HITS is back in news. Five years ago, Jain Studios and Zee Group's ASC Enterprises managed to get permission to launch HITS, that is, delivery of satellite channels to the cable operator through a head-end in the sky (located on a satellite) rather than through an on-ground control room. Simply put, a HITS operator encrypts all TV channels at a common facility and uplinks them to a satellite (head-end in the sky). These are then beamed back to various digital cable head-ends from where they reach the consumer through cable.

Today, a multi-system operator (MSO) or a large independent cable operator downloads each TV channel signal from the broadcaster's satellite. In HITS, he will be able to download the whole bouquet of channels from the HITS operator's satellite. "At one go, cable can go all-India and become digital as well as addressable, if HITS is allowed," says Ashok Mansukhani, president (corporate affairs) at Hinduja TMT [Get Quote] that operates the InCable network.

In its recent recommendations to the government, the Trai says that only a registered cable operator or a registered MSO could operate HITS. To get a HITS licence, the company will need to pay an entry fee of Rs 10 crore (Rs 100 million) and furnish a bank guarantee of Rs 40 crore (Rs 400 million). Broadcasting companies and/or DTH licensees will not be allowed to collectively hold more than 20 per cent of the total paid up equity in a HITS company. Similarly, a HITS licensee should not hold more than 20 per cent equity share in a broadcasting company and/or DTH licensee company. The HITS licensee has to commence uplinking/downlinking operations within a year of receiving spectrum allocation.

Interestingly, the Trai does not insist on HITS using "C" band satellite, as the government mandated earlier. The regulatory authority says that either Ku or C band transponders can be used. (DTH uses only Ku band transponders). Also, as in the case of telecom, 74 per cent FDI is permitted for a HITS operator. But before digging into the pros and cons of HITS recommendations, it is important to see what it can mean for the consumer.

For starters, HITS is a digital platform and can offer more channels than analog cable. At the consumer end, like the conditional access system (CAS), channels are received via a set top box. "Frankly, there is no difference between HITS and DTH except that HITS is direct-to-operator while DTH is direct-to-home to a consumer," says Dish TV's managing director Jawahar Goel, who is said to have lobbied hard for HITS to drive Zee group's cable business under WWIL.

HITS scores over DTH as unlike in the case of satellite operators, cable has a return path that makes interactivity easy for services such as video-on-demand, pay-per-view and so on. Media industry estimates say that by 2010, nearly 50 per cent of television ARPUs will come from content on demand. Adds Goel: "HITS can offer VoIP, broadband, telephony and much else without really any extra wiring." Besides, unlike in DTH, billing is at the consumer's doorstep.

For the cable industry, HITS may be its only chance to fight the onslaught of DTH and other content delivery platforms like IPTV and mobile TV. Vikram Kaushik, Tata Sky Ltd's CEO and managing director, expects rapid conversion of the existing cable market into DTH. "Several independent agencies say that India would have 15-30 million DTH subscribers by 2015. My estimate is that the DTH market should touch 25 million subscribers by that time," says Kaushik.

Since digital is the only way forward, MSOs such as InCable and Hathway are installing digital head-ends in each of their markets to offer CAS. But the cost of going digital city-wise is prohibitive - a digital head-end could cost up to Rs 2.5 crore (Rs 25 million).

"If you downlink digital signal from a HITS operator, you need equipment worth Rs 2-3 lakh," says Goel. Adds E Jayaraman, Hathway Cable's head: "The operational expense of maintaining multiple head-ends is also high. If you have them in, say, 25 cities, you need managers and engineers in all those 25 cities."

Since HITS allows cable to cover the country digitally at one go, will it affect DTH operators? Kaushik refuses to comment on HITS and its effect on DTH penetration. However, industry experts say that today, few MSOs (there are at least 6,000 of them) can afford to become HITS operators since it entails an investment of Rs 200-300 crore (rs 2-3 billion).
"DTH companies already have the back-end and are likely to be allowed to have 20 per cent equity in a HITS operator. They could be interested in this platform," says a media industry expert.

To be sure, HITS may have to overcome many roadblocks before becoming a reality. First, the Trai recommendations have to be approved by the government. Two, HITS won't succeed unless CAS is compulsory. "If CAS is not made mandatory, HITS will be a non-starter. Why will a consumer buy the set top box? Voluntary CAS has not really taken off," says a distribution expert. The cost of the box is high at Rs 3,000. "It is a chicken-and-egg situation. We need volumes to bring the price down and vice-versa," says Mansukhani.

A media marketing expert, however, sees it as a lame excuse. "Nowhere in the world is CAS mandatory. It depends on marketing and your value proposition."

Even if the consumer bites the bait, HITS operators may have to scramble for transponder capacity, which is in short supply, be it on Ku band or C band. Additionally, in the Ku band, experts say, rain disrupts signals, especially in markets like Mumbai.