defamatory remarks against the new Chief Minister (CM) K Chandrashekar Rao of the state.

The programme telecast on 12 June was carried by the MSOs and LCOs in Telangana and according to the tribunal was ‘highly defamatory’ of the CM leading to a serious law and order problem. Therefore, MSOs and LCOs stopped carrying TV9. As the petition filed by ABC involved Constitutional rights and public order, The Union of India through the Information and Broadcasting secretary and Telangana home secretary were directed to be impleaded as respondents in the case.

Although the broadcaster stopped the broadcast of the offending programme and issued a public apology for it, MSOs did not resume transmission and the channel was literally taken off air in Telangana.

The TDSAT had in an earlier order this month directed the MSOs to commence showing the channel. Siti Vision started showing it on 3 September in the evening but had to take it off the very same day as it received threatening calls. ABC went ahead and filed an EA in the tribunal.

On reading the transcript of the programme, TDSAT stated that it found the content ‘extremely defamatory, offensive and inflammatory and the product of a sick mind.’

Counsel for the government, K Parameshwar, informed TDSAT that the I&B Ministry had written a letter to the Telangana chief secretary to ensure that the tribunal’s orders are complied with. The letters of the same had been submitted to it.

A similar case is pending before the Privilege Committee of the Telangana Assembly for which no proceedings have begun either under the Cable Television Networks (regulation) Act 1995 (CTN) section 19 or any other law. However, counsel for Siti Vision and Telangana additional advocate J Rama Chandra Rao pointed out that Rule 5 (A) of the CTN Act (1994) casts an obligation on the MSOs and LCOs to not carry programmes which might be in violation of the programme code and/or the advertisement code prescribed under rules 6 and 7 of the CTN Act.

According to TDSAT, the MSOs have also changed their stance for stopping the broadcast of TV9. While earlier it was fear of public violence, now it is due to non renewal of interconnect agreement that expired on 31 March 2014. To this the counsel for the government stated that this was merely an excuse to not show the channel for fear of public anger. Rao assured TDSAT that the state of Telangana would do all that is required to provide sufficient security to the MSOs and LCOs, as long as the channel does not telecast any defamatory statements against Telangana, its people and the government.

The TDSAT has directed TV9 to strictly abide by the Programme Code and the Advertisement Code from rules 6 and 7 of the Cable Television Networks Rules (1994) and that it won’t make any false or malicious references to the state of Telangana or its people or government or its elected representatives. Subject to this, the MSOs are directed to carry the broadcaster’s channel.

It also clarified that this order would not come in the way of the proceedings in the Telangana Assembly nor would it stand in the way of the authority to take legal action against TV9 under section 19 of the Regulation or any other provision of the law.

September 24, 2014
TDSAT directs Taj TV to restore Zee signals to Hathway; to hear MSOs plea late next month

NEW DELHI: Taj Television has been directed by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to restore with immediate effect the signals of Zee TV channels to Hathway Cable and Datacom, pending final hearing of the petition by the latter.

TDSAT Chairman Justice Aftab Alam and member Kuldip Singh also directed Hathway as an interim measure to make payment of the monthly subscription fees from 1 April 2014 (in case of Kolkata and Digital Addressable System – II areas) and from 1 May 2014 (in case of Delhi and Mumbai) up to 31 July at the rate of Rs 21.60 cost per subscriber basis.

The Tribunal has asked Taj to reply to the petition filed by Hathway in three weeks and asked Hathway to file a rejoinder if any, two weeks thereafter.

Zee channels were earlier being distributed to Hathway by Media Pro but the latter was not in a position to renew the agreements in view of the regulations issued by the Telecom Regulatory Authority of India around the same time the earlier agreements came to end.

Thus, the Zee group of channels came to be handled by Taj Television. But when discussions between Hathway and Taj Television for Zee TV channels failed to yield any results, Taj TV on 26 June sent the RIO based agreement executed from its side. There was delay on the part of Hathway in executing the RIO based agreement and in the meanwhile, Taj Television issued the disconnection notice under regulation 6.1 on 8 July 2014 and the public notice under regulation 6.5 on 11 July 2014.

On 28 July 2014, Hathway counter-signed the RIO based agreement and sent it back to Taj Television. On the same day, Hathway also sent a cheque dated 31 July for Rs 16.8 crore.

According to it, this amount was in full payment of the arrears of the monthly subscription fees for the period 1 April to 31 July 2014, calculated at the rate specified under the fixed fee agreements with Media Pro that had expired on 30 March and 30 April.

However, Taj did not accept the cheque and sent it back and deactivated the signals on 31 July.

This led to the present petition by Hathway. During arguments, Hathway maintained that the RIO agreement can only come into effect prospectively and for the past period it can only be asked to make payment on the basis of the fixed fee agreement with Media Pro and at the rates as specified under the earlier agreements.

The Tribunal has identified three main issues for decision:

(i) Whether the RIO based agreement and the rates prescribed under the RIO would apply retrospectively from the date immediately following the expiry of the earlier agreement or prospectively from the date it was executed by both sides?

(ii) Whether in the facts of this case, Hathway’s liability to make payment on RIO rates would arise from 26 June 2014 when the agreement was signed by Taj Television and it was sent to it for its counter signature?

(iii) What would be Hathway’s liability towards payment of monthly subscription fee for the period immediately following the expiry of the earlier agreement and the date on which the RIO agreement between the two sides came into effect?

August 5, 2014
Police case filed against two Hathway-linked LCOs in Kolkata for illegally carrying Star Sports 1 signals

NEW DELHI: Kolkata police has registered a first information report (FIR) against two local cable operators (LCOs) Akash Darpan and Titli Cable Service, both linked to multi system operator Hathway Cable and Datacom’s network for illegally re-transmitting signals of Star Sports1 on unencrypted frequencies.

The FIR follows the raids conducted by the Kolkata police after a complaint was filed by Star on 22 July against ‘the deliberate illegal acts of Hathway.’

Acting on the complaint, the police raided the control rooms of the LCOs and found that the signals of Star Sports 1 were being retransmitted in unencrypted mode on LCN No. 872 meant for local channels. The police registered an FIR No. 649/14 dated 22 July 2014 against Hathway and the two LCOs under sections 120-B/409 IPC and 37/51/63/65/69 Copyright Act.

Star said in a press release that ‘in order to mislead and deceive it, Hathway has adopted an unlawful methodology whereby Hathway’s electronic programming guide (EPG) displays to the subscribers that the said TV channel is available on an a-la-carte basis. However, the said channel is available and enjoyed by Hathway subscribers even without opting for the said TV channel on an a-la-carte basis by the unlawful placement of the TV channel in unencrypted frequencies/forms.’

The broadcaster also claims that because of the unlawful placement of the channel, the subscriber base of Star Sports1 is not captured on the SMS and Cable Access System of Hathway. Consequently, the MSO does not pay any license/subscription fee, though the channel is available and viewed by the Hathway subscribers.

Star investigated the issue and video recorded the unencrypted retransmission by Hathway on 19 July on being informed of the illegal retransmission.

Even earlier, Hathway had illegally carried Star Sports channels on unencrypted frequencies in the DAS notified city of Mumbai in gross violation of the provisions of sections 51 & 63 of the Copyright Act, the Cable Television Networks (Regulation) Act and the applicable Regulations of the Telecom Regulatory Authority of India. A legal notice on 27 February 2014 was issued by Star Sports India in this regard.

July 30, 2014
Shareholders okay Hathway to up borrowings to Rs 1600 crore

BENGALURU: Indian multi system operator (MSO) Hathway Cable and Datacom has informed the bourses that it has received shareholder approval and passed special resolutions as under:

(1) Special Resolution under Section 180(l)(c) of the Companies Act, 2013 for authorising the Board of Directors of the Company to borrow loans in excess of Paid up Capital and Free reserves of the Company subject to maximum of Rs 1600 crore.

(2) Special Resolution under Section 180(l)(a) of the Companies Act, 2013 for authorising the Board of Directors for creation of Charge / Hypothecation / Mortgage on the movable / immovable properties of the Company for securing the borrowings of the Company subject to maximum limit of Rs 1600 crore.

(3) Special Resolution under Section 186 of the Companies Act, 2013 for authorising the Board of Directors to invest or to provide loans and advances or give guarantees/ securities up to 100 per cent of free reserves and securities premium account or Rs 1,000 crore whichever is higher.

Last June, the company had obtained shareholder approval for borrowing from time to time, as it may think fit, any sum or sums of money not exceeding Rs 1400 crore in aggregate or equivalent thereto in any foreign currency to meet fund requirements for effective implementation of Digital Addressable System (DAS) and broadband capital expenditure.

The shareholders of the company in August 2013, had also given a nod to permitting the company to issue preferential equity shares aggregating Rs 109.9 crore for 38.7 lakh fully paid up equity shares to Asia Holding Investments IV (Mauritius) Limited and 14.05 lakh fully paid up equity shares aggregating at about Rs 39 crore to Hathway Investments Private Limited (which is a promoter group company) of face value of Rs 10 each at a premium of Rs 274 per share.

Hathway’s consolidated EBIDTA for FY-2014 was Rs 311.19 core and Rs 274.1 crore in FY-2013. During FY-2014, Hathway reported a standalone loss of Rs 125.25 crore and a consolidated loss of Rs.111.111 crore as compared to a standalone profit of Rs 3.2 crore and a consolidated profit of Rs 15.7 crore in FY-2013.

The company has paid Rs 92.52 crore towards finance cost in FY-2014 as compared to the Rs 46.14 crore in FY-2013.

July 15, 2014
Taj Television issues switch off notice against Hathway

MUMBAI: Two days after Star India issued a notice against Hathway Cable and Datacom, it’s now the turn of the newly formed Taj Television Network to do the same. In a notice issued in the leading dailies, the distribution arm of Zee and distribution agent for Turner channels has stated that Zee and Turner channels are likely to be switched off for subscribers of Hathway Cable and Datacom and its franchisees.

The cities where the switch off is likely to happen are the DAS areas of Greater Mumbai, Thane, Kalyan-Dombivali, Jaipur, Pune, Nashik, Delhi, Bengaluru, Aurangabad, Lucknow, Allahabad and Kolkata Metropolitan Area.

The reason for deactivation has been stated as ‘non signing of subscription agreement/interconnection agreement’, ‘non submission of subscribers reports’ and ‘non-payment of subscription fees’.

The channels included in the list are Zee TV, Zee Cinema, Zee Marathi, Zee News, Zee Café, Zee Studio, Zee Punjab Haryana Himachal, Zee Bangla, Zee Business, Zee Salaam, ETC, Zing, Zee Jagran, Zee Talkies, Zee 24 Taas, Zee Smile, Zee Kannada, Zee Telugu, Zee Kalinga, Zee Classic, Zee Action, Zee Premier, 9X, Zee Madhya Pradesh Chattisgarh, Zee Bangla Cinema, Zee Marudhara, Zee Tamil, & Pictures, Zee Anmol, Zee Q, Zee Khana Khazana, Zee Sangam, 24 Ghante, Zindagi, Zee TV HD, Zee Cinema HD and Zee Studio HD from the Zee stable as well as CNN International, Cartoon Network, HBO, POGO and WB of Turner International India.

July 11, 2014
Star India to switch off channels on Hathway

MUMBAI: Issuing of public notices by companies, be it broadcasters or distribution platform (DTH operator or MSO), is getting common. In a fresh spat, a public notice has been issued by Star India which informs its viewers that they will not be able to watch the network’s channels on Hathway Cable and Datacom.

In the notice published in leading newspapers of Delhi NCR, the broadcaster has said that the consumers in the DAS notified areas of Delhi, Faridabad, Ghaziabad and Agra will not get the signals of the Star India channels.“The signals are likely to be disconnected after three weeks from today by Star India to Hathway New Delhi, Haryana and Uttar Pradesh,” states the notice.

The reasons for deactivation as cited in the notice are: non-signing of subscription agreement; non-submission of subscriber report and non-payment of outstanding subscription fees.

With this, all the DAS areas serviced by Hathway and its franchisees will get affected.

The channels that will be switched off include: Star Plus, Life OK, Star Gold, Star Movies, Star Movies Action, Star World, Channel V, Movies OK, Star Pravah, Star Jalsa, Star Jalsa Movies, Star Utsav, Star Vijay, National Geographic, Fox Life, FX, Fox Crime, Nat Geo Wild, Nat Geo People, Nat Geo Music, Baby TV, Asianet, Asianet Plus, Asianet Movies, Suvarna, Suvarna Plus, Star Plus HD, Life OK HD, Star Gold HD, Star Movies HD, Star World HD, Star World Premier HD, National Geographic Channel HD.

July 9, 2014
Star Sports, Hathway lock horns

MUMBAI: Two hard-to-miss campaigns have been doing the rounds of television, radio and digital media lately.

One, launched by sports broadcaster Star Sports, hits out at multi-system operator (MSO) Hathway for not providing Star Sports channels to subscribers, apart from suggesting that subscribers move to other MSOs or a DTH platform.

The other, launched by Hathway, informs viewers to subscribe to Star Sports channels as part of the MSO’s ‘Sports Package’ or on a la carte basis.

Subscribers may be confused but what is obvious is that Star India and the MSO, once close partners, seem to be no longer on the same page and are scrapping with each other like a couple after a bitter parting. And that too in the public eye.

But both deny that they are hitting out at each other; they say they are just protecting their individual interests.

“We noticed that several subscribers didn’t even know how to subscribe to our channels and were therefore under the impression that the channels had been switched off at our end. We were thus compelled to issue an advertisement in mainline newspapers to assist our viewers and clear all misgivings so that consumers could explore their options to avail our channels,” explains the Star Sports spokesperson.

“We would like to highlight that we have received complaints that many consumers are facing lot of difficulties in getting our channels activated. There are newspaper reports talking about subscribers facing challenges in availing signals from Hathway.”

On his part, Hathway Cable & Datacom CEO Jagdish Kumar says, “We had to launch the campaign because of the wrong information that was being spread against us. We have not pulled off Star Sports channels. We have simply removed them from our premium package and are now giving them to subscribers either a la carte or through our Sports package.”

Didn’t Star Sports spark off Hathway’s move by raising the sticker price of its channels? “We have not increased the price of our channels. The channel pricing is regulated by the Telecom Regulatory Authority of India (TRAI) and no broadcaster can unilaterally increase the channel price,” the spokesperson shoots back.

However, unconfirmed reports are that Star Sports asked Hathway to pay for a higher number of subscribers this year – when its contract came up for renewal – if it wanted the channels to be placed in any of its packages. Something which most broadcasters are resorting to with the onset of greater transparency following the wider spread of set top boxes in subscriber homes.

This was something which Hathway was not open to hence it yanked Star Sports channels from its existing pack and begin charging separately for them.

“I don’t understand why it is being made out as such a big issue? Isn’t digitisation about this? We are giving the consumer the power to choose. Any consumer who wants the sports channels can get them either a la carte or they can subscribe to our sports pack,” Pillai maintains.

The Star Sports spokesperson however insists that the move has affected Hathway consumers adversely. “They are today worse off than before as they have to now pay more to Hathway for availing the same set of channels, including the Star Sports Channels,” he empasises.

Pillai contradicts this saying, “Who says we are charging more? We have instead reduced the package price for consumers, who have opted for a la carte channels.”

He claims that the MSO has reduced the price of its premium package by Rs 5 and is offering Star Sports 1, 2, 3 and 4 at Rs 17.25 per month. Consumers opting for these channels would have to subscribe for a period of three months, he adds. Else, the channels are available as part of its Sports Pack with Neo Sports at the same price and consumers could subscribe to that for a period of one month.

The Star Sports spokesperson then accuses Hathway of not giving prior and adequate notice to its consumers before making these changes to its package composition and “discontinuing the exhibition of Star Sports channels”.

“We have received information that Hathway did not protect those who had subscribed to the packages containing the Star Sports channels in the last six months nor did it protect those who had paid for the same on a yearly basis, thereby breaching its obligations under the relevant regulations. We have been inundated with enquiries from agitated and confused consumers of Hathway, who saw their favourite sports channels suddenly going off their TV screens, thereby missing out on quality sporting action on our channels,” alleges the spokesperson.

Pillai has a quick riposte to this allegation. Says he: “Who says we had not given any prior notice? We had sent out a public notice 20 days back informing our subscribers of our plan. In fact, we were also running scrolls on the TV screen, informing them of the same.”

So, can consumers expect some kind of resolution soon? “We have always acted in the spirit of cooperation. As a result, our content is widely available across cable TV and DTH platforms,” highlights the Star Sports spokesperson. “Having said that, we cannot accept that our viewers are taken for granted. We also expect distribution platforms to behave responsibly as both broadcasters and distributors owe a minimum quality of service to our viewers as provided for in the regulations framed by TRAI.”

Pillai reveals that his company is just following market demands, adding that “we are examining all options. The case had come up for hearing in TDSAT, where the tribunal had disposed-off the petition of Star Sports. I don’t see a reason for the sports broadcaster’s reaction. We are just complying with what digitisation was meant for.”

April 7, 2014
Q3: Digitisation pushes up MSOs’ subscription revenue

MUMBAI: Transparency in subscriber numbers with the digitisation of cable TV services in 42 cities is translating into higher subscription revenues for multi-system operators.

The benefit of digitisation is still to fully reflect in revenues of MSOs as billing to cable TV subscribers is still to be completed in the 38 cities that were digitised in Phase II.

Digitisation has had an added impact on the MSOs financials. Their carriage or placement revenue earned from broadcasters is decreasing.

MSOs expect carriage revenue to rise as new channels get launched.

Carriage Revenue

Hathway Cable & Datacom’s income from placement of channels fell 14 per cent to Rs 73.6 crore in the third quarter ended 31 December, 2014. The share of placement revenue in Hathway Cable’s total revenues fell to 31 per cent in the third quarter from 41 per cent a year ago.

Den Networks too saw softening of its placement revenues to Rs 117.8 crore, down nearly 2 per cent from Rs 119.90 crore a quarter earlier. Den Network’s placement revenues a year ago are not available.

Subscription Revenues

Digitisation gains led Den Networks revenues to rise to Rs 105 crore in the third quarter, up 6 per cent from Rs 99.11 crore a quarter earlier.

The quarter-on-quarter increase in subscription revenues for Hathway Cable was sharper. Its subscription revenues rose to 74 per cent to Rs 119.1 crore in the third quarter from Rs 68.5 crore a quarter earlier.

Hathway Cable’s subscription revenues rose as it completed billing for a substantial percentage of its cable TV customers in the cities covered under the Phase II of digitisation. As a result, its average revenue per month per subscriber too has increased substantially, an analyst said.

Hathway Cable says with its focus on collections, the company has witnessed continued traction in the pace of subscription collections into January 2014.

SITI Cable Network saw its total revenues in the third quarter rise 42 per cent to Rs 177.3 crore from Rs 124.7 crore a year ago.

SITI Cable CEO V D Wadhwa says, “We gained further momentum in the third quarter of fiscal 2014.”

Direct-To-Home TV

Dish TV’s revenues rose 3% quarter on quarter to Rs 6,128 mn in the third quarter but its EBITDA fell 1.6% quarter on quarter to Rs 135.50 crore. The company’s operating profit was down as its content cost rose and selling, general and administrative expenses increased as it tapped benefits flowing from digitisation.

Dish TV added net 2,20,000 households in the third quarter taking its subscriber base to 11.2 million.

Analysts expect Dish TV to reap higher benefits of digitisation in Phase III and IV starting 1 October, 2014.

In the case of Bharti Airtel’s DTH business, the multiplier impact of increased customer additions and higher realisations during the quarter, pushed up revenues by 25.8 per cent to Rs 538.4 crore from Rs 428 crore a quarter earlier.

Leveraging economies of scale, EBITDA for the quarter increased to Rs 97 crore from Rs 14.7 crore a year earlier. Consequently, Airtel Digital TV’s EBIDTA margin improved significantly to 18.0 per cent in the third quarter from 3.4 per cent a year earlier.

During the current quarter, the company incurred a capital expenditure of Rs 110.90 crore in DTH services. The cash burn during the quarter at Rs 13.9 million was significantly lower Rs 120.40 crore a year ago.

Airtel DTH added 2,35,000 net subscribers in the third quarter to take its total subscriber base to 88,07,000. Its average revenue per user in the third quarter was Rs 207.

February 18, 2014
MCOF and its MSO-LMO revenue sharing proposal

MUMBAI: The struggle to find a solution on how multisystem operators (MSOs) and cable operators (LMOs – last mile owners) will work together in a digitised India continues. The discussions between Maharashtra Cable Operators Federation (MCOF) and Hathway Cable & Datacom to come up with a workable arrangement had given some hope for a smooth rollout of MOS-LMO revenue shares, and consumer billing in Mumbai. But talks between the two seem to have come to a standstill for some time now.

Indiantelevision.com has got a hold of the proposed revenue share model which has been hammered out after a lot of thought and conversation: it takes into consideration operational expenses (OPEX) and the capital expenditure (CAPEX) of both the LMOs and MSOs.

“It is as much in our interest as it is in the MSO’s to resolve the bottleneck, differentiate amongst subscribers and cater to their needs to optimise the network resources and push ARPUs up in the shortest time,” says MCOF president Arvind Prabhoo.

According to the proposed revenue sharing structure, the MSO: LMO share for free to air (FTA) channels should be 37 per cent : 63 per cent. For basic pay packages, the price range of which is Rs 150-Rs 250 (excluding taxes), the proposed revenue share is 45 per cent : 55 per cent; for advanced pay channels, which are in the price range of more than Rs 250, the revenue share proposed is 50 per cent : 50 per cent. For special/VOD packages, it is 75 per cent : 25 per cent and for HD channel packages it is 60 per cent: 40 per cent.

“The best way for the industry to not only survive but prosper to its true potential is to work as a pure and true partnership business. MCOF will act as the collection management and settlement entity,” adds Prabhoo.

The MCOF model assumes that every MSO has two systems in place: the subscriber management system (SMS) and Financial Accounting System (FAS). The SMS hosts the entire subscriber details and is the basis of value chain reconciliation and audit.

“We have proposed that the MSO use this to generate end-customer bills with full details, factoring the LMO income share and taxes at various levels. These bills would be raised in the name of the LMO network and carry the tagline powered by the MSO,” says Prabhoo.

The billing details, as per the proposal, will be pulled by MCOF and placed on the cloud and each LMO would gain access via the worldwide web using a mobile device or through a desktop. The collection data is planned to be captured in real time using MCOF approved technology, which is currently UPASS and updated on the MCOF cloud in real time and at the MSO-end either in real time or on an end of day basis.

“We will work out the tax liability at LMO levels and guide them to use the technology to compile tax returns/challans. We will also reconcile the MSO-LMO accounts taking into account prepaid/post paid, online payments made to the MSO and unpaid customers,” informs Prabhoo.

Explaining the reason for the proposed revenue share, Prabhoo says, “The LMO has certain base expenses to cover, such as employees, office rent, repairs and replacements of shared infrastructure, audit and tax returns.”

The effective OPEX for an LMO, according to MCOF for 1000 subscribers is Rs 109,500 a month. “The LMO’s per subscriber cost comes to Rs 109.5. We need at least Rs 109- Rs 110 to pay the employees and other costs. So this is the minimum and then comes profitability,” he highlights.

The average CAPEX per subscriber is close to Rs 4000. Also, MCOF points that while the subscribers/employee ratio for an LMO is around 400, it is expected to be more than 5000 for a MSO. Thus making the OPEX element much higher for an LMO than an MSO.

Prabhoo feels that while the MSO is a wholesaler and LMO the retailer, the assumption of equal sharing as envisioned by the Telecom Regulatory Authority of India (TRAI) needs to be rectified and replaced by equitable sharing.

“We have had detailed discussions with the TRAI on this and the matter will be reviewed sooner or later, but for sure it is not correct on TRAI to assume equal sharing by all three stakeholders,” he says.

The collection cost currently is entirely on the LMO while a good part of the monies flows to MSOs. This, according to MCOF needs to be allocated in the revenue share formula, if not actually computed and reimbursed. “For all practical purposes the LMO’s work load will increase as he acts as the marketing arm and administrative support system for the MSOs. Also, another round of set top box (STB) deployment/retrieval/repairs/replacement by HD boxes will entail quite a lot expense.”

MCOF, in the email to MSOs, has also suggested that carriage fees should be clubbed with customer revenues, being a mathematical product of STBs in place and carriage fee per STB.

MCOF has agreed that the UPASS technology, devices and connectivity costs will be borne by the LMOs. Also while integration, payment gateway, electronic processing and settlement system costs are incurred by the MSOs for direct connections or internet services, for any additional integration, the cost can be shared with the LMOs on a pro-rata basis.

The LMOs are also suggesting carriage fee sharing as a loyalty bonus. “This can be mutually worked out,” says Prabhoo.

The new system will enable the MSO to see and monitor the exact collections made each month by the LMO and also the revenue due to the MSO, excluding taxes. While revenue will be booked in both books as per packages, the LMO will pay the MSO per month for all the collections made during the previous month after deducting taxes and the LMO share within seven days of the invoice being generated by the MSO.

While MCOF is trying to move things forward, what’s stopping the MSOs? “Well! There are talks going on between the promoters of the MSOs. There is no consensus amongst the MSOs and that is what is taking time,” says a Hathway official on condition of anonymity.

According to the official, the proposed revenue share by MCOF is acceptable, with minor changes. “But, all the MSOs operating in the state, have to come to a consensus, which I don’t see happening soon,” he says. The official feels that billing in Mumbai is most likely going to be delayed further.

SitiCable Network, which also has a presence in the country’s financial capital says it may soon conclude on how it will share revenues. “We are negotiating. We may announce our revenue share in a couple of days. Since, we have a small presence in the state, we are seeing what other MSOs are doing there,” explains SitiCable Network chief operating officer Anil Malhotra.

January 23, 2014