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Update: TRAI initiates review of new tariff order for broadcasting sector as complaints mount
MUMBAI: Armed with the consumer data for the last six months, the Telecom Regulatory Authority of India (TRAI) has set in motion the process to review its new regulatory framework that has reaching consequences for the TV broadcasting sector.

The regulator has issued a consultation paper titled ‘Tariff related issues for Broadcasting and Cable services’ asking stakeholders to provide their responses on the 27 questions covering different aspects related to the new tariff order (NTO).

Written comments on the Consultation Paper are invited from the stakeholders by 16th September. Counter comments, if any, may be submitted by 30th September.

One of the main issues that the TRAI seeks to address through the consultation process is that of mismatch between a la carte and bouquet pricing. The existing regulation has a clause that caps the discount on bouquets offered by the broadcaster at 15%.

The clause, which is currently in abeyance, mandates that the MRP of a bouquet formed by a broadcaster should not be less than 85% of the sum of MRPs of the a-la-carte pay channels forming part of that bouquet.

This has rendered the TRAI’s objective of offering choice to consumers meaningless since consumers are forced to take bouquets as a la carte price of popular channels are priced closer to the channel cap of Rs 19.

In its press release, the regulator has admitted that adequate choice to select TV channels has not been given to the consumers. However, there are some positives like transparency in TV channel packaging harmonised business processes in the sector, reduced disputes among stakeholders.

TRAI, in March 2017, notified the ‘New Regulatory Framework’ for Broadcasting and Cable services. The new framework came into effect from 29th December 2018.

The regulator lamented the fact that the broadcasters and distribution platform operators (DPOs) have lived up its expectation in implementing the NTO despite having the requisite flexibility. To the contrary, the TRAI stated that the flexibility was misused to throttle market discovery of TV channel prices by giving huge discounts on the bouquets.

Based on the tariff declared by the broadcasters under new regulatory framework, the TRAI observed that broadcasters are offering bouquets at a discount of up to 70% of the sum of a-la-carte rates of pay channels constituting those bouquets.

“It indicates that in absence of any restriction on the discount on the offering of bouquets, broadcasters are making prices of a-la-carte channels illusory thereby impacting the a-la-carte choice of channels by consumers,” the TRAI noted.

While the Madras High Court had set aside the 15% discount cap on bouquets, the Supreme Court had upheld the TRAI’s powers to formulate pricing for TV content. The tariff order and regulations were also upheld by the apex court. The TRAI, however, chose to wait and watch before implementing the bouquet cap.

Data available with TRAI suggests that on an average discount offered on various bouquets of major broadcasters are in the range of 40-54%. It also observed that in some case broadcasters have declared MRP of their bouquet such that their bouquet price is equal to or less than the MRP of a single channel present in that bouquet.

Analysis of most selling bouquets of broadcasters revealed that heavy discounts are applied to bouquets making the a-la-carte prices of channels irrelevant in comparison.

MRP of the popular channels are declared at the maximum permissible limit of Rs 19/- so as to qualify to be the part of a bouquet and then these are bundled along with a number of other channels, mostly marginally priced non-popular channels.

By following this business model, the broadcasters gain in maximising their reach even for not so popular channels, increasing subscription revenues, the TRAI said.

“On the flip side, this perverse pricing strategy renders the a-la-carte subscription of the channels meaningless for the consumers and reduces the option of choice. They end up subscribing to channels not of their original choice and even paying for those channels which they are not inclined to watch without even taking notice of,” it stated.

The TRAI has asked stakeholders to comment if there is a need to reintroduce a cap on discount on sum of a la carte channels forming part of bouquets while forming bouquets by broadcasters? If so, what should be an appropriate methodology to work out the permissible discount? What should be the value of such a discount?

Large number of bouquets confusing consumers

The second critical issue flagged by the TRAI is the creation of too many bouquets by the broadcasters which confuses the customers. The TRAI noted that some major broadcasters have declared 97, 86, 26, 93 and 29 bouquets while the number of channels uplinked by them are 57, 59, 33, 74 and 29 respectively. This has forced consumers to adopt some suggested packs of TV channels.

“TRAI has observed that too many bouquets are formed by the broadcasters/Distributors and many of them contain very similar set of channels, with very few changes. This too many bouquets are not only creating confusion among consumers but also becoming a hurdle in choosing the channels by consumers. With too many bouquets of broadcasters and DPOs, the consumers get confused and as a result forced to adopt some suggested packs of TV channels which kills the freedom given to consumers to choose desired TV channels,” TRAI noted.

Rs 19 cap on individual channels

The regulator has also sought views on whether the ceiling of Rs. 19/- on MRP of an a-la-carte channel to be part of a bouquet needs to be reviewed? If so, what should be the ceiling for the same and why?

According to TRAI, comparing the distribution of all pay channels over MRP (price) intervals before and after the new regulations demonstrates the fact that channels are now concentrated in the Rs 0-2 price range (some converted from FTA to pay) and at the Rs 19 price point.

The spread of the distribution of channels reduced compared to the distribution of the 2017 rates. However, the bunching of channels at the start and end of the bouquet range is not a uniform trend, it stated. There are wide variations in the practices that have been adopted by different broadcasters as well as across different genres of channels.

The reason for review of the channel price cap is that the broadcasters are pricing their driver channels at the threshold price of Rs. 19 or close to it purely based on commercial considerations.

The TRAI stated that is no visible change in consumer demand or preference could be attributed to this sudden change in pricing at a large level.

Out of the existing 330 pay channels, 94 pay channels have been priced lower than or equal to Rs 1. These channels are generally less popular channels and many of them are recent converts from FTA to pay so that it could be included in a bouquet.

“As the price range of MRP increases, it can be observed that there is a decrease in the number of channels as we move towards higher price range. Further, 66 channels which are generally popular (mainly GEC and sports) have the MRP declared at the threshold price of Rs. 19 by the broadcasters,” the TRAI said.

Freedom of DPOs to create bouquets

The TRAI is also relooking at the issue of allowing DPOs to create their own bouquets. DPOs have been given the flexibility to form bouquets with an understanding that they understand the requirement of consumers much better than others.

However, after implementation of the new regulatory framework, several instances have come to light where many bouquets have been pushed to consumers without their specific choice, the TRAI stated.

“Some broadcasters also informed that the flexibility of formation of a bouquet is grossly being misused by DPO by having their preferred channels in most of the bouquets. This problem further accentuated for FTA channel. Many of the bouquets formed by DPOs are not in line with the market demand,” the regulator added.

The TRAI also noticed that mobile apps are becoming popular are being used efficiently by a large number of subscribers. In view of these developments, the need to continue the flexibility of formation of bouquets by DPOs also needs to be reviewed.

Other key issues

Other key issues discussed in the consultation paper are network capacity fee (NCF) for multi TV home, discounts on Long term subscriptions, placement of channels in EPG, promotional offers by DPOs, flexibility in offering NCF, and whether 25 DD mandatory channels be over and above the 100 channels permitted in the NCF of Rs. 130/.

Airtel Digital HD Recorder / Kerala Vision Digital TV
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