India’s digital TV transition is well underway, with around 40% of the country’s 140-150 million pay-TV households already subscribing to digital platforms on a regular basis, according to the latest estimates from industry analysts at Media Partners Asia (MPA).


Converting the remaining 60% however, about 80-90 million homes largely served by thousands of small cable systems outside the main cities, promises to be more challenging.


For the Hinduja Group, a US$25 billion business conglomerate, that spells opportunity. The group is making an US$80 million bet on headend-in-the-sky (HITS) technology, an alternative to traditional DTH and digital cable platforms, even though commercial success for other HITS providers in India has proved to be elusive.


Of the country’s prior license-holders, one – Essel Group – shuttered its HITS operations four years ago, citing commercial and regulatory hurdles. Essel, run by pioneering media mogul Subhash Chandra, houses broadcast major Zee as well as two large distribution businesses: Dish TV, a DTH provider; and Siti Cable, an MSO.


Meanwhile, the other, Noida Software Technology Park, which received its license over 10 years ago, has only just started building traction for its service, JainHITS, after securing distribution rights for key channels last year.


First launched in the USA 20 years ago, HITS technology, with the ability to access bandwidth from several satellites at the same time, always promised to ease the strain on India’s congested distribution platforms. Now, it might be about to realize its potential.


“HITS should enable local cable operators to widen their digital reach for a minimal investment,” notes MPA (India) VP Mihir Shah in the latest issue of Media Route 26 India, a bi-monthly research and analysis digest.


A new license-holder

After applying 14 months ago, Hinduja now has a HITS license in principle, though still needs additional clearances as well as another license for wireless operations before it can start business. The group recently consolidated its media assets, including cable network InCable as well as its prospective HITS operations, into a single entity headed by Tony D’Silva.


The company is proposing a different approach to JainHITS, selling digital content, services and hardware upfront to analog cable networks that are under government orders to upgrade. JainHITS, by contrast, operates as a consumer-facing pay-TV operator, with an offering similar to a typical DTH provider or MSO.


Hinduja needs to amass a subscriber base of around 6-8 million homes, via its cable partners, to recover its initial US$80 million HITS investment, banking on a timely rollout and strong government enforcement during the final stages of India's nationwide digital migration.


Some sizable obstacles await.


Digital rollout has some encouraging momentum but has also encountered several stumbling blocks along the way. Further extensions to the digitalization timetable are likely.


At the same time, many broadcasters are unconvinced by the security of HITS technology, echoing a major gripe about analog networks which are susceptible to widespread piracy.


In addition, small cable operators might find it hard to fund digital transition as well as content, especially in poorer areas, making negotiations problematic, even though infrastructure costs for HITS are lower than buying a digital headend on the ground.


D’Silva is unfazed.


“Broadcasters need not be worried as HITS has multiple layers of security, and I am confident they will be ready to negotiate on content costs once we make them aware of the potential incremental revenue they would earn,” he says.


“I don’t think getting an 8-10% share from a potential market of 90 million homes should be a problem.”