IPTV in India : Aggressive Reliance Pricing

IPTV and DTH are going to be buzzwords for Indians as everybody is trying to ride over the digital wave be it broadcasters like Star & Zee, telecom operators like Tata, Bharti and Reliance or new players like Atlas. Broadcasters want to reach directly to the customer in order to protect there top lines from Local Cable TV Operators (LCOs). Currently LCOs corner 79% of the total subscription revenue, living very little (17%) for broadcasters. This is the reason that the currently reported ARPU of Cable TV is reported at 125 Rs. To protect there revenues and control over the subscriber, broadcasters are going to other delivery platforms to offer their content. DTH fits the strategy very well as broadcasters lack the infrastructure (read fiber and last mile connectivity) needed to deliver the content directly to the consumer. DTH gives the flexibility to offer the same without the last mile infrastructure.

But it doesn't cost them cheap. Take the example of Zee DTH service which has already consumed the capex of approx Rs 4500 MN and awaited launch of TATA-Sky DTH service is expected to have a capex of Rs 15400 MN. But the DTH service lacks genuine interactivity due to the lack of "reverse path". Here IPTV comes to the rescue which provides enhanced level of interactivity. Indian telecom operators are aligning their capex investment strategy with proposed launches of IPTV. Reliance, MTNL, BSNL and Bharti are already in the pilot phase to test the technology and scalability of IPTV over existing infrastructure. Reliance is doing pilots of Home Netway in Jamnagar and Mumbai to test the Microsoft TV platform with their patented technology for STB (read CHOISpad) and customized pilot (read CHOISer). Reliance is expected to launch its services near the year end. As Reliance is expanding the broadband in over 200 cities therefore we can expect it to launch IPTV not only in the metros but also in some of the Class A cities. Speculated deal of 5 MN set top boxes with Motorola also indicates the same.

As expected Reliance will come with cheap pricing for their bundled triple play packages, if soft billing started by Reliance indicates. Key indications from soft billing are

a) Rs. 100/ month flat fee (base rate)
b) Rs. 50 / month for each movie downloaded (unlimited views/replays in that billing cycle)
c) Rs. 25 / month for each music video or song (unlimited replays in that billing cycle)
d) Rs. 5-10 / month / TV channel (depending on usage - you only pay what you watch!)
e) Bill Statement has the timestamp for each movie download.
f) The threshold levels seem to be about 1 min / channel / month and 10 min / movie after which they are billed
g) Price cuts for movies & songs could be expected for the launch to about Rs. 25 & Rs 10 / month respectively

Considering the capex involved in the IPTV, soft billing indicates that Reliance wants to go for market share in the first 2-3 years and then make money out of it (Just like Google). I personally like this strategy of eating the market, gaining customers' experience and loyalty and then play with volumes. I believe Google also does the same, like it is doing with Orkut, Spreadsheets, etc. Moreover Reliance is going for a long term strategy to create a market for the connected homes where Reliance will be offering a solution of digital platform for households. All the home appliances will be connected and controlled with the same platform.

One important thing is to notice a unique strategy of telecom operators worldwide like AT&T, Reliance , etc where they are going for DTH as well as IPTV together. Telcos want to capture the market as soon as possible and this is little bit difficult to do with existing infrastructure which requires huge investment in network upgradation to either of FTTH, MEN (Metro Ethernet Network) or something else. So it is a practical solution to grab subscribers from cable dry towns with DTH and then upgrade them in future.