In the first part of this post-FY09 results interview with MediaNama, Aksh Optifibre MD Dr. Kailash Choudhuri spoke of the state of the companys IPTV rollouts, challenges, plans to raise money, targets and investment plans for the financial year 2009-10. Read Part 1 here.

In Part 2 of this two part interview, Dr. Choudhuri talks about why the company has priced IPTV much lower than DTH, increasing their Pay TV and Time Shift TV bouquet, and plans to raise subscription rates. Interestingly, he believes that the real potential for IPTV, is from Advertising:

There is a sense that you’ve priced IPTV fairly low – lower than DTH or MyWay…

We’ve asked for a tariff revision from MTNL and BSNL. Our customers have developed an appetite for IPTV, and we can raise the monthly subscription by 20-30%. However, we will continue ot be one of the lowest priced services.

The reason we’re looking to raise the tariff is because we’re offering Time Shift TV (TSTV) on paid channels. Previously we were giving recording of 5-6 days of free to air channels, which one could go back and view anytime. Now we’ve tied up with the STAR bouquet, NDTV bouquet, Colors etc for Time Shift TV. At 8:30, if there are 4 serials, Tata Sky Plus only records one. The viewership behaviour we’ve seen is that there’s a large demand for TSTV. You need a high unicast ability for this, which we’ve built in our network.

So Your Revenue Model Will Be Largely Subscription Driven?

Our revenue model is based on the philosophy that the subscription revenue will always be a minor component of total revenues. It’s largely going to be a pull advertising model, because of the unicast nature of our services. We have just started, and the first revenues of A-Tube (their video advertisements service) have just started coming in. We believe that of the total revenues raised per subscriber – the ratio will be 33% for subscription, and 66% will be A-Tube (advertising). After we reach a particular subscriber base, advertising will a larger portion of revenue. We are not putting in advertising during movies or channels because that is not allowed.

We’re working on a pull model – like info-tainment. You want information, then we put in advertising alongwith that. Someone wants to buy a diamond ring. If he goes on to A-Tube, there will be information on how you value diamond on valuing – color, clarity, carat etc, and it will give details of advertisers. Over time, IPTV should take over: our needs and demographics are ideally suited to it. Nowhere in the world do parents spend so much on education and professional colleges, or the same house has grandfather, mother, father, son, daughter, every home has a TV, but 1/10th have PC. I think it has great potential.

What is the minimum subscriber base that you’ll need for the advertising model to work?

If you have a minimum subscriber base of 50,000, people will come on to the platform. Similarly for business information.People have come in for a subscriber base of 20,000, but we think a reach of 50,000 is right.We can give them data on views – who has viewed the ad, etc.

How do you see the competitive scenario playing out, with BSNL and MTNL taking multiple franchisees in each city?

There’s a clear, public policy for two franchisees. We’ve seen a lot of players before us, who have signed agreements much before we did. We feel that IPTV is a quite a ground-work service, not top heavy. You’ll need interaction at the ground level with BSNL and MTNL customers, and there are landline issues. Anybody who will now try to reach the kind of subscribers we have will have to go through the same educational process. Even Bharti, with such a large backing of a group, has not yet been able to reach 5 figures in IPTV.

We feel that the learning curve of IPTV is not easy. It’s not purely a question of funding, or getting more people on board, but deployment and ground level reality. It’s possible to ramp up signups to 500/day, but not 2000-3000 is not. IPTV is not an easy model to make an OpEx break even. In terms of competition, we are not worried. Even BSNL records show that we came in last, but are the farthest. You need to build the unicast power of IPTV.

Your content costs must be significant…

It’s related to number of subscribers, but there is a minimum guarantee. Till you do not reach the minimum guarantee number, your content costs will be high. On the other hand, if you try to reason it out, or discuss it out that you will only pay on a per subscriber basis, then there are various loopholes in the policy that will allow the content holder to hold back the content. Content is largely going to drive this scenario. Despite having paid channels and Bollywood video on demand, we had to go to Hollywood Video on Demand.

Do you see the situation changing – with carriage fees on IPTV?

Carriage fees are a function of the limitation of your ability to carry a number of channels, and give exposure to a large number of subscribers. IPTV, technically, has no limitations in terms of number of channels. The only carriage fee you can charge is giving exposure to large number of subscribers. Large number of subscribers, unlike DTH, would not be so easy in IPTV. Carriage fee as a function of pan-India channels, I don’t see a practicality. Carriage fees as a function of boutique channels – regional channels where people cant go on to satellite, and people can host channels – a service like video sharing, is more probable.

What is your take on the IPTV guidelines from the Ministry of Information & Broadcasting?

There are hardly any guidelines related to IPTV. What they have basically done is, given a guideline that broadcast channels can downlink to IPTV service providers – whether Telecom or Cable. And there are licensing guideliens – 6% license fee etc. The policy is keeping te government in mind, doesn’t keep the service providers in mind. It doesn’t say what channels can charge, how the channels will charge, what happens to other services in IPTV, the dealings with content providers like in case of CAS and DTH.

What is in the guidelines is restrictive, and keeping IPTV as an entertainment media. Whatever is applicable to Cable TV operators is also applicable to IPTV. Once people are able to see the power of IPTV in terms of Information and Education, then policies will come. The present guidelines keep in mind broadcast channels. There’s no mention of Video on Demand.  As a service, IPTV is governed by the Telecom ministry, and content by I&B ministry.

Part 1: Aksh Optifibre Looks To Raise $10-15M; Targets IPTV, VoIP OpEx Break Even By FY10 End

Related:

– Q4-09: Aksh Optifibre Reports Loss Of Rs. 67.32M For IPTV & VoIP Biz
– Smart Digivision To Launch IPTV In Delhi, Kolkata; Pricing; No Sun TV Content