SC Grants Stay On The Demand Of Tariff War Broadcasters Are Unhappy With New Tariff Regulations

A division bench of the Supreme Court comprising of Justice Pinaki Chandra Ghose and Justice Rohinton Fali Narman has ceded to the demands of Star India by granting a stay on the tariff order and interconnect regulations. While the order pertaining to the special leave petition filed before the Supreme Court is awaited, sources at Star India confirmed to media that its plea had succeeded.  Earlier, the division bench of the Madras High Court led by Chief Justice Indira Banerjee had dismissed Star’s plea for an interim stay as it felt that the broadcaster had failed to make a strong prima facie case. Following the expiry of the May 2 deadline set by the Telecom Regulatory Authority of India (TRAI), Star India complied with the regulations by publishing its Reference Interconnection Offer (RIO).

In the proceedings before the Supreme Court, Star was represented by the legal firm Karanjawala & Co., whereas Department of Industrial Policy and Promotion’s (DIPP) advocates were Navin Chawla and Sanjay Kapur. Star had previously engaged former Finance Minister P Chidambaram who had argued on behalf of it before the Madras HC. The concerned petition was hit due to the recusal of three judges, namely, Justice S Nagamuthu, Justice Anita Sumanth and Justice S Manikumar.

Represented by senior counsels P Chidambaram, Abhishek Manu Singhvi and Amit Sibal, Star argued that the new tariff order will unsettle the existing system. Once it is implemented, it will be difficult to go back to the old system in case the Madras High Court decides in the broadcaster’s favour. The broadcaster also argued that the matter got delayed at Madras High Court due to recusal of judges, something which is beyond its control. It also submitted that there is no hurry to implement the tariff order and the regulations now since it intends to officially get activated from 1 September.

Interestingly, even before the matter came up before the SC bench, Star, which had sought from TRAI a grace period of 10 days to file their Reference Interconnect Offer (RIO), published the maximum retail price (MRP) of its channels on its website. Star was the last among the leading networks to publish its RIO. TV18, Viacom18, ZEE, Sony Pictures Networks India, Sun TV Network and Disney India had published their respective RIOs before Star. Industry sources told media that the new RIOs are not final and are subject to change, depending on the Supreme Court case. As per TRAI regulation, the broadcasters can change their RIO after giving a month’s time.

According to the TRAI’s new tariff order, the agreements between broadcasters and distribution platforms have to be signed by 1 June. Earlier, the Madras High Court had dismissed Star and Vijay TV’s petition seeking a stay on the tariff order and regulation till the completion of the jurisdiction appeal. This prompted Star to move the apex court. TRAI notified the tariff order and interconnection regulation on 3 March following a go-ahead from the Supreme Court. The SC had also stated that the Madras HC can continue to hear the issue of jurisdiction. While retaining most of the recommendations, the TRAI had removed the genre-wise price ceiling. The authority also said that any channel that is priced above Rs 19 cannot be part of the bouquet. In December 2016, Star and Vijay Television challenged TRAI’s jurisdiction to fix the price of content. The Madras HC ordered TRAI to maintain status quo. Irked by the order, TRAI filed an SLP in the Supreme Court, which allowed the regulator to frame regulations with the condition that the same be placed before the apex court before being notified.

TRAI had released the draft order in October 2016 and the final order was notified in March 2017. It was implemented on 2 May. The counsel for Tata Sky told the court that TRAI’s regulations were “excessive, without jurisdiction and in violation of the Telecom Regulatory Authority of India Act, 1997”. DTH operators also argued that prices of channels could not be fixed by broadcasters.

Up until now, distribution platform owners like DTH operators and cable networks had an upper hand in deciding the prices of the channels. In the new tariff order, TRAI has asked the broadcasters to fix and declare channel rates to the consumers. Subscribers will be able to access 100 free-to-air channels for Rs130 plus taxes and will have to pay extra for pay TV channels. However, subscribers can opt for any number of pay TV channels.

Apart from DTH platforms, the order has also drawn flak from television broadcasters and broadcasting associations. Star India Pvt Ltd and its subsidiary, Vijay Television Pvt Ltd, had filed a petition in the Madras high court in December on the grounds that the tariff regulations stood in conflict with the Copyright Act, 1957. Subsequently, the tariff order was stayed by the Supreme Court in May, following a petition by Star India and Vijay television. The case is due for hearing in Madras high court on 12 June on a day-to-day basis. The case will be heard next in July in the Delhi high court.

Under the new tariff regulations

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 Ltd. 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.

Broadcasters worried

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, and 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.

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