AAPRESENTATION PRESENTATION

TO TO TELECOM DISPUTES SETTLEMENT & TELECOM DISPUTES SETTLEMENT &

APPELLATE TRIBUNAL APPELLATE TRIBUNAL (TDSAT)(TDSAT)

Presented byPresented by Jawahar GoelJawahar Goel

President President Indian Broadcasting FederationIndian Broadcasting Federation

This presentation is the personal view of the speaker and should not be treated as the view of the IBF.

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INDUSTRY ON A GROWTH PATHINDUSTRY ON A GROWTH PATH

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The Broadcasting Sector in India is undergoing a process of sweeping changes driven by advent of new distribution technologies such as DTH, Broadband, CAS, HITS, IPTV, etc.

A recent report by Price Water Cooper (PWC) has projected :

Indian entertainment & media industry is expected to grow at 18% compound annual growth rate (CAGR).

Reach a projected size of Rs.1 lac Crore by 2011 from its present size of Rs.43,700 Crores.

The Television industry is projected to grow 22% CAGR from Rs.19,100 Crores to Rs.51,900 Crores by 2011.

LEAKAGES HAPPENING AT LCO LEVELLEAKAGES HAPPENING AT LCO LEVEL

Broadcaster12-15%

Subscriber100%

LCOs76 – 80%Leakage

MSO4-6%

BroadcasterDistribution

Company2%

Source :SSKI Reasearch

Markets Operator BroadcasterUSA 60% 40%UK 63% 37%Australia 65% 35%Japan 65% 35%India 88% 12%

Distribution of Revenues

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12 1828 30 30 35 35 37 40

606365657070728288

0

10

20

30

40

50

60

70

80

90

100

India Taiwan Thailand Malaysia Singapore Australia Japan UK US

Operator Broadcaster

Broadcaster’s Share Far Below the Global Broadcaster’s Share Far Below the Global AverageAverage

(%)

Source :SSKI Research

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REVENUE LEAKAGE DUE TO UNDER REVENUE LEAKAGE DUE TO UNDER DECLARATION BY CABLE OPERATORSDECLARATION BY CABLE OPERATORS

Last mile Cable Operators highly under-declare the subscribers numbers which not only means loss of revenue to Broadcasters, but also to the Government by way of non-payment of taxes viz Service Tax, Entertainment Tax, Income Tax etc.

As per the survey conducted by Centre for Media Studies (CMS) of 9 cable operators in C and D class cities for IBF, in most places, the actual subscriber numbers were found to be many times more than that reported by the local cable operators.

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CMS SURVEY REPORT OF CABLE OPERATORSCMS SURVEY REPORT OF CABLE OPERATORSSUBSCRIBER BASE SUBSCRIBER BASE

PlaceMSOs*

SLR

LCOs*Dec Sub

Base

Actual Sub Nos as per CMS

SurveyDhanbad 4550 8225 18000Ajmer 18000 34650 79010Akola 15000 30000 38302Amravati 18000 29000 55800Bhiwani 5000 8000 25650Charkhi Dadri 1600 1720 4377Sirsa 6000 10000 28265Dharmavaram 6000 9000 21600Alwar 7500 9250 24468

* From different sources

Bulk of cable TV subscription is retained by local cable operators (LCOs) who declare only a fraction of actual number of subscribers to MSOs paying a portion of subscription fees. The distribution of revenue in non-addressable environment is highly skewed in favour of distributor of channels and the broadcaster get only a fraction of only 12-15% of the subscription amount paid by the subscriber.

It should be made mandatory for all the cable operators to register with Service Tax authorities and the authorities should launch periodic campaigns to ensure that all last mile cable operators are registered and display their registration certificates prominently so as to ensure the proper realisation of Government revenue.

The extent of leakage of service tax revenue in various cities is reflected in subsequent slides. The same holds good for leakage in Entertainment Tax revenue as well.

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Delhi Kolkata Bangalore Chennai Hyderabad Jaipur

No. of C&S homes (in Lakhs)

26.08 20.97 13.93 15.57 11.82 2.25

Average ARPU (Rs.) 150.00 125.00 175.00 100.00 150.00 225.00

Total C&S Revenue (Rs. in Crs.) P.A.

469.44 314.55 292.53 186.84 212.76 60.75

Service Tax Payable (Rs. in Crs.)

58.02 38.88 36.16 23.09 26.30 7.51

Service Tax Collected (Rs. in Crs.)

5.57 4.99 3.29 2.69 0.58 1.15

Leakage in Service Tax (Rs. in Crs.)

52.45 33.89 32.87 20.40 25.72 6.36

DATA REGARDING LEAKAGE OF SERVICE TAX BECAUSE OF UNDER DATA REGARDING LEAKAGE OF SERVICE TAX BECAUSE OF UNDER DECLARATION DECLARATION (Source : NRS & RTI Data)(Source : NRS & RTI Data)

99Means service tax declaration of 6.8% only

LEAKAGE OF SERVICE TAX BECAUSE OF UNDER DECLARATION LEAKAGE OF SERVICE TAX BECAUSE OF UNDER DECLARATION (Source : NRS & RTI Data)(Source : NRS & RTI Data)

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CARRIAGE FEE & PIRACY CARRIAGE FEE & PIRACY HINDERING THE GROWTHHINDERING THE GROWTH

Cable operators demand huge carriage fee from Broadcasters particularly from FTA Channels

Nearly Rs. 1400 Crores/p.a. of carriage fee is being paid just in 150 cities cable operators by channels

When seeking for carriage fee those MSO,s demand based on lakhs of subscriber base.

Viewers are being deprived of favorite channels.

News channels are forced to divert their finical resources to pay carriage fee then to deploy in research for meaning full news reporting, leads to low quality of news content

Further loss of revenue to broadcasters because of rampant piracy prevalent in cable distribution. 1111

SOLUTIONSOLUTION

The cable distribution should move towards digitalisation &

under declaration be treated as piracy

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