The demand of Media-rich home entertainment services is driving innovations and new revenue opportunities in the STB industry.
The Indian set top box (STB) market has gained significant momentum over the last couple of years. This trend is expected to continue till December 2014. The two key drivers have been the shift in viewing to DTH services and the government directive to digitize the entire pay TV network including cable TV platform (which is majorly analog based).
About 60 percent of all television homes in India will receive digital pay-TV by 2020, according to a research from Media Partners Asia. Digital penetration of total pay-TV homes is likely to double from 35 percent in 2012 to almost 70 percent by 2020, while the total number of pay-TV homes is expected to hit 183 million by 2020 compared to 128 million in 2012. Total revenues for the industry are expected to reach Rs. 918 crore (USD 170 million) by 2020, up from Rs. 421 crore (USD 77.96 million) in 2012 – showing a compound annual growth rate (CAGR) of 10.2 percent. Consumers are likely to transition to digital TV in the form of IPTV, digital cable, or DTH.
Indian Market
The STB market for 2012-13 is estimated at 20.03 million units, valued at Rs 30.5 crore. Out of this, 7.5 million STBs were installed in the DTH sector, while 12.53 million STBs were installed in cable TV sector.
Phase I of cable digitization saw 10 million homes across the four metros in India switch to digital signals from November 2012. A total of 6.43 million STBs have been installed in thefour metro cities in the first phase of digitization during the span of about 10 months. A total of 10.37 million households are there in four metro cities. At an average rate of 80 percent TV penetration it has been estimated that about 8.25 million households will have TV sets. Out of this, there were 2.81 million DTH connections already having STBs, and 6.53 million Cable TV subscribers who required STBs.
Phase II witnessed digitization of 38 cities with installation of around 13.6 million STBs. Over 85 percent of digitization has been achieved in these cities. Out of the 38 cities, 15 cities have achieved nearly 100 percent, 24 cities in all have achieved more than 75 percent and 34 cities have achieved more than 50 percent digitization. As against a target of 16 million STBs, 13.6 million STBs have already been installed by the MSOs and DTH operators. The total number of installed Cable TV STBs stands at 9.15 million whereas DTH operators have installed a total of 4.45 million STBs.
Going forward, Phase III shall see the installation of more STBs in all other urban areas (municipal corporations/municipalities) by September 30, 2014, and rest of India in Phase IV by December 2014.
It is anticipated that cable homes with DAS will rise from 15 percent in 2012 to 50 percent by 2020, as operators install infrastructure and roll out high definition TV (HDTV) and broadband services. The real benefit of Phase I and Phase II digitization is expected to be seen over 2013 and 2014, as multi-system operators (MSOs) drive addressability and work with last mile local cable operators (LCOs) to ramp up tiering, billing and collections.
DTH. Conversion of analog cable subscribers to digital cable was not expected to take place without some churn to DTH providers. DTH players like Dish TV, Airtel Digital TV, Videocon d2h, Big TV, Tata Skyand Sun Direct are expected to have an edge as they have already established themselves in themarket.
The Indian DTH industry is estimated to have clocked revenue of Rs. 8550 crore (USD 1.5 billion) in 2012. The active DTH subscriber base is estimated to grow from 54.52 million in 2012 to 63.8 million by 2017 and 76.6 million by 2020. The DTH market is expected to see its annual revenue grow over three times to more than Rs. 28,500 crore (USD 5 billion) by 2020, as mandatory cable TV digitization would help the DTH players expand their subscriber base. DTH has curbed the menace of under declaration of subscribers by cable operators and opened up an additional revenue stream in the form of subscriptions, new forms of entertainment/media platforms are also fast gathering acceptance in the country.
As competition intensifies with the growth of DTH inkey markets, cable operators in India and other parts of the Asia-Pacific region are responding with the introduction of STBs with digital output, interactive services, and next-generation ramp-up like digital video recorders (DVRs), video-on-demand (VoD), and pay per view (PPV) services.
Consumer demand for media-rich home entertainment services is driving innovations and new revenue opportunities in the STB industry. Next-generation STBs will become hybrid devices, integrating the video content from multiple signal sources such as broadcast television, premium VoD, and Internet-based over-the-top (OTT) video services, providing value-added capabilities like time shifting, and allowing content to be distributed to a variety of viewing devices including multi-room TV networks, personal computers, portable media players, and other mobile devices. STB manufacturers are looking to decrease the bill of materials (BOM) cost by using in-house CAS solutions and low-cost system-on-a-chip (SoC) optimized with lower-powered CPUs that support HD video, but only simpler graphical user interfaces.
HD STB adoption in India currently accounts for only 12 percent of overall shipments. The increasing adoption of HDTV sets and cable TV digitization is expected to bring more HD channels and HD services in India. HD STB adoption in India will accelerate in the coming years.
Some of the major players in the STB segment include Huawei Devices India, Pace Plc, Homecast, Skyworth, Cisco, Kaon Media, Sichuan Changhong Electric Co. Ltd., Technicolor SA (Thomson), and Humax Electronics India Pvt. Ltd.
STBs may be broadly segmented into two categories – MPEG-2 and MPEG-4 STBs. Traditional STBs are designed to receive standard definition (SD) MPEG-2 video format broadcasts. Many STBs are now HD-ready. Selected cable television service providers, networks, and local terrestrial TV stations are concurrently transmitting both SD and HD contents. Over time, MPEG-4 is expected to displace the MPEG-2 format for both SD and HD.
MPEG 2 STBs, being competitively priced, are generally used by cable operators for providing digital TV connections (the average unit price is less than USD 20). MPEG 4 STBs are more expensive and are mainly used by DTH service providers (the average unit price is USD 30).
A digital head-end is required that processes and secures an enormous quantity of information along with an STB that can be tuned to digital services it sends out. STB software like MediaHighway from NDS supports electronic program guide (EPG), user interface, and interactive applications. The middleware and conditional access are inextricably linked, since these elements must be integrated and closely work together. The middleware and conditional access (CA) also impact on the type and complexity of EPGs, which can be implemented.
Regulatory Support
This is a critical driver for industry growth and the government in the last few years has encouraged with significant initiatives. This includes focus on mandatory digitization for television and further liberalization of the sector in terms of foreign investment limits. It is important that regulatory clarity and transparency continues and suitable focus is on implementing the announced policies, such as meeting timelines for the digitization process.
The Telecom Regulatory of India (TRAI) has taken pains to ensure that the interest of consumers are protected and at the same time conditions for growth of broadcasting and cable services are nurtured in a manner and at a pace which will enable India to play a leading role in the emerging global information society.
TRAI has recently issued a Tariff Order prescribing standard tariff package for STBs for Digital Addressable Cable TV Systems (DAS) and Consumer Premises Equipments (CPEs) for Direct to Home (DTH) services.
In DAS, customers need a STB to be connected with the TV set for the reception of TV programs as signal transmission is in digital and encrypted form. The prescribed standard tariff package tariff includes installation and activation charges as well as the charges for maintenance and repairs.
In order to protect the interest of the consumers, the authority has decided to prescribe standard tariff packages for STBs on rental basis. These packages are to be mandatorily offered to the subscribers and, in addition service providers can also offer alternative schemes or packages for supply of STBs/ Customer Premises Equipments.
The prime objective of these tariff orders is to ensure effective commercial interoperability. The tariff orders have been devised to make available STBs / CPEs at reasonable price and easy to understand terms and conditions as well as to take care of the interests of the service providers. This would also promote healthy competition amongst the operators, which would ultimately benefit all the stakeholders of the sector, including the consumers.
The standard tariff packages prescribed in the tariff order for supply of STB/ CPE to the subscribers:
Salient features of the tariff order:
No monthly rental to be paid after 3 years. The STB/ CPE become property of the subscriber after 3 years.
Cable TV operators have sought tax incentives and capital subsidies to promote manufacturing of STBs in India. Currently, a mere five percent of the required STBs are manufactured domestically. The Union Budget, 2013-14 has outlined several steps to promote infrastructure growth and encourage domestic electronics manufacturing. The import duty on STBs was hiked from 5 percent to 10 percent. With demand for STBs, estimated at 100 million units over the next couple of years, the increase in duty would end the unfair advantage enjoyed by STB importers. The government is encouraging sourcing from the domestic market, which in turn will give confidence to domestic manufacturers to upgrade their technology and also encourage new manufacturers enter the fray. Domestic STB manufacturers are looking at Rs. 4,500 crore turnover in the financial year 2013-14 by capturing 50 percent market share, as hiking import duty on such devices is expected to boost indigenous manufacturing. The total demand for STBs is estimated to be 60 million and the turnover of overall STB segment around Rs. 9,000 crore in the next one year.
The Department of Electronics and Information Technology (DeitY) is also taking several steps to promote indigenous manufacturing of STBs for DTH/Cable particularly in view of huge indigenous requirement on account of roadmap for digitization of the broadcast sector. The Core Advisory Group for Research and Development (R&D;) in the Electronics Hardware (CAREL), the empowered group formed under the auspices of the Office of the Principal Scientific Adviser has identified six products for design, development and manufacture indigenously and one of the products is set top box. Along with the hike in customs duty, the set top box has also been considered under the Special Focus Product Scheme of the Foreign Trade Policy. Hence, STBs are now entitled for Duty Credit Scrip equivalent to 5 of free on board (FOB) value of exports. To facilitate design and development of domestic STBs, process of development of indigenous CAS is underway for development of an Indian CAS and an EoI has been floated regarding this.
However, hike in import duty may negatively affect cable and DTH operators and consumers. With more than 90 percent of the STBs being imported, this directly affects not only the operators but also the consumers as the cost rise will be passed onto them, eventually.
Global scenario
The global STB market is expected to grow from 221 million in 2011 to 242 million in 2016. STB shipments through the period are expected to decline in North America and Western Europe (especially in saturated cable platforms that are losing subscribers to telco and satellite alternatives), while they grow strongly in the Asia-Pacific region and Latin America, where subscribers are gaining access to pay-TV platforms for the first time. Major trends in the STB markets include digital terrestrial transitions, digital cable transitions, HD service offerings, hybrid (CATV-IPTV, DBS-IPTV, and DBS-DTT) STBs, and the adoption of cable video gateways.
STB revenue grew almost 10 percent in 2012, a considerable rebound from a year ago, and will remain healthy in the near term as operators in China, India, and Latin America add digital services. The market is likely to reach USD 15.6 billion by 2018 as next-generation gateways and cloud computing are introduced to manage Internet connectivity to HD TV devices in the home.
Integrated televisions will also play a major role in digitization, but STBs, by necessity, are still the driver used to fully satisfy most analog switch-off goals. Proactive work from government agencies in the form of subsidies and consumer education remain vital components to a successful analog switch-off, best suiting the STB as the digitization vehicle of choice.
