Anirban Roy Choudhury

"Who is TRAI to decide which channels are unwanted?": IBF

The TRAI amendment directs broadcasters and distributors to submit the revised channel prices by January 15, 2020, and January 30, 2020, respectively, with full implementation from March 1, 2020.

It is evident that the amendments to the New Tariff Order (NTO) are based on the premise that the regulator believes that "unwanted" channels have been clubbed with the "driver" ones by broadcasters through heavy discounting in a bouquet.

In February 2019, the Telecom Regulatory Authority of India (TRAI) rolled out a New Tariff Order (NTO) for the television industry. While earlier, the digital platform operators made their bouquet and the local cable operators billed a standard amount to a particular locality, TRAI's NTO mandated that to change. The new regulatory framework asked customers to subscribe to the channels of their choice and then pay for whatever they watch. Accordingly, the broadcasters announced the maximum retail price of their channels and formed their bouquet offering too. TRAI observed that the cable TV cost per house has increased manifold and then issued a consultation paper to correct the course. The broadcasters pleaded with the regulator to avoid any major amendments as that would mean disruption for their businesses. The DPOs alleged that the broadcasters have priced their channels too high and thus the cable TV cost had gone up. They also alleged that because of the increase in price, many cable TV subscribers have resorted to cord-cutting.

The broadcasters, in response, said it was the network capacity fee (NCF) which is the single largest reason behind the price-rise and not the pricing of the channels. NCF is the mandatory minimum of Rs 130 (excluding GST) that a subscriber needed to pay. In return, she got 100 free to air channels which included a compulsion of all Doordarshan channels. The broadcasters argued that these channels are free to air in nature and it is unfair to charge customers for channels that are otherwise available for free on platforms like DD Freedish (government's free DTH platform).

In response to the broadcasters' allegations against NCF, the operators pleaded with TRAI to not reduce the NCF, but instead sought an increase in it, as that is the revenue that gets shared between the MSOs (DEN, Siti Cable etc.) and the Local Cable Operators. They said this money is essential for them to service their customers adequately.

After going through all the comments from stakeholders and organising Open House Discussions, TRAI announced the amendments to the New Tariff Order on January 1, 2020, just nine months after first implementing it. Among many amendments, the one that the broadcasters said will impact their revenues is the introduction of 'twin conditions' - something that the DPOs urged the regulator to do during the open house discussions.

TRAI notified, "In order to address the issue of huge discount during the formation of bouquets by the broadcasters vis-a-vis sum of a-la-carte channels, the Authority prescribed following twin conditions to ensure that price of a-la-carte channels does not become illusory:

i) the sum of the a-la-carte rates of the pay channels (MRP) forming part of a bouquet shall in no case exceed one and half times the rate of the bouquet of which such pay channels are a part; and

ii) the a-la-carte rates of each pay channel (MRP), forming part of a bouquet, shall in no case exceed three times the average rate of a pay channel of the bouquet of which such pay channel is a part."

Apart from that, the Authority also decided that only those channels which are having MRP of Rs12 or less will be permitted to be part of the bouquet offered by broadcasters.

"These amendments were the writing on the wall and it is surprising that the broadcasters did not foresee it," says an analyst working with a consultancy firm. He sheds light on a point that was mentioned in TRAI's consultation paper released in August 2019. TRAI had shared that because there is a huge difference in the bouquet and the a la carte pricing, it had observed "perverse pricing of bouquets visà-vis individual pay channels." It added, "In the process, the public ends up paying for unwanted channels, thereby blocking newer and better TV channels and restricting subscribers’ choice."

TRAI went on to ask the stakeholders, "What other measures may be taken to ensure that unwanted channels are not pushed to the consumers?"

On January 10, 2020, the broadcasters displayed their show of strength. Heads of the leading broadcasters in India - Star India, ZEE, Sony, Viacom18, ETV, Discovery and the India Today group addressed media in a conference organised by the Indian Broadcasting Foundation (IBF). "We never did something like this where we all have come together to address an issue. We believe our job is to tell the story and not be the story, but this is way too serious," said Uday Shankar, president of The Walt Disney Company Asia Pacific, and chairman of Star India and The Walt Disney Company India.

NP Singh, president, IBF
NP Singh, president, IBF

N P Singh, MD and chief executive officer, Sony Pictures Television Networks India (SPNI) addressed the gathering and narrated the stand of the IBF on the issue. The IBF members mentioned that the "smaller channels" will find it difficult to survive following the amendments which will force organisations to lay off employees.

The long term impact of these amendments is going to be severe for the industry and eventually it is the consumer who will suffer.
NP Singh

So, from TRAI asking for measures to ensure that unwanted channels are not forced on to customers, to network heads talking about pulling off smaller channels, is it mission accomplished?

In a conversation, N P Singh told afaqs!, "Who is TRAI to decide which is an unwanted channel and which are the driver ones? There are viewers for those channels too." He adds, "You are the consumer and you make the choice about the content you want to watch and whether that content is relevant to you, is a choice that you should make and I must not force on you. As a broadcaster, it is not my decision. As a DPO, it is not their decision, and similarly, it cannot be the regulator's decision either. To term any channel unwanted is demeaning the broadcasting community and the consumers. I do not like this terminology. These channels exist because there are viewers for these channels and if there are no viewers, nobody will run channels which do not have any viewership."

In the interim, advertising will suffer a lot. Overall too, advertising will suffer as the reach might come down further.
Sudhanshu Vats

Sudhanshu Vats, group chief executive officer and MD, Viacom18 and vice president of IBF, shares, "Basically, this concept of defining what is a driver channel is a distribution-industry lingo that the regulator has also started using. This language is used during negotiations between content owners (broadcasters) and the distribution platforms. There you go by sheer numbers - reach and popularity."

Sudhanshu Vats, VP, IBF
Sudhanshu Vats, VP, IBF

He refers to a Viacom18 channel to settle the 'unwanted versus driver' debate. "Comedy Central is a very small channel at an all India level but I am sure there would be about 500,000 homes where Comedy Central is very popular. So, I think we have to recognise the diversity and complexity of the country. Trying to micro-manage it may not be prudent and is more likely to be detrimental to the growth of the industry. We should allow the market forces to play out."

The Indian broadcast ecosystem is heavily dependent on advertisers for its revenue. As per industry estimates, 65 per cent of the broadcasters' revenue is contributed by advertising, while 30 per cent comes from distribution. While TRAI's amendment is related to the distribution ecosystem, it will have its impact on advertisers too, believes Vats. He says, "In the interim, advertising will suffer a lot. Overall too, advertising will suffer as the reach might come down further."

The IBF mentioned that in the last 15 years of regulating the broadcast sector, TRAI has issued more than 36 tariff orders and ancillary regulations. The broadcast sector not only employs a workforce to run its channels, but also commissions a huge number of shows which in turn create employment opportunities for production houses. In India's television business, the broadcaster commissions a production house to create shows which it airs on its channels. On average, about 250 - 300 people work at the sets where the episodes are shot. With the prime time spread across five hours, each channel runs almost 10 different shows of 30 minutes each. If a channel shuts down, it impacts the entire ecosystem and not only the broadcasters.

In the brouhaha over the pricing, has the IBF or the community failed to communicate the sheer number of lives that depend on the sector? "We have communicated it at all levels and I think it is understood as well," replies N P Singh.

Talking about the impact of the amendments, he says, "As we have already said, the long term impact of these amendments is going to be severe for the industry and eventually it is the consumer who will suffer."

TRAI said it has brought the amendments to protect "consumer interest" and the regulator believes that the cable TV price will go down. It said the same after the implementation of NTO too, but the opposite happened. Now it remains to be seen if the cost comes down.

The IBF has said it is contemplating a legal fight too. It is not yet clear if it would be an IBF versus the regulator fight or if the broadcasters will fight it out individually. As it stands now, the amendment directs broadcasters and distributors to submit the revised channel prices by January 15, 2020, and January 30, 2020, respectively, with full implementation from March 1, 2020.

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