Arasu Cable cuts NCF to ₹35/month vs ₹130 by Tata Sky, Airtel Digital etc

Channel list for Arasu Cable’s new plan priced at Rs 130

Arasu Cable, the government-owned cable feed provider in Tamil Nadu, has become the first big player to drastically reduce the monthly network charge under TRAI’s new tariff order, throwing a challenge to the likes of Tata Sky, Dish TV, Hathway and Sun Direct.

Arasu Cable’s new base plan of Rs 130 contains six broadcaster packs that together cost Rs 95 per month, thus reducing its network charge to just Rs 35.

In comparison, the 130-rupee plans of competitors like Tata Sky, Airtel Digital, Dish TV, D2h and Sun Direct typically contain no pay channels, with the entire amount being collected by the cable/DTH operator as the network fee.

The six broadcaster plans included in Arasu Cable’s base pack are Star Value Pack Tamil, priced at Rs 25 per month, Zee’s Prime Pack for Tamil, priced at Rs 10 per month, Discovery Kids Infotainment (Rs 6), Sun TV Tamil Basic pack (Rs 40), Colors Tamil Budget (Rs 6) and Jaya HD pack, priced at Rs 6 per month.

The total cost of these pay channel packs comes to Rs 95 per month.

Given that Arasu Cable’s new plan offers these packs under the Rs 130-per-month plan, it has reduced its NCF to just Rs 35 per month.

The new plan was rolled out last week, and cable operators in the state will start offering the same in coming days.

Till now, Arasu was charging Rs 220 for a similar pack, including a network charge of Rs 130 and pay channel charges of Rs 90. Including taxes, the total price of this pack used to come to around Rs 260 per month. The total price of the new pack, including tax, will be only Rs 154.


The new tariff plan is terrible news for Arasu’s competitors, such as Sun Direct, SCV, Hathway Cable, Tata Sky, Airtel Digital, Dish TV, D2h and others.

Under TRAI’s new tariff order that came into effect in February this year, cable and DTH companies can charge anywhere from 0 to 130 rupees per month as monthly network charges. In addition, consumers pay content (or pay channel) charges extra.

When TRAI unveiled the scheme, it was expected that competition will force cable and DTH companies to keep their monthly network fee in the range of Rs 50-100. It was expected that customers will continue to be able to watch most of the popular channels — including local pay channels — at a total monthly cost of around Rs 150.

However, nearly all cable and DTH operators, including Dish TV, D2h, Hathway, GTPL, Den, Sun Direct, Tata Sky and Airtel Digital, kept their monthly network fee at Rs 130 — the maximum permitted under the new rules.

However, this has had an unexpected result.

Given that everyone was charging Rs 130 per month, and pay channel costs were the same across platforms, consumers started moving to higher quality platforms like Tata Sky and Airtel Digital that offered more channels.

This has started hurting cable and DTH players who used to compete with players like Tata Sky by giving their service at a lower cost.

However, with everyone charging the same Rs 130 rupees and pay channel costs remaining the same, consumers are migrating away from cheaper networks.

For example, in the three months from April to June, Airtel Digital added 6.34 lakh new active subscribers compared to 2.2 lakh in Oct-Dec, before the new tariff schemes came into effect (see below).

While subscriber numbers for Tata Sky are not available, it is expected that it too has seen a similar increase as subscribers no longer see any advantage in sticking to low-end players.

Arasu Cable, which used to offer its cable services at Rs 150 per month before TRAI’s new tariff came into effect, has been among the worst hit.

After it hiked its price to Rs 260 per month, it found that over 11 lakhs, or about 30%, of its subscribers were not recharging their connections.

Alarmed by this, the company has decided to offer the new plan, which effectively reduces the monthly network charge from around Rs 125 to just Rs 35.

With this new plan, out of the Rs 130 that Arasu Cable will get from the consumer (net of tax), it will pay around Rs 65 to channel owners such as Sun TV, Jaya TV, Discovery, Star India, TV18 and Zee Entertainment.

Out of the remaining Rs 65, it will pay around Rs 50 to the local cable operator, retaining only Rs 15 for meeting its own operating expenses.

It may be able to generate slightly more revenue from customers who activate incremental packs, such as English movie channels, Hindi channels, Telugu packs and so on.


Among the worst affected by Arasu’s move will be SCV and Sun Direct, the cable and DTH arms of Sun Network, as well as other, local competitors like VK Digital and TCCL.

Even pan-India services like Sun Direct, D2h, Tata Sky and Airtel Digital may have to consider cutting their monthly network charge in Tamil Nadu from the current level of Rs 130 to around Rs 50 or so.

However, the impact is likely to be less severe for a player like Tata Sky than for one like Sun Direct, which caters to largely the same segment of population that Arasu targets.


Even without Arasu Cable, DTH players are likely to be forced to cut their monthly NCF (network capacity fee) to Rs 0-50 over the next 2-3 years as Jio Fiber, the new cable and internet service from Jio, starts rolling out.

This won’t be as difficult as it seems either.

Unlike cable operators, the incremental cost of servicing an extra customer is practically zero for a DTH operator.

In other words, whether a DTH operator has 10 lakh customers or 1 crore customers, most of its primary cost items — such as satellite capacity, head-end capacity and tie-up with channels — remain unchanged. It has to pay a fixed amount to satellite companies and so on, whether it has 1 customer or 10 crore customers.

Therefore, it would be possible for DTH players to slash their monthly NCF to zero rupees and still make money by relying on the 15%-30% commission generated by the sale of pay channels.

However, this would require them to slash marketing and promotional costs, and increase the upfront amount collected from each new customer to Rs 2,500-3,000.

Unlike in case of Arasu Cable, the impact of Jio Fiber will be first felt by premium players like Tata Sky, whose customers are skewed more to urban areas than rural areas. Jio Fiber will largely confine itself to the top 1,600 cities of India over the next five years.