Hinduja's HITS platform plays to a 110m TV market
Inherent HITS strengths, and focus on needs of small cable operators, could be a winning formula for growth and profits
The long-awaited Headend-in-the-sky (HITS) platform is here in India. Hinduja Ventures’ subsidiary Grant Investrade is rolling out a HITS service, called NXT Digital. The company was granted a HITS licence in July, after a three year wait. Armed with an investment of nearly $100 million in back-end technology and a teleport in Noida, the venture proposes to enrol many cable operators on its platform. It "will help cable operators make the transition from analogue to digital and offer specialized value-added-services".
HITS is a technology on which Comcast (U.S.'s largest cable company) built its business. It works wherever terrain is a challenge and customer acquisition costs are high. HITS is a cross between cable and DTH: in a HITS system, pay channels from many satellites are downlinked to a centralized location, decoded, combined and re-encrypted before being again uplinked to a satellite. The same can be downlinked to individual MSOs/cable operator headends.
HITS strength is in its geographical coverage: with it, digitization and addressability can be achieved throughout the country at one stroke, at an investment far lower than what's needed to build terrestrial digital headends in each city. And cable operators need only one transmodulator per transponder for re-transmission through cable to individual subscribers with set top boxes.
The service will be rolled out in digital addressable system (DAS) Phase-3 and Phase-4 markets, which together currently have more than 110 million analogue TV households. "We feel the timing is right for us to participate in Phases 3 and 4 of DAS” says Grant Investrade MD Tony D’Silva
Under the digitisation programme, cable operators and MSOs are required to shift to digital broadcasting across the country by 2016. Phases 1 and 2 which covered metros and major cities have been completed.
Currently about 50% of DTH subscribers are in Phase-3 and -4 towns, and the maximum churn has come from these areas; since rain usually means signal failure. There are also constraints on the number of channels DTH can offer. Also it cannot offer local channels. There are an estimated 22,000 local channels, which show festivals and local events. For example Goa has 13 Konkani channels that are not national. The HITS platform is capitalizing on these problems faced by its DTH and conventional cable competitors.
Grant Investrade MD Tony D’Silva says the company has invested $80 million in the project. Out of this, $55 million has been pumped in to create a broadcast facility in Noida. For Thaicom’s seven C-band transponders, the company is shelling out $9.1 million. The subscriber management system comes from Hansen Technologies of Australia, and the conditional access system from Nagravision. The HITS system was built on Thomson technology from Thomson of France, which provided its ViBE SD and HD broadcast encoders and its multiplexing and network management system. Overall, NXT Digital will invest $100 million in the HITS project.
NXT Digital will launch with 150-200 channels in August and aims to take it up to 500 plus MPEG-4 encrypted services including HD channels with the ability to insert local channels as per requirement by October-November 2015. Not just this, the platform will also introduce value added service (VAS) like Darshan, TV Everywhere, Games and Learning by December this year.
"We are the back-end for any cable operator or multi-system operator (large signal distributors). We offer 500-plus channels, a terminal to manage your subscribers, a subscriber management system, 24x7 call centre, set-top-boxes and other value added services to cable operators. Plus we will be the broadband partner for the cable operator. And the service can be offered across devices, even on 2G phones" says D'Silva.
The service will operate on two business modes:
First, a White Label service, which is meant for cable operators who have a digital addressable system license and have deals in place with broadcasters. The cable operator will pay per set-top-box on a prepaid basis. NXT Digital will provide everything, the channels, the back-end and customised billing for all customers. The last mile cable operator fronts the whole service.
Second, a full service model for operators who do not have a DAS or digital addressable system licence.
There are 5,000 multi-system operators in the analog system, of which 800 have provisional DAS licences. About 200 of the latter are in Phase-1 and 2 areas. NXT is targeting the remaining, as well as the thousands of operators who do not have a DAS licence. "We can offer them the Full Service Model and when they get a license they could move to the White Label Service. A lot of MSOs are talking to us because they can use it for expansion (without the cost of laying more cable) in Phase-3 and 4. We expect to break even at 6 million subscribers (in about three years)", says D'Silva.
The company's path won't be easy. Analysts say the biggest challenge would be to negotiate terms with the broadcasters. The company would also face the same heavy taxation load as its competitors do. But given the natural strengths of the HITS concept, and if it plays well with the last mile operators, the new platform may survive and even do well.
Source: based on reports in televisionpost.com, livemint.com, indiantelevision.com