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

We bring you a special report from ground zero.

March 31, 2019, was the last day for cable and satellite consumers to migrate from the old regulatory framework to the Telecom Regulatory Authority of India's (TRAI) New Tariff Order (NTO). As per TRAI, there are 170 million cable and satellite households in India of which 70 million are direct-to-home (DTH) subscribers and 100 million are cable TV consumers.

Migrating such a considerable number of customers from one system to another was always going to be a colossal task. Moreover, this migration demanded that customers also actively participate by choosing the channels they want. Local cable operators (LCO), who collect payments from consumers, are supposed to interact with them, explain the entire shift, get the names of the channels they want, and submit it to the multi-service operators (MSO).

Consumers in Confusion

Operators communicating the information say that the new regulatory framework is 'hasty and confusing' for consumers to understand and act. "It needs consumers to change their behaviour and it takes time to do that. The regulator did not allow adequate time and instead, instructed the transition to take place overnight and make a 'best-fit' plan for consumers who did not choose a new pack. The situation on the ground is confusing at best and chaotic at worst," says M R Srinivasan, general secretary of the Chennai Network Cable Operators Association.

Prices of Sony Channels as uploaded on their website
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Instructions for creating a 'best-fit' plan suggest that it must not be more expensive than the existing one and should consist of as many channels as possible.

As per Srinivasan's estimate, there are 1.6 crore cable subscribers in Tamil Nadu of which around 60 lakh are digitised while the rest are still using analogue cable connections. "The best-fit plan has irked customers as it means either a cut down on their entertainment or paying more," informs Srinivasan.

Ajanta Bhattacharjee

Customers are not happy in the east either. Ajanta Bhattacharjee, general secretary of the Bengal Cable Operators Association estimates that 85 per cent of subscribers in cities and 60 per cent in rural areas have selected their preferred channels. "There are 1.3 crore cable TV subscribers in Bengal and they are very upset as their cable costs have gone up from Rs 150 to Rs 250 (Average Revenue Per User)," says Bhattacharjee.

As per his observation, subscribers in rural areas are only subscribing to the basic plan by paying the Network Carriage Fee (NCF). This gives them access to 100 FTA channels of which it is mandatory to subscribe to 25 DD channels. "Moreover, customers are asking why they need to pay Rs 130 for free-to-air channels as they were always available for free," Bhattacharjee adds.

Prices of Viacom18 channels as uploaded on their website
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Similar feedback is coming from up North in Delhi too. "Since it has been made mandatory, the NTO has been implemented forcefully; it has harmed the operator-customer relationship. We bill them, the broadcasters don't, the MSOs don't, so the relationship matters to us," says Chanderdeep Bhatia, joint secretary of All Delhi Cable Operators Association.

Star Channel rates as uploaded on the website
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According to his estimates, 70 per cent of subscribers has chosen their channels while 30 per cent never got back to the operators. "They have either moved to DTH or resorted to cord-cutting due to the chaos," asserts Bhatia.

ZEE Channel prices as uploaded on their website
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A low migration rate is observed in Maharashtra too where, as per Arvind Prabhu, president, Maharashtra Cable Operators Foundation (MCOF), only 60 per cent of customers selected their channels, as per TRAI recommendations, while best-fit plans were made for the remaining 40 per cent. "We will get the feedback when we bill them as many of the channels have been discontinued to match their existing tariff," says Prabhu.

He feels the cable cost has gone down in some cases where the customers picked channels as per their needs.

Businesses took a hit

The new regulatory framework is going to make "survival difficult", believes Bhatia. The MSOs and LCOs work in a revenue-share business model where both parties are supposed to meet at a common point and sign the Model Interconnect Agreement (MIA). TRAI recommended that in case of a fall-back, a Standard Interconnect Agreement - 55 (MSO)-45 (LCO) per cent - revenue-share partnership deal has to be signed.

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"On one hand we are telling customers to pay more for half the number of channels; on the other, the MSOs have made TRAI's fall-back recommendation a norm. This 55-45 deal on the network capacity fee (130 + GST) is going to kill the operators and eventually harm the industry," says Bhatia.

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Prabhu also sees loopholes in the 55-45 revenue-share deal. "Earlier, for a bill of Rs 300, the LCO, as per the 45 per cent revenue-share deal, would get around Rs 145. Now, in the new regulatory framework, the revenue -share is limited to the NCF, which is Rs 130. Say, after the NCF a customer subscribes for content worth Rs 200, the total cost before GST is Rs 330. Now, of the Rs 330, the content cost will go to the broadcaster who will then pay the MSO 20 per cent, which is Rs 40. There is very little clarity on the revenue-share model to be followed on this Rs 40," Prabhu explains.

He also feels the MSOs are taking advantage of TRAI's lack of awareness of ground reality, something which the Bengal and Delhi cable operators associations also mentioned several times. They accused the MSO of only making those FTA channels available that benefit them in some way. "In Bengal, Siti Cable (ZEE's MSO) made it clear that channels won't be available a la carte and customers must subscribe to the MSO packs," says Bhattacharjee.

"MSOs are blatantly flouting TRAI regulations and indulging in false reporting to misguide the regulator. They are interpreting the law and regulation in a manner that benefits them and TRAI is missing it all by believing what the MSOs convey," adds Prabhu.

It's not only the LCOs, but the broadcasters too who will suffer because of the MRP regime believes Srinivasan. According to him, only two out of 100 customers are subscribing to HD channels as they don't want their cable bills getting inflated. "Also, MSOs are not buying content from broadcasters as they used to earlier. An MSO would pay a broadcaster running operations from Mumbai, Rs 84 lakh before the NTO. Now the same MSO is paying the same broadcaster Rs 14 lakh as that particular broadcaster does not have a Tamil channel or South Indian offering," says Srinivasan.

He believes the trend is the same across all genres and regions where customers are only subscribing to regional channels, sports and news. "English movies, factual entertainment and other niche channels are finding very few takers," he adds.

Are media planners worried about the viewership? That's for another day; as of now, cable operators are clearly not very happy with the NTO and their comments suggest consumers aren't either.