By Joe Leahy
© The Financial Times Limited
A group of international cable television industry operators and investors have warned that the Indian market needs to be deregulated or the country’s already lagging broadband penetration rates will fall further behind rivals such as China.
The group, which includes Star Group, News Corp’s Asian arm, US-based Liberty Global and Australia’s Macquarie Media Group, warned that price caps and other measures were deterring investors from committing the billions of dollars needed to upgrade India’s cable network to provide broadband.
“Cable in India is under-developed and consumers are under-served – especially within the digital context,” Paul Aiello, chief executive officer of Star Group, said in the paper, prepared by Media Partners Asia, a leading research firm, Indian prime minister’s office on Friday.
The arguments, which were rejected by India’s telecoms regulator, come ahead of an expected review of cable pricing this year.
Despite its reputation as a global information technology hub, India is struggling to build a strong domestic broadband market. As of last year, less than 2 per cent of Indian homes received broad-band compared with 13 per cent for China and 8 per cent for Brazil. Cable operators argue the best way to rectify this is to offer broadband through cable. The world’s second largest cable market after China, India has 71m homes connected to cable, outnumbering by 20m the number of households with fixed line telephones.
However, the last mile of India’s cable industry is controlled by about 30,000 small local operators who typically under-report their user numbers, resulting in lower fees for broadcasters.
To try to reform the system, the Telecom Regulatory Authority of India introduced a more transparent system requiring each subscriber in the biggest cities to buy a set-top box to access channels.
To woo subscribers across to the new system, the regulator set a low flat rate of Rs5 per channel. Broadcasters argue this system and other rules distort the market, preventing them from charging a premium for higher quality channels and ultimately deterring investment in the sector.
“For a simple cable operator to move into broadband services would require a huge amount of investment and, currently, based on his fees, he might not be able to sustain that sort of investment,” said Farokh Balsara, a partner at Ernst & Young.