Two recent pay-TV industry events in India illustrate how important this burgeoning market is to NDS. First was the Convergence India 2008 Exhibition held in New Delhi in mid-March. Second was the opening of the NDS office in New Delhi, announced this month.

At Convergence India, NDS was one among hundreds of exhibitors. “What we showed is a full range of solutions geared to help TV service providers enable convergence and capitalize on the business opportunities it presents,” says Hong Kong-based Martin Kaufmann, NDS Corporate Director for Consumer Devices.

“Specifically NDS presented a live demonstration of the Tata Sky end-to-end solution that features VideoGuard® conditional access technology which provides the robust security required to deliver services and premium content to multiple devices, as well as NDS middleware and the latest NDS interactive services for subscribers,” Kaufmann says.

[For more on Tata Sky, see “Tata Sky's MD & CEO Vikram Kaushik: "Target is 1 million subscribers in first year” in World Vision No. 34.]

“At Convergence India we also showcased NDS’ latest and future technologies designed to help service providers take advantage of the business opportunities that convergence presents in the region.” Kaufmann is in a unique position to comment on the commercial potential in each territory in the Asia Pacific region.

India: ‘Dynamic and exploding’

With close to 130 million TV households, India is a potentially huge pay-TV market. Of this total there are an estimated 82 million pay-TV subscribers, of which only about 4 million are digital subscribers. Kaufmann describes the Indian market as “both dynamic and exploding. Operators want everything yesterday. Because of the scale of the market, almost the only consideration is financial.”

Given the financial pressures, one could discount how robust the Indian market is,” Kaufmann says. “But that’s one of the paradoxes. The operators are really delivering. It’s not uncommon for an operator to gain 1 million subscribers annually.”

“One of the reasons for the fierce competition is government regulation,” he says. “Basically all operators must offer the same channels,” he says.

Despite tight regulations, seven new operators have been granted DTH licenses recently. “New operators are entering the market all the time. Despite the impressive performance of some of them, I wonder how many more the market can support in the long run,” he says. “After all, for all intents and purposes the US only has two major satellite operators.” In light of this analogy, Kaufmann wonders how Indian operators will survive.

The answer: Digitization, added services

Because of the vast size and scope of the Indian market there are significant opportunities for savvy DTH and digital cable players to enter the fray and gain market share prior to likely future consolidation.

“At present most of the platforms and analog providers don’t even have real EPGs. This opens up opportunities for the major players to offer digital services like customized EPGs as well as effective conditional access, interactive applications, multiple languages and DVRs.”

Does he expect the Indian market to settle down? “I think it will -- eventually. What we expect to see is increasing competition between DTH and cable providers for position and market share. The market is still very competitive and driven by financial considerations. This will ultimately benefit viewers who will be able to choose from a broader selection of higher quality services at competitive prices.”

MPEG-4 and DVB-S

On the technological and standards side of the Indian market there is good news and bad news. MPEG-4 is the good news.

“Virtually all Indian operators are launching MPEG-4 for standard definition broadcasting,” Kaufmann says. This is at a time when most European operators are still using MPEG-2. “The result of introducing MPEG-4 is that it has brought down the price of STBs and related CE devices to a level the market can support.”

“Because of the size of the Indian market the shockwaves that result from this situation have in fact affected STB prices around the world,” he explains.

Despite this effect on the world market there is still tight regulation on STBs as well. The Telecom Regulatory Authority of India (TRAI) specifies what STBs must do, how much they can cost, and what percentage of programming can be commercial. “What this means is that on one hand the Indian market is determining the worldwide fixed scale price for STBs while on the other hand, the local regulators are determining what these STBs must include.”

Now for the potentially market-inhibiting bad news: the dynamics surrounding DVB-S and DVB-S2 – variants of the standard for satellite broadcasting. “There are currently discussions about what standards to adopt.” DVB-S is the original satellite broadcast standard, while DVB-S2 is the more recent standard. “The problem is that some of the legacy broadcasters are trying to block the introduction of DVB-S2 because they see this as a way of maintaining their advantage over newcomers.” Their arguments are being considered.

Cable market: ‘Amazing’

“It’s abundantly clear that numbers are what drive the Indian pay-TV market,” Kaufmann says. This applies to both numbers of subscribers and prices. “When it comes to the cable market the numbers are nothing short of amazing.” He explains that of the estimated 60 million potential cable homes only about 2 million have actually been connected.

“There are somewhere between 30,000-80,000 cable operators in India today. No one knows exactly how many operators there are and virtually anyone can obtain a license.” Some of the operators are as local as serving one street in a major city.

“In other words the Indian cable market has been extremely fragmented but it is now entering the consolidation phase,” he explains. This will require operators to identify their subscribers, have proper accounting procedures and obtain licenses for the channels they offer. “This will no doubt change the face of cable broadcasting in India,” Kaufmann predicts.

“Taking into account factors like the dynamics of the local market, the size and the scale, as well as regulations, operating locally is a major advantage for a company like NDS,” he says. “We employ 900 people in India. This is divided between our commercial offices in Mumbai, our new sales and support office in New Delhi, as well as our Bangalore R&D center.” As for other countries in the Asia Pacific region, NDS also has local offices and R&D centers in China, Korea, Hong Kong and Australia. “Each market is different but each is essential to NDS,” he says.

China: ‘Highly regulated’

China is the second major market in the Asia Pacific region. This market was discussed in "China: World’s Largest TV Market Poised for Major Advances" in World Vision No. 38.

“What is significant in China is that it is a highly regulated cable market,” Kaufmann says. “There is no satellite broadcasting.” The government has mandated a program called Ping-yi that will switch off all analog broadcasting by 2015.

“At present the offerings are very basic. This means there are virtually no EPGs. But Chinese operators are starting to ask NDS for DVR services as well as hybrid IP and middleware applications. The Chinese market is clearly poised for a variety of key changes,” Kaufmann says.

Korean market: Technology is paramount

If the pay-TV market in India is characterized by its size and effect on the world market, and China is known for its size and regulations, the market in Korea is most characterized by the advancement of technology.

“Because of the emphasis on technology, the market in Korea is very different from both India and China. The Koreans are often more interested in pushing the bounds of technology than in determining whether they actually need a given application or poring over spreadsheets assessing how much commercial sense it makes.”

“Where the extremes come together is in Indonesia, Malaysia and the Philippines,” Kaufmann says. “In these countries the pace is slower and they are interested in both price and technology.”

Massive growth and change afoot

It is obvious that there are considerable opportunities in the Asia Pacific region. This is based on the fact that the region has three main leaders: India and China because of the scope of their markets, and Korea because of its technology leadership.

“As the region rushes towards digitization of the pay-TV industry we can expect to see massive growth and change,” Kaufmann says. “New operators will enter developing markets and will want to establish their market share. As markets become more established the key players will probably have to consolidate. This will result in a more sustainable long term situation.”

“It is too soon to know who the winners will be in this rush to lead this dynamic emerging digital market,” Kaufmann says. “What is clear is that they will have to have deep pockets and be early adopters of value added services made possible by digital pay-TV technology.”