New Tariff Order On The Edge Of Implementation Spending On Entertainment May Rise

New Tariff Order

The twists and turns in the case of a new tariff regime being sought to be implemented by broadcast and telecoms regulator TRAI continues. It has filed a petition in the Supreme Court on the issue of 15 per cent cap on discount on a bouquet price of TV channels to consumers that had been set aside by Madras High Court while upholding TRAI’s right to regulate the broadcast sector.

TRAI’s new tariff order may allow viewers to select and pay for individual TV channels they want to watch starting from January 1, only if the legal hurdles were to get out the way. According to the new order by telecom regulator, broadcasters would be required to draft per month retail price (MRP) of the channels. In addition, broadcasters may also offer to their customers bouquets of channels, which shouldn’t be priced below 85 percent of the sum of the MRPs of the all channels combined in the pack. “… Authority is of the view that after receiving any discount from the broadcasters in MRP of a pay channel or a bouquet of pay channels, a distributor of television channels may provide discount to its subscribers on the MRP of pay channels or the bouquet of pay channels declared by the broadcasters and notify the retail price to its subscribers”, TRAI order said.

In other words, more than 15 percent discount can’t be offered on bouquet pricing by the broadcasters, TRAI orders noted. “Authority has decided that a distributor of television channels may also offer a maximum discount of 15% to its subscribers while forming the bouquet(s) of pay channels over the sum of retail price offered by it to subscribers for those channels”, order said. This could lead the subscribers to pick and choose, and pay for, individual TV channels and not subscribing to the bouquets outright, which often also contain TV channels with low viewership. However, the ‘discount cap’ has been done away with by the Madras High Court on the petitions filed by a few of the broadcasters. So, it’s still to be seen how the new tariff order would get implemented from the next year. TRAI has moved Supreme Court against the High Court’s order.

On a matter that’s complicated, TRAI’s petition, in layman’s language, exhorts the Supreme Court to set aside that portion of the high court judgement that frowns on the 15 per cent cap on discounts on bouquet prices of TV channels. The Madras High Court, while upholding most of the TRAI tariff order issued middle of 2016 and challenged by Star India and Vijay TV later that year on grounds of overstepping of jurisdiction had struck down as arbitrary almost 18 months later the 15 per cent cap on bouquet prices.

With the case finally disposed of by the Supreme Court earlier this year, upholding the high court’s views, TRAI had issued a notification stating that India’s broadcast and cable industry stakeholders implement its tariff regime in phases and report on compliance. As the final compliance deadline nears the end of the year, the new twist in the tariff tale  nudged by an appeal of Chandigarh-headquartered MSO Fastway in disputes tribunal TDSAT may add to the ambiguity and result in further delays in signing of contracts between TV channels and distribution platforms. A hearing of the fresh TRAI petition is likely early next week. Keep tuned in for soap-opera type twists in the script.

Benefit 

Hathway Cable & Datacom, one of India’s largest cable feed providers, said the implementation of a new TRAI tariff scheme for television from next month will empower consumers, even as it will be ‘not so good’ for broadcasting groups that make heavy use of bundling. Bundling refers to the practice by broadcasting companies of making cable and DTH companies carry unwanted and unpopular channels by tying them with good channels.

The TRAI last year came up with new guidelines aimed at stopping the practice, which was challenged by Star India, Tata Sky and Airtel Digital in various high courts. However, overcoming the legal challenges, the guidelines are set to come into effect on the 29th December 2018. Hathway MD Rajan Gupta said the consumer will be the biggest beneficiary of the new tariff regime as he does not need to pay for the channels that he or she doesn’t want to watch.

“Due to the shift from wholesale to retail, the consumer doesn’t have to pay for the whole bundle,” he said. “C0nsumers are more empowered as they have choice and power over what channels they wish to watch.” “We believe this shift from wholesale to retail pricing, the single biggest change, will shift power from broadcasters to consumers,” he added. Under the new system, consumers have to choose the channels they want, instead of their cable or DTH provider deciding for them.

The cable or DTH provider has to offer a ‘base’ pack of 100 channels which cannot be priced at more than Rs 130 plus tax. The key difference compared to the present system is that in the new system, the consumer is free to add and subtract any channel he wants to his base pack. It should also be noted that the base pack can be priced at any level, including zero.

In addition to the base pack, the cable and DTH operators also have offer top-up packs. Each of these packs will comprise 25 SD channels, and will also comprise entirely of channels chosen by the consumer. Under the new rules, one HD channel will be considered equal to 2 standard channels. In other words, as part of the base pack itself, the consumer would be able to subscribe to either 100 SD channels or 50 HD channels, or any other combination of the two.

However, if a subscriber chooses pay channels as part of his subscription, the price of the pay channel has to be paid over and above the pack charge. Like in case of the pack prices, the cable or DTH operator can set the price of pay channels at any level — including zero — depending on its marketing strategy. However, it cannot be higher the MRP declared by the channel owner. There is also a second dimension to the new tariff — the price paid by the DTH or cable company to the broadcaster or channel owner.

The channel owner has to declare only one price for their channel, plus one price for any bouquet or collection of channels. These prices are applicable to all DTH and cable operators, and no operator can be given a discount. This will ensure that all DTH and cable companies will get their feeds at the same price, said Hathway. At present, bigger platforms, such as DTH companies, get their feeds at a fraction of the price paid by smaller platforms such as a single-city cable operator. Many cable operators, including Hathway, have been complaining that some channel owners are giving their channels at very low rates to DTH and cable companies that are linked to their parent companies.

Under the present negotiation-based pricing, channel owners often cut off their feeds to certain cable and DTH operators in an effort to make them pay higher charges. “The new tariffs will help in making the entire framework and value chain of the broadcast sector completely transparent, provide choice to consumer and ensure a fair deal among LCOs, MSOs and broadcasters,” Gupta said. “Hathway has been one of the victims of content-cost disparity and therefore, should be a significant gainer from the tariff order implementation,” he added. He also pointed out that it will also help in reducing disputes and litigation in the sector. “Overall,” he said, “we believe the tariff order is a beneficial proposition for broadcasters who have good content that consumers want to watch, and probably not so good for broadcasters who have been more used to bundling many channels with no demand, with one driver channel.”

Ratings blackout

The Indian media and entertainment industry might be headed towards a TV ratings blackout period of up to two months, if the broadcasters get their way with viewership monitoring agency BARC India. According to multiple senior executives in top TV networks, members of the broadcasters’ body — Indian Broadcasting Foundation (IBF) — are worried about the implications of the new tariff order by the Telecom Regulatory Authority of India (TRAI), which, staring January 1, will allow viewers to select and pay for the channels they want to watch.

Effectively, the new tariff order will make it difficult for long-tail channels — which do not have much viewership — of broadcasting networks to piggyback on the stronger channels for subscription. This, the executives say, may cause a disruption and disconnection of many channels. “There is no clarity on how the new tariff order will be implemented from January 1. Some petitions are still pending in courts and there are a few cable and DTH operators and even broadcasters who are hoping to get a stay order. If not, a lot of channels may get disconnected, which will create discrepancies and anomalies in the viewership data,” said a top executive of one large TV network, who did not wish to be named.

Another executive said IBF members were finalising a proposal to ask BARC India to suspend ratings for 45-60 days. “We are working on reaching a consensus on the duration first within the IBF. Once all the members agree, this will be presented to the BARC board in the next board meeting. With the IBF being the majority shareholder of BARC, and some members of the Advertising Agencies Association of India (AAAI) also in agreement, it should not be a problem,” the executive said.

The temporary suspension or blackout of data will allow some breathing space to broadcasters till the on-ground situation stabilises in terms of viewers deciding on which channels to watch, the broadcasters believe. The IBF owns a 60% interest in BARC India, the joint industry body. The AAAI and the Indian Society of Advertisers (ISA) own 20% each. Incidentally, the board meeting of BARC India was scheduled for December 11, which some sources say might get postponed.

Meanwhile, TRAI recently floated a consultation paper to review the current TV audience measurement and ratings after some stakeholders raised concerns in relation of neutrality and reliability of the current system. The regulator stated that the basic objective of the consultation paper was to solicit the views of stakeholders on regulatory initiatives/measures to be taken to make TV rating more accurate, and widely acceptable. BARC India chief executive Partho Dasgupta and IBF president NP Singh did not respond to emails seeking comment. If BARC India agrees to suspend the ratings, it will only be the third time since the inception of the viewership measurement in India that the industry will have to function without TV ratings.

In 2012, the then TV ratings agency TAM Media Research suspended viewership data for nine weeks starting October 7 in the wake of mandatory switchover from analogue to digital addressable system of TV distribution in the four metros. That time, the broadcasting industry was of the view that during the transition process from analogue signals to digital environment, there could have been discrepancies in TAM’s reporting of data, which could have had serious implications, particularly for the broadcasters, not only in terms of finance but also in terms of credibility. The second TV ratings dark period started on April 1, 2015, when the three industry bodies — IBF, AAAI and ISA — told their members to terminate their contracts with TAM and pay advance to BARC India, which was expected to start rolling out viewership data from April end.

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