India's cable television distribution industry comprising multi system operators and local cable operators is set to generate over Rs 1,000 crore a year as carriage fee from the channels slated for launch in the coming months.

In case they wish to be seen in the 71 million homes with cable and satellite TV, the new channels (there are 70 applications in the information and broadcasting ministry) will have to shell out close to Rs 15 crore per channel per year.

"This is really the kind of money a national-level channel will pay to cable operators to be seen in TV homes. However, channels eyeing the prime colour band may be paying a much higher sum," said Atul Gupta, head of cable distribution at BAG Films [Get Quote].

Gupta should know, for he is currently negotiating deals with cable operators for the three channels BAG is gearing up to launch. He refuses to confirm the figure, but for cable connectivity, the company is said to be spending Rs 16 crore on each of its channels.

BAG could probably take comfort in the fact that INX, the broadcasting venture led by Indrani Mukerjea, may be spending more.

INX is said to have budgeted Rs 25 crore a year each for its entertainment and news channels. Though INX did not respond to Business Standard's queries on the subject, the broadcasting industry is less than surprised at the figure.

"If you do not pay that kind of money today you have no chance of being seen in the analogue cable system," said the Star India spokesperson.

There are about 3 million conditional access system homes in the country and an equal number with the direct-to-home system.

"But the general entertainment channels, which are advertising-dependent, cannot ignore the 65 million to 70 million households that still watch TV in the analogue mode," he explained.

The distribution head of a news channel added: "In boardroom discussions, the amount seems high. But when you are in the field, Rs 25 crore does not take you very far."

Carriage fee escalated as channel influx has been very high and bandwidth is limited: analogue cable can barely carry 80 channels, he reasoned.

New channels are disturbing the carriage fee deals for the existing free-to-air and pay TV broadcasters as well.

For one, leading and popular entertainment and news channels are under threat of losing their prime slots unless they pay more for the same position.

News channels, for instance, have been paying Rs 8 crore to Rs 10 crore as carriage fee.

Without quoting the sum, Rajmohan Nair, distribution head of TV Today, admits carriage fee for the broadcaster has doubled in the last two years.

Cable industry expert and president, corporate affairs, Hinduja TMT Ltd [Get Quote], Ashok Mansukhani said there was "nothing illegal or coercive" about carriage fees.

It is a worldwide practice and "the broadcasters have to pay for the network they use."

Even the Telecom Regulatory Authority of India is not in favour of regulating carriage fee. "There is no service sector anywhere which does not expect to be compensated for the use of its network," he said.

He refuted the allegation that cable operators are charging too high. "There is no overcharging. Spectrum is scare and therefore market forces apply," he said.

Digitalisation of cable networks may help bring the carriage fee down as cable operators can offer more channels in the same bandwidth and the reception quality across the spectrum remains constant.