GTPL Hathway, one of India’s top cable TV and cable internet providers, indicated it was not overly worried about telecom players like Bharti Airtel luring away its local cable operator partners under their new LCO partnership strategy.
Bharti Airtel had announced some weeks ago that it plans to authorize local cable operators (LCOs) to resell its wired broadband services to their customers.
Under the model, Bharti Airtel will provide upstream connectivity, plans, marketing material, IT support as well as billing infrastructure, while it will be the cable operator’s job to set up and maintain the local fiber network. In return, Airtel will share part of the subscriber revenue with the LCO.
The scheme has the potential to disrupt the operations of large cable feed providers like GTPL Hathway, Den Networks and so on, which traditionally do not prefer to share broadband revenue with their local cable operator partners.
Under the model adopted by traditional MSOs, local cable operators get to keep a fixed payment of around Rs 100 per household per month from the cable TV charges, and have little role to play on the broadband side of the business, which is usually entirely handled by the MSO.
More often than not, it is the MSO that lays its own fiber to the customer premises. It also keeps most, if not all, of the monthly broadband service fee paid by the customer.
The model allowed MSOs to focus on the small, but growing broadband side of the business, while allowing the local cable operator to keep the lion’s share of the revenue generated from the cable TV service.
However, that understanding is coming under stress due to changing consumer preferences and habits. Consumers are increasingly ditching traditional TV channels in favor of IPTV and streaming apps like Amazon Prime Video to get their daily dose of entertainment.
As this trend becomes more and more widespread with the expansion of fiber-broadband, traditional cable and broadcasting business has started declining, threatening the incomes of local cable operators.
It is in this context that players like Bharti Airtel are offering a hand of friendship to local cable operators, promising to give them a share of the broadband revenue in addition to the traditional cable TV revenue.
However, speaking to investors after releasing GTPL Hathway’s second quarter results, Chief Financial Officer Anil Bothra said he was not unduly worried about Airtel’s offer to LCOs as such offers have been made in the past as well.
“Yes, they’ve come up with a partnership offer,” he said, “but they had come up with a similar plan four years ago too.”
He also pointed out that Bharti Airtel is not the first telecom company to try to lure away local cable operators from the MSOs to the telco side.
Before Airtel, Tata Communications had tried to bring onboard local cable operators through a program called Metro Ethernet, he pointed out.
Similarly, he added, public sector telco RailTel came up with a program to distribute its broadband services through LCOs in 2016-17.
“But one doesn’t see these [projects] to be rolled out in the market to that extent…Other telco-ISPs have worked on this formula in the past, whether it is Tata, or RailTel, but we have not seen this get implemented on the ground.”
MD Anirudhsinh Jadeja said GTPL Hathway does have agreements for sharing broadband revenue with a small proportion of local cable operators — either on the basis of customer acquisition or on the basis of customer retention.
ANDROID HYBRID BOX
As of now, said Jadeja, the local cable operator partners of GTPL Hathway are eagerly waiting for the launch of the company’s Android-based, hybrid set-top-box, which he indicated will happen in the first half of November.
The box was originally slated for a launch in April, but has been delayed due to supply disruptions related to COVID-19.
Local cable operator partners, he said, are putting pressure on the company to launch the box as quickly as possible.
“They all are demanding [to know] when our [hybrid] services are launching so that they can put [them up for distribution],” he said, interacting with investors.
They, in fact, seem more keen on launching the Android set-top-box than the company itself, he added. “They have already been taking [feedback] from the subscribers and they are saying there is demand in the market. The demand is more from their side, rather than our side,” he added.
DISRUPTION
The demand for the hybrid set-top-box is a reflection of the rising uncertainty among cable operators with regard to their future. The uncertainty is due to two different trends: First is the expansion of IPTV and on-demand services such as Reliance Jio and Tata Sky Binge+, while the second is increasing price competition from DTH players desperate to hold on to their subscribers.
DTH provider Sun Direct, for example, last week cut the starting price of its packages from Rs 153 to Rs 59 in an attempt to keep its customers from canceling their subscriptions or moving away to competing platforms.
However, cable operators cannot offer their connections at Rs 59 per month because of the expenses involved in maintaining a wired connection to the customer premises.
The second threat perception is with regard to the fast-expanding IPTV and broadband service from India’s largest telecom operator Reliance Jio, which eventually targets to reach 50 million homes in India.
However, the company cannot reach that target without displacing small cable operators. At present, the total number of cable TV households in the country is around 95 million, out of which around 35 million are direct subscribers of big cable networks such as GTPL, Ortel, Hathway, Fastway, Siti and so on.
The majority of cable subscribers, however, are still with small, local cable operators. Most of the 50 million customers targeted by Jio Fiber will eventually have to come from these small cable operators.
In this context, small operators are left with only three choices: Compete with Jio and DTH by offering value-added services like IPTV and on-demand content, sell their business to bigger players like Jio and Hathway, or try to continue as agents of these bigger networks.
Jadeja said GTPL Hathway currently offers three options to smaller operators: They can sell their business to GTPL Hathway for a lumpsum amount, convert themselves into GTPL’s distribution agents or form a joint venture with GTPL Hathway.
Even though most smaller operators have traditionally chosen the option of becoming a distribution (LCO) partner for the big players, the increasing popularity of IPTV coupled with the falling demand for traditional TV may force them to look for alternatives in the future.