Podcast | Digging Deeper - How TRAI and Star India remain conflicted over regulations

According to this new draft tariff order,  TRAI wanted broadcasters to also declare the maximum retail price (MRP) of their "a la carte" channels for their subscribers.

PTI had reported then how TRAI had also proposed a genre-wise ceiling on channel prices. And as BloombergQuint informed, broadcasters were, however, allowed to offer premium channels, which would have no ceiling on MRP and could be offered to subscribers only on an a la carte basis.

In the draft order, TRAI had said that distributors of TV channels could form bouquets only from a la carte channels of broadcasters. However, the retail price of such a bouquet of pay channels could not be less than 85 percent of the sum of MRP of a la carte channels forming part of the bouquet.

According to BloombergQuint, the regulator had also said that distributors of TV channels had to offer at least one bouquet, referred to as a basic tier, of 100 free to air channels including all the channels which have to be mandatorily shown to viewers as per the government norms.

Among other suggestions was that a subscriber may request for additional network capacity in bundles or lots of 25 SD or Standard-definition television channels at a rate of Rs 20 per month for subscribing to more than 100 channels. This accounted for additional bandwidth cost by distributors of television channels, TRAI had said.

Stakeholders were also asked to suggest whether the option of pay-per-view (PPV) be made available to the subscribers and if so, whether the tariff of such viewing be regulated.

Disconnect between TRAI and stakeholders

The response to the suggestions was lukewarm with most of the stakeholders, including broadcasters and distributors of television channels not in favour of pay-per-view option. Their point was that it was not feasible to implement PPV because it would be difficult to keep track of.

In 2017, the conflict deepened when a division bench of the Supreme Court comprising of Justice Pinaki Chandra Ghose and Justice Rohinton Fali Narman ceded to the demands of Star India by granting a stay on the tariff order and interconnect regulations.

Star had been arguing that the new tariff order would unsettle the existing system and since December 2016, Star and Vijay Television had been challenging TRAI’s jurisdiction to fix the price of content.

TRAI had released the draft order in October 2016 and the final order was notified in March 2017.

Many naysayers

But as Mint reported in May 2017, even the counsel for Tata Sky had argued  that TRAI’s regulations were “excessive and without jurisdiction."  DTH operators also argued that prices of channels could not be fixed by broadcasters.

We quote, "Up until now, distribution platform owners like DTH operators and cable networks had an upper hand in deciding the prices of the channels." The directive to broadcasters to fix and declare channel rates to the consumers was always going to be a game changer.

As has been reported repeatedly, apart from DTH platforms, the order had also evoked dismay from television broadcasters and broadcasting associations.  Star India and its subsidiary, Vijay Television, had also filed a petition in the Madras High Court on the grounds that the tariff regulations stood in conflict with the Copyright Act, 1957.

Madras High Court went on to give a split verdict in TRAI versus Star India case with one judge ruling in favour of Star India while another judge dissented.

And to repeat the sequence of events, subsequently, the tariff order was stayed by the Supreme Court in May, this year.

TRAI’s tariff order, was meant to make channel pricing transparent although not necessarily cheaper.  We quote Mint again, "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."

The clause that the bouquet price cannot be less than 85 percent of the maximum retail price of individual channels, prevents hugely discounted bouquets which can be forced upon people comprising channels which they don’t want to see, informed the Mint piece.

We quote again, "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."

The intention of the directives was to remove the malpractices in pricing though this comes directly in conflict with the economic model of broadcasters. Mint wrote, "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 average revenue per user (ARPU) 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."

A decisive plot twist

In October 2018, the Supreme Court finally paved the way for TRAI's tariff order and interconnect regulations for pricing and packaging of TV channels offered to subscribers, listing channel genres and a genre-wise ceiling on channel prices.

According to the new tariff order, broadcasters were required to declare the maximum retail price (MRP) and nature of all the channels within 60 days. Additionally, distribution platform operators were mandated to declare network capacity fee and distribution retail price (DRP) within 180 days.

A bench comprising Justices Rohinton F Nariman and Navin Sinha dismissed a challenge by Star India to a Madras High Court order upholding TRAI's draft regulations preventing broadcasting companies from mixing free-to-air channels with pay channels in bouquets.

On May 23, as reported by various news sources, following a split verdict on the issue, Justice MM Sundresh of the Madras High Court affirmed the findings of Chief Justice Indira Banerjee and had upheld TRAI's tariff order of March 2017 for the television broadcasting sector.

How will this impact the broadcast industry?

To answer that, we will quote Business Standard, "The move has far-reaching implications for the broadcast industry, since the debate about whether the TRAI Act of 1997 superseded the Copyright Act of 1957 is now settled, said legal experts tracking the case. Broadcasters in India have used the Copyright Act, 1957, to argue their point that content televised on their channels should be monitored and priced by them. The TRAI Act of 1997, on the other hand, gives this power to the regulator following an amendment in 2004, which brought broadcasters under its purview. It is only now though that TRAI is enforcing its powers, experts said."

There is, however, more to this story

As Business Standard reported along with other news sources, legal issues pertaining to the recent tariff order by TRAI haven’t ceased, despite the Supreme Court verdict to Star India’s plea.

The argument now shifts to the Delhi High Court, where direct-to-home (DTH) operators have challenged the order on the basis that the framework or mechanism laid out by TRAI, to package channels and their overall pricing, is not sustainable.

TRAI had also asked DTH operators, reported Business Standard,  to provide proper customer care centres, where consumer grievances can be handled effectively. DTH players have also been asked to provide proper timelines to consumers in the event of a complaint.

The report quotes, Kunal Tandon, an independent lawyer and legal expert who says, "In a sense, the battle now shifts from a broadcaster-centric issue to a DTH-centric one, even though Discovery Networks (which runs the Discovery channel) has also challenged the regulation and tariff order (in court)."

Even as DTH operators await the verdict from the Delhi High Court, media industry sources have said Star India is expected to come out with its reference interconnect offer (RIO) after the Supreme Court order, according to Business Standard.

Star, reminds the piece,  was the only broadcaster that had resisted from providing its RIO or Revised Reference Interconnect Offer which details the number of channels in its bouquet, their pricing, and which channels will be part of the bouquet. Sony Pictures Networks India, which runs Sony Entertainment Television (among other channels), Zee Entertainment Enterprises (which has ZEE TV), and Viacom18 (which has Colors channel), had all come out with their respective RIOs in the last few months.

We quote, "RIOs, under TRAI regulations, have to be provided by both the broadcaster and the distributor, which means both DTH operators and multi-system operators (MSOs), said experts. While broadcasters can only enforce their RIOs once DTH operators and MSOs have agreed to its terms, the latter too will have to come out with RIOs in the event of a new channel or channels being added by broadcasters, indicating how they will package it within the existing bouquet."

How these developments will impact the consumer, in the long run, remains to be seen. For now, though, a push and pull ensue between TRAI and those at the vending end doing their maths and swaying their heads in dismay.

Disclaimer: Viacom18 is a joint venture between Viacom Inc. and the Network 18 Group, which publishes Moneycontrol.