Arasu Cable might be a "blow" to DTH operators in Tamil Nadu, if the state-owned multiple system operator (MSO) adds prominent pay channels to its bouquet and still offers connection at Rs 70 a month, said industry sources.

The DTH industry has already been burdened with 'entertainment tax' in the State, making a DTH connection at least twice as expensive as cable connection. "This (Arasu) will only hamper the digital penetration in the State," said a highly placed source in the industry.

DTH operators pay around 30 per cent of the revenue to the Government by way of licence fee and taxes, and 50 per cent to broadcasters. For example, if a subscriber pays Rs 135 a month, the DTH operator pays around Rs 40 to the Government by way of taxes and a little over Rs 65 to broadcasters. That leaves only Rs 30 with the operator.

With the average revenue per user (ARPU) remaining a big challenge for DTH operators, it will take years even to recover the subscriber acquisition cost (which is hovering around Rs 4,000)