Tata Sky's decision to price its HD services and boxes lower than all its rivals is surprising, given that the operator has always positioned itself as a premium player in the direct to home (DTH) market. Tata Sky's boxes are between 50-70 per cent cheaper than Sun Direct and Big TV.?Following Tata Sky's announcement of its price points for HD hardware, rival Dish TV followed suit by lowering its box price to Rs 2990. Dish TV's HD boxes were previously priced at Rs 5990.?Subscription rates have also been kept low by Tata Sky, and at Rs 30 per month for new customers. Tata Sky's HD bouquet is cheaper than both Dish TV (charging Rs 150 for a five-channel bouquet) and Sun Direct (which includes a free one year subscription to its three-channel bouquet).

Given that Tata Sky targets a premium customer segment with a (potentially) higher than average disposable income, we believe that the lower entry barrier via cheaper hardware and subsidised/free content will definitely aid the operator in upgrading its subscriber base, and provide an incentive for more content providers and channel operators to start offering HD content. However, there are a few hurdles which could potentially negate the upsides from lower cost and (negatively) impact subscriber additions/upgrades.

Tata Sky lacks HD content, with just two channels currently available. Rivals Dish TV and Sun Direct, on the other hand, offer five to six HD channels including Discovery World HD and Nat Geo HD.

Secondly, Dish TV has inked deals with ESPN Star Sports (ESS) to offer the live HD feeds of the FIFA World Cup finals to its HD subscribers-expected to be a key incentive for customers to trade up during the period. Tata Sky's efforts to obtain distribution deals for the ESS channel in time for the World Cup appears to have failed, with the Delhi High Court dismissing Tata Sky's request for the court to order ESS to offer the feed to Tata Sky on a per subscriber fee basis rather than for a one-off sum.