TRAI’s New Tariff Regulation on TV Channels May Not Effect LCOs / MSOs Business

TRAI’s New Tariff Regulation on TV Channels May Not Effect LCOs / MSOs Business

Recently, Telecom Regulatory Authority of India’s (TRAI) changed the tariff and interconnection regulation which are neutral for Multiple System Operators (MSOs) according to India Ratings & Research.

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The changes in regulations stipulate a reduction in a-la-carte pricing for channels and a cap on bouquet prices in line with a-la-carte prices, which would impact broadcasters’ profitability.

Measures such as cap on Network Capacity Fees (NCF) and carriage fees and a higher number of pay channels in base NCF sound optically negative for MSOs, but would have a marginal impact as they are broadly in line with current on the ground ecosystem.

The reintroduction of discount on bouquet prices compared to a-la-carte channel prices is surprising, given that the Madras High Court had earlier ruled against it.

The regulation has de-risked the business model of MSOs, Local Cable Operators (LCOs) as their revenue stream will contain fixed NCF from subscribers and content commission from broadcasters, effectively passing through content cost.

The increase in the total number of channels under the base Network Capacity Fee to 200 from 100 earlier is unlikely to have any major impact, as MSOs anyways offer above 200 channels under the current price regime for NCF of Rs. 130/-.

The exclusion of mandatory channels as per the India government from the bouquet of 200 channels may free-up space for additional pay channels, which may further reduce NCF for MSOs. MSOs earn content fees and distribution fees from broadcasters as a proportion of content cost.

MSOs’ realisations may slightly be impacted as the content costs and resultant content & distribution fees have also reduced. However, MSOs can minimise the impact by offering more channels in the bouquet while keeping the overall price of the bouquet unchanged. Sharing of revenues with LCOs in line with the regulations is quite favourable for MSOs, which can support their revenues in long-term.

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