With the emergence of new technologies and services, the business model of the traditional cable TV service provider has undergone significant transformation. Gone are the days of plain vanilla analog cable TV service. Digital TV platforms like direct-to-home, internet protocol TV (IPTV) and mobile TV are taking centre stage now.
Cable TV service providers are also providing broadband services using their coaxial cable networks and cable modems to deliver last mile access to residential subscribers. In India, home to over 70 million cable TV households, this translates into a huge opportunity for cable operators.
With substantial market share in the digital cable TV and cable modem-based broadband business, Hathway Cable and Datacom is capitalising on the twin opportunities in broadcasting and telecom.
Background
Established in 1995 as part of the Rajan Raheja Group, Hathway Cable and Datacom has three broad business segments: cable TV, digital cable TV and broadband internet services. It also operates TV channels such as Cine Channel, ITV and WIN Delhi. The company has tied up with the Star network for content provisioning.
Hathway is a Category A internet service provider (ISP) and is one of the first operators in India to start providing internet services using its cable TV network. The company started out by offering services in Chennai and has since expanded to 15 more cities including Mumbai, Delhi and Bangalore. The company also has a sister concern, Asianet Dataline, a division of Asianet Satellite Communications – a Category B ISP and the largest broadband service provider in Kerala.
Internet operations
Hathway provides broadband last mile access to residential subscribers via a coaxial cable leading into the home, and a cable modem for converting data signals. The company follows the data over cable services interface specifications (DOCSIS) protocol and offers users internet surfing speeds from 256 kbps to 512 kbps.
Cable-based broadband is the second most widely deployed technology after DSL, both globally and in India. Since the cable network is already connected to people's homes, this obviates the need to deploy new copper networks – an expensive proposition.
According to Sourabh Kaushal, industry manager, ICT practice, Frost & Sullivan, "Cable ISPs have tremendous reach and coverage. They have potential for tapping subscribers in tier 2 and 3 cities."
There is a flip side to this, however. Most of the present cable network is unidirectional and cannot support broadband. Also, the cost of upgrading networks is high and can reach up to $200 per line.
Moreover, though cable ISPs do bundle their service with TV, they face competition from other ISPs who can combine their broadband service offerings with services like internet telephony.
Subscriber base and market share
Despite the odds, Hathway has managed to garner the third largest broadband subscriber base in India with 173,808 subscribers as of March 2008. Though this is relatively insignificant compared to the incumbents Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), which are the largest broadband service providers in the country with 2,033,540 and 570,703 subscribers respectively, Hathway has outdone more established telecom operators like Reliance and Sify in this segment.
The cable ISP's success in broadband operations has subsequently provided a fillip to its overall internet subscriber base which has risen by 64.25 per cent from 122,504 in March 2007 to 201,212 in March 2008. This is a healthy result compared to ISPs like Sify, which registered a negative growth rate in its subscriber base during the period under review.
Going forward
For Hathway, the future holds the promise of substantial growth. There is speculation that the company is planning to launch its initial public offering in order to raise about $100 million. It also plans to raise its foreign holding to 42.13 per cent by issuing compulsorily convertible debentures to the Infrastructure India Holdings Fund and Morgan Stanley Asia, and has received the government's approval to do so.
In the future, the broadband businesses of cable companies like Hathway are slated to receive a further fillip with the Telecom Regulatory Authority of India recommending that cable ISPs be allowed to provide services like internet telephony and bid in the e-auction for mobile TV spectrum. The Department of Telecommunications has already permitted cable service providers to offer IPTV services.