NTO 2.0 amended; relief for broadcasters as MRP cap returns to Rs 19

After almost three years of litigations and discussions, the television broadcasters have finally managed to have their way with the new tariff order (NTO).

The Telecom Regulatory Authority of India (TRAI) has decided to not prescribe a ceiling on the maximum retail price (MRP) of pay channels. Issuing amendments to the NTO 2.0 on Tuesday, TRAI decided to continue with the MRP ceiling of Rs 19 for a channel to be a part of a bouquet.  

The order comes nearly three years after the NTO 2.0 was first put forward by TRAI in January 2020, setting a Rs 12 price cap for each channel in a bouquet. It had faced strong opposition from broadcasters as well as direct-to-home (DTH) operators. The order will now be implemented in February 2023.

The latest amendments allow a broadcaster to offer a maximum discount of 45%, while pricing its bouquet of pay channels over the sum of MRPs of all the pay channels in that bouquet. The discount offered as an incentive by a broadcaster on the MRP of a pay channel, will be based on the combined subscription of that channel, both in à la carte as well as a bouquet.

It will continue with forbearance on the MRP of TV channels. This will allow broadcasters to freely price their à la carte or standalone channels.

All broadcasters need to report any change in name, nature, language, MRP per month of channels, and composition and MRP of bouquets of channels to TRAI by December 16, 2022.  

Welcoming the amendment, K Madhavan, president, Indian Broadcasting and Digital Foundation (IBDF), said it was a result of constructive dialogue.

“NTO 2.0 is the outcome of the strong collaboration between the industry and TRAI, under the leadership of Dr Vaghela. Rather than pursue a litigative approach to address pending demands, our approach of engaging in constructive dialogue has allowed us to make strong progress in creating a more conducive environment for the industry on the pricing front. We remain confident of moving to an environment of regulatory forbearance."

Madhavan is also country manager and president of Disney Star.

Karan Taurani, senior vice president, Elara Capital, says the amendment will provide much-needed respite and clarity to the broadcasters.

"This may positively impact subscription revenue, near term, if the broadcasters were to hike prices."

However, Taurani expects the maximum 45% discount on the bouquet prices to hit subscription revenues of channels/broadcasting groups.

"The former will have to reduce discounts by removing certain ancillary or marquee channels from the bouquet to pure à la carte."

Speaking at the CII Big Picture Summit last week, TRAI chairman PD Vaghela had said that it will soon come out with amendments to its NTO framework.

“We will soon issue amendments to the tariff order, which was a demand by the industry. The interconnection regulation will be aligned with the stated policy of light-touch regulation. We expect the industry to respond with tariffs and prices that don't put undue pressure on the consumers.”

The NTO, which was first issued in December 2018 and implemented in February 2019, was expected to make channels cheaper for the consumers and offer more choices. It allowed the consumers to choose the TV channels they want to watch and pay only for them at MRPs set by broadcasters, instead of the pre-set bouquets offered earlier. However, in reality, the opposite happened, as the cost of like-to-like channel options went up.

To bring down this cost, TRAI brought in NTO 2.0 on January 1, 2020. It reduced the cap on the MRP of individual channels, which can form part of any bouquet, to Rs 12 per month from Rs 19.

The IBDF had said this decision was not backed by any logical rationale or consumer insight. It moved the Bombay High Court against the amended order, seeking that it should be declared constitutionally invalid. When the HC didn't rule in its favour, it even approached the Supreme Court in July 2021. However, in February 2022, it withdrew its petition and began a consultation process with TRAI in May.