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Waiting for Trai’s tariff order

LiveMint logoLiveMint 10-05-2017 Shuchi Bansal

Imagine a scenario where, as a consumer of television, you could choose the channels that you actually want to watch and pay for only them. Under this scheme of things, you would also know the price of each channel. All this would have been possible if the Supreme Court had not stayed on 8 May the reference interconnect offer and tariff order of the Telecom Regulatory Authority of India (Trai). The stay followed a special leave petition by television broadcaster Star India Pvt. Ltd and Vijay Television Pvt. Ltd.

Star and Vijay Television had filed the petition on grounds that the tariff regulations issued by Trai stand in conflict with the Copyright Act, 1957.

However, as per the Trai notification of March, broadcasters had to publish their reference interconnect offers or channel rate cards by 2 May 2017.

To be sure, Star India has been embroiled in a legal battle with Trai on the tariff order and had moved the Supreme Court after the Madras high court refused to grant a stay. The matter is scheduled in the Madras high court for 12 June and the Supreme Court has asked it to complete the hearing in four weeks.

Trai’s tariff order, however, is a good one that attempts to make channel pricing transparent although not necessarily cheaper. Under the new tariff regulations, consumers would get 100 free-to-air channels for a price of Rs130 plus taxes. Over and above this, they could opt for any number of pay TV channels.

There are several clauses in the order that could benefit the consumers. For a start, earlier the tariffs were more of an understanding (based on negotiations) between the distribution platform owners (DPOs) like cable networks and direct-to-home operators and television broadcasters.

Now, broadcasters will declare rates to the customers. Earlier, there was no relationship between the rates the channels negotiated with the DPO and those that reached the consumers. The customers were never clear about what they were paying for which channels. With the new tariff order, consumers will know the difference between a free-to-air and a pay TV channel.

Trai guidelines on tariffs also say that the bouquet price cannot be less than 85% of the maximum retail price of individual channels. This clause prevents hugely discounted bouquets which can be forced upon people comprising channels which they don’t want to see. “The tariff order is aimed at equality and removal of unfair practices,” says Ashish Pherwani, partner, media and entertainment, EY Llp. This move intends to eliminate circulation of weaker channels with the stronger ones. “They can still bundle channels but the irrational pricing of the bundles would go away.”

Another good point is that premium channels—defined as anything that is priced above Rs19—cannot be bundled. They can only be sold a la carte. Similarly, a channel in standard definition and high definition cannot be clubbed in the same bouquet as currently both of them carry the same content.

Importantly, all channels will be priced the same everywhere. So Sun TV in the north cannot be priced higher or lower than in the south. The belief is that the customer is the same everywhere. Besides, there will not be any difference in prices for different operators either—the price of the channels will be the same for cable, DTH or any other distribution platform owner.

To be sure, Trai is not determining the prices of channels and that’s a good thing for broadcasters. Its only intention is to remove the malpractices in pricing. “In fact this order has removed the price freeze which had been there”, says Ashok Mansukhani, managing director and chief executive of Hinduja Ventures Ltd, the holding company for its cable distribution firm and headend-in-the-sky platform.

In fact, broadcasters can also change the prices of their channels at a month’s notice. They can even indulge in promotional pricing. For instance, a sports channel can ask for a premium during a cricket match. Clearly, the order is not restrictive.

However, broadcasters are probably worried about the order as some of their weaker channels, which they currently bundle with popular ones, may not find takers. This may unsettle their economic model. Advertising is still their dominant revenue source. If the reach of some of their channels decline, it may affect their advertising revenue. So, broadcasters need to protect their bouquets.

There is also a possibility that people at the lower income levels, who were low ARPU (average revenue per user) customers, may switch to Free Dish, the free-to-air DTH platform of Doordarshan, shunning cable networks, private DTH firms as well as pay channels.

There may be challenges, but if the broadcasters price their channels intelligently and DPOs create rational bouquets, the new tariff order, when implemented, could be a game changer. “It is one of the most flexible pricing regulations which will bring transparency and fairness to all stakeholders and give genuine choice to the customer,” says Mansukhani.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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