India’s Set-top Box Market: Poised for a Shakeup?

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India is well known as a huge market for set-top boxes (STB). In addition to a thriving direct-to-home satellite business, the country is nearing the end of the digitization of its cable TV system—an effort which saw a massive upgrade of cable boxes across the country. DTC estimates that over 195 million set-top boxes shipped in 2015 and 194 million in 2016 worldwide.

But India’s sizeable STB market may be on the brink of a significant change.

The first, and less significant, change would impact domestic STB production. In a report to the Indian Parliament, the Standing Committee on Information Technology (SCIT) claimed that while the 19 Indian firms manufacturing STBs had the capacity to meet domestic demand, they were being undercut by foreign, mostly China-based, rivals. Indeed, an estimated four out of every five STBs sold in India originate abroad, leaving India’s domestic manufacturers out of the lion’s share of a $750 million annual market for TV access devices.

According to SCIT, one reason why Indian producers were failing to keep up was a lack of government support. While Indian regulators have taken some steps to boost domestic business under the “Make in India” campaign, such as reducing the Value Added Tax on Indian-made STBs, China was supporting its own STB industry by providing generous loans to Indian STB importers. Indian banks, on the other hand, were not offering generous terms to the country’s own manufacturers. As a result, Chinese vendors were able to grab the lion’s share of the volume generated by India’s digitization.

Unfortunately for India’s domestic STB manufacturers, any move by the government to provide more generous financing will come too late to capitalize on the cable digitization initiative, which is due to conclude at the end of 2016. Still, domestic support would enable the country’s manufacturers to capitalize on future volume, which will still be sizeable.

But India’s STB market could witness a major shakeup beyond who is making the boxes if the country’s telecom regulators get their way. Since the end of last year, the Telecom Regulatory Authority of India (TRAI) has been floating proposals to make the country’s set-top boxes interoperable so Indian consumers could change TV services without discarding their old box. According to TRAI, roughly 30 million STBs worth $750 million sit unused across the country, contributing to e-waste. The regulator further claimed that a move toward interoperability would help drive down pay TV prices for consumers and allow TV operators to redirect the money currently flowing toward box subsidies into other areas of their business.

Not surprisingly, India’s pay TV operators have argued that between incompatible conditional access modules, modulation methods, middleware and different compression standards, creating a “one size fits all” STB simply isn’t feasible—and even if it was technically achievable, it wouldn’t come cheap. Beyond equipping new customers with interoperable boxes, India’s pay TV providers would have to grapple with updating a truly mammoth installed base.

Given these hurdles, it’s doubtful that TRAI will succeed in its vision of having STBs and TV services function like mobile phones—where consumers can keep their phone number while moving between providers and choosing from a multiplicity of phones to access their service. Nonetheless, given the size of India’s STB market and given a similar debate unfolding in the U.S. spurred by the FCC, the issue of a “universal” set-top box is now front and center.

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