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Trai caught in TV tariff crossfire
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After drawing fire from telecom operators for its recent recommendation linking 2G spectrum prices to 3G, Telecom Regulatory Authority of India (Trai) is facing protests from broadcasters over cable tariffs. In a development which amounts to a loss of faith in the regulator, pay channel broadcasters have termed their deliberations with Trai a 'failure' and a 'waste of time'. A top broadcaster said pay channel broadcasters will go to court if Trai makes any reduction to the existing content prices of pay channels on DTH or cable.

Trai, which is currently finalising new channel subscription tariffs as directed by the Supreme Court, is expected to file its response in a day or two.

Meanwhile, a rift has emerged between leading DTH operators and multi-system operators (MSOs) over the new content pricing formula, with each operator demanding a separate tariff formula.

"We will not accept any formula which impacts or reduces our revenue from cable and DTH platforms," Jawahar Goel, president, Indian Broadcasting Foundation (IBF) told FE. IBF is the apex body of leading broadcasters like Star, Zee, Sony, ESPN, Discovery and Sun TV. A top broadcaster, who did not wish to be identified, termed the deliberations with Trai a "waste of time."

"MSOs and DTH firms want to do business at the cost of broadcasters. This is unacceptable. Our costs have multiplied in the last seven years while there was a freeze on channel tariffs by Trai," Goel added.

The tariff revision is significant for the industry, since there has not been any consolidated revision in the last seven years. During this period, the number of cable homes doubled and new platforms like DTH boomed. However, sources said deliberations with Trai have divided broadcasters, cable operators and DTH firms. Broadcasters are miffed at learning that Trai may be looking at linking DTH content cost to digital cable pricing for MSOs, with a view to incentivise the spread of digital cable. Also, broadcasters worry that Trai may reduce DTH tariffs, which would impact revenues.

According to sources, Trai may drastically reduce the content cost on digital cable to help it compete with DTH. In just three years, DTH operators have signed up over 25 million subscribers or nearly 30% of cable homes. Trai is also expected to freeze monthly cable prices for consumers at Rs 250 while reducing content cost for MSOs to 25% of the cost fixed for DTH operators. Trai may also reduce the content cost of DTH operators from the existing level, thereby automatically helping MSOs too, said sources.

"All formulations proposed by the various stakeholders have been presented to Trai. We understand Trai will file its response in the court in next few days. Until Trai files its response, I cannot comment on which stakeholders will benefit or at whose cost," said Ashok Mansukhani, president of MSO Alliance, the apex body of leading cable firms. However, broadcasters fear any reduction of DTH or cable tariffs would ultimately lead to lower earnings for them, even as their own costs continue to rise.

On its part, MSO Alliance wants Trai to fix content cost at a fourth of DTH costs. This is significant as DTH operators already pay broadcasters at 50% of the tariff fixed for non-CAS cable homes following an order by the telecom disputes appellate tribunal in 2006. Therefore, any reduction of tariffs on DTH platform will impact cost for MSOs, experts said.

Meanwhile, DTH operators themselves want a further reduction in their content cost formula and the existing ceiling of 50% of non-CAS rates to come down to 10-40% of non-CAS tariffs. If accepted by Trai, the revenue of broadcasters from the DTH platforms will go down drastically, an IBF executive said.

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