TRAI Tariff order: Broadcasters, distributors poles apart in open house discussion

Just six months after the implementation of the regulatory framework in the television industry, TRAI (Telecom Regulatory Authority of India) sought comments on a new consultation paper. In the consultation paper, TRAI listed issues ranging from bundling, pricing, consumer satisfaction and imbalance in the playing fields among many others. As many as 30 questions were listed for the stakeholders to respond to. The regulator said it received 288 comments and 20 counter comments and to address the matter further it called for an Open House Discussion (OHD), which was held in Delhi on October 18, 2019.

Present at the OHD were Chairman TRAI, RS Sharma, secretary, SK Gupta, member, H Pradeep Rao and advisor, Arvind Kumar from TRAI. “We have made substantial progress in the implementation of the NTO, which would not have been possible without the efforts of the stakeholders. However, there are certain issues that need to be ironed out. So, we thought it would be appropriate to discuss,” said Rao.

Issues related to the bundling of channels, discount structure on bouquet pricing as well as ceiling on MRP were first up for discussion. Initially, TRAI had decided to impose a cap of 15 per cent on discounting for the broadcasters in the new tariff order. Meaning, when put in a bouquet the price of a channel can be reduced by only 15 per cent. Is there a need to relook and reintroduce the cap, are broadcasters taking undue advantages, are they pushing unwanted channels through to the consumers — these were the nature of questions briefly discussed in the initial set of the OHD.

Representatives of several cable operators associations in Tamil Nadu agreed to TRAI's assessment and said the broadcasters are indeed taking advantage. They said that because of the bundling, consumers are refusing to go for a-la-carte, which was the "the primary motive" of NTO. A representative of the association said that people in Tamil Nadu are watching fewer channels but are made to pay more as the channels are priced high. The associations pointed out that because of the NTO, which has increased the cable bill, they are witnessing a 30 per cent churn.

“This is resulting in loss of business, having to let our people go and in some cases operators losing their lives too. It is our request to the TRAI that it must look into bringing down the prices from Rs 19 to at least Rs 9, if not lower, so that cable TV remains affordable in India,” said a representative of the Tamil Nadu Operators association.

Also Read: What do cable operators make of TRAI's tariff order?

Gururaja Rao, legal counsel, Sony Pictures Networks India, questioned TRAI on its decision to invite consultation on NTO within such a short period of its implementation. He said that the broadcasters, as other stakeholders, had to put in a lot of work to implement the NTO, which caused a lot of "disruption" and another consultation at this stage could derail everythin

“The main objective of the MRP regime was to offer a choice to consumers. With that intent, the broadcasters have come out with various bouquets. Hence we believe that limiting the bouquet at this stage would also curtail the freedom of the broadcasters to carry on trade in the manner in which they would like to,” said Rao.

He also took a jibe at the regulator for using "unwanted channels" in one of its questions, “We fail to understand and comprehend how the term unwanted channels have been coined. No broadcaster would come out with a channel that is unwanted. Before launching a channel the broadcaster conducts research to understand the likes and dislikes of the consumer. Launching a channel means the broadcaster investing a huge amount and hence such terminology for any channel, in my view, is not right.”

Deepak Jacob, president and general counsel, Legal and Regulatory Affairs at Star India, too, was irked by the terminology. He said, “The authorities and stakeholders need to come to an understanding on certain terminologies. Unwanted, wanted, driver, non-driver, popular, unpopular, these are colloquial terms. I watch Malayalam and Tamil channels and I watch special interest channels such as Nat Geo and Discovery, to me they are wanted, driver popular... so I think authority needs to reconsider a lot of questions that have used these terminologies because we need to respect the linguistic and social-cultural diversity of our own country.”

Other broadcasters joined Jacob and Rao in criticising TRAI on the usage of the term “unwanted channels”. SK Gupta intervened from the bench to clarify the usage of the word “unwanted channels” in the TRAI consultation paper. (TRAI’s Question was: What other measures may be taken to ensure “unwanted channels” are not pushed to the consumers?). Gupta said, “If I am a consumer, I have certain choices that I want to subscribe to and at the same time, I will also have a set of channels that I don’t want. Now if by certain means those channels are pushed to me those are unwanted channels for me. It is very clear. Don’t read the word unwanted in isolation, instead look at it from the consumer’s perspective.”

He also mentioned that there are examples where consumers have complained to the TRAI that despite not wanting a particular channel the consumer has to subscribe to those channels because the framework encourages to opt for a bouquet. “There are scenarios where the cost of an a-la-carte channel is Rs X while the cost of the bouquet consisting that channel and three others is (X - Y). How can I subscribe a-la-carte when this is the framework,” he said was the complaint of a customer.

"Broadcasters have not misused their flexibility,” said Jacob. He added, “The average discount across networks is not more than 35-40 per cent, which is a significant improvement from the earlier regime where it was closer to somewhere between 70-80 per cent and the authority is aware of this data hence there are no remedial measures required here.”

Gurjeev Singh Kapoor, president - Distribution, too, questioned TRAI’s decision to relook at the way broadcasters have priced their channels. “We have close to 900 channels in India out of which around 575 are FTA and 325 are as-pay. The objective behind coming up with the regime was to provide choice to the customers and now the customer is getting the choice to choose which channels s/he or the family is interested in watching. In such a scenario, when the objective is met why are we looking at the ceiling again, which was introduced by the authority after deliberations?” he asked.

Anil Malhotra, chief executive officer, Siticable Networks, was of the opinion that the NTO in its current state fails to make the industry a level playing field and thus remedial measures are required. He said, “Flexibility is only available to broadcasters as DPOs have to follow the 15 per cent cap while creating packs and the customers can only buy the packs announced by the broadcasters and DPOs.”

He added, “The broadcasters have assumed that since there is no cap on discounting for them they are free to offer any discount. There can be a situation where the a la carte price of a channel is Rs 19 and the bouquet consisting that channel and many others is also Rs 19 because there is a flexibility to do so, there is a business model to do so and so, of course, they will misuse it.”

Yatin Gupta, vice-president, GTPL Hathway, questioned the concept of broadcasters monetising pay channels through advertisement. He referred to the pre-NTO discussions where the broadcasters said that they would subsidise subscription by monetising channels through ads. His question was, now that the broadcasters are allowed to price as per will in a-la-carte (For a channel to be a part of bouquet there is a ceiling of Rs 19 for a-la-carter there is none) why should they be allowed to monetise through advertisements?

“The consumers are paying the maximum retail price set by the broadcasters and then taxes after which they are spending 20 per cent of their time on television watching ads. Our suggestion is pay channels should not be allowed to carry advertisements,” said Gupta.

He also opined that in order to maintain a level playing field, the TRAI must either remove the discounting cap imposed for the DPOs or introduce a similar one for the broadcasters. On the bouquet front, he said, “The bouquet formation should be in particular price patterns. There is a premium band with channels priced between Rs 15 to 19 where most of the channels have got quality content and certain popularity because of which they are priced at 19. We suggest the channels on those bands only should be clubbed into a bouquet. A broadcaster must not be allowed to club a Rs 19 channel with a 10 paise one. Because it clearly shows a very wide difference.”

Also Read: "Market forces at play; benefits of new tariff order will be visible soon": TRAI Chairman RS Sharma

The discussion then moved towards pricing and if there is a need to relook the fixed Network Capacity Fee (NCF) introduced in the new regime. The NCF, as defined by the TRAI, means the amount, excluding taxes, payable by a subscriber to the distributor of television channels for distribution network capacity subscribed by that subscriber to receive the signals. It does not include subscription fee for pay channel or bouquet of pay channels, as the case may be. This NFC is shared between LCOs and DPOs.

Star India’s Jacob opined that all the price hikes post-NTO are due to, “NCF Rs 130 plus taxes which takes it to Rs 153. TRAI gave the DPOs flexibility to charge up to Rs 130 for x number of channels. TRAI never said you will mandatorily charge Rs 130 to every consumer but unfortunately implementation on the ground translated into exactly that. The Rs 250, Rs 275 pre-NTO customers are now paying Rs 130 more for the channels he did not want.”

Jacob suggested that the TRAI look into the NCF in totality as he believes the flexibility given by the TRAI to the DPOs to charge upto Rs 130 as NCF has been misused. “Get rid of the NCF, there is no need for that. The TRAI gave 15 years for DPOs to recover the cost of infrastructure through various mandates several times and that has been recovered,” he suggested.

The cable operators present at the OHD countered Jacob’s suggestion and said they want the NCF to be increased to Rs 150 at least. They said there are several costs that the local cable operators need to bear to offer services to the end customer and if the NCF is not increased then their businesses will be further hit. A representative of the operators association from Bengal said, post-NTO the price of cable TV has steeply risen cause about 30 per cent of their customer base resorting to cord-cutting. Earlier, he said, houses that had connections for three televisions are watching OTT on two and have subscribed for only one.

Also Read: TRAI's New Tariff Order: How do the communication & marketing challenges of channel heads change

While there was hardly any representation from the consumers, the remaining three stakeholders (Broadcasters, DPOs, Local Cable Operators) were sailing in three different boats. Despite the OHD being on tariff order, the TRAI bench was asked about its stand on OTT services delivering content for free.

A representative of an association from Uttar Pradesh pointed out that the shows that air on channels priced at Rs 19 are available for free streaming on the same broadcaster’s OTT platform. He asked, at a time when data price is low and casting on television is becoming a phenomenon, why would people pay for channels to watch content that is streaming for free.

The bench said it noted all the points raised and it would discuss them in detail to decide the course ahead.

You can download the consultation paper here