The Telecom Regulatory Authority of India (TRAI) has released a path breaking consultation paper on pricing and discounts as it seeks to address the concerns of all stakeholders in television broadcasting and cable services.
The paper, issued after the deliberations of a stakeholder committee to discuss the implementation of new regulations, is sympathetic to the challenges faced by the TV broadcasting sector while also trying to avoid likely disruption for consumers.
The consultation paper, released on 7 May, seeks the comments from stakeholders on issues including: the price of channels provided as part of a bouquet– an assortment of channels offered as a bundle; the discount structure on the pricing of bouquets, and additional discounts offered by broadcasters to distribution platform operators (DPO).
DPOs are distributors of television channels such as multi-system operators (MSO), direct-to-home (DTH) operators, headend in the sky (HITS) operators, and internet protocol television (IPTV) operators.
TRAI’s New Regulatory Framework 2020 had imposed certain ceilings on prices of channels, bouquets and discounts which were challenged by broadcast associations in various legal fora.
Now, in the consultation paper, TRAI has sought stakeholder inputs on matters ranging from doing away with the ceiling price for a channel to be included in a bouquet to suggestions for ensuring that popular TV channels remain accessible for a large number of viewers. In other words, by taking a sympathetic stance towards the challenges faced by the TV broadcasting sector, the consultation process attempts to help the industry tackle them.
New Regulatory Framework 2020
The New Regulatory Framework 2020 was notified in January 2020 with the aim of promoting competition and providing customers varied choices when it came to television viewing.
However, not only did broadcaster associations challenge the New Tariff Order 2.0 in the Bombay High Court and later, the Supreme Court (before withdrawing the petition earlier this year), other stakeholders highlighted that large scale disruptions in the sector and changes in consumer offerings.
According to the consultation paper, DPOs, local cable operators (LCOs) and consumer organisations approached TRAI highlighting the difficulties in implementation of the new tariff order. These included: price hike for consumers, change in the composition of offerings, the impact of easy availability of TV content on OTT (over the top platforms), issues in implementing these new rates in their systems and in migrating consumers to the new tariff regime etc.
TRAI said it gave stakeholders sufficient time to implement the changes and allowed broadcasters to revise RIOs (reference interconnect offer, a document with technical and commercial terms and conditions that an MSO needs to sign to get TV signals).
However, as the consultation paper pointed out, “the revised RIOs as filed indicate a wide-scale changes in composition of almost all bouquets being offered.”
It was in this backdrop that TRAI constituted a committee consisting of representatives from Indian Broadcasting & Digital Foundation (IBDF), All India Digital Cable Federation (AIDCF) and DTH Association to look into the smooth implementation of the new tariffs keeping in mind both consumer convenience as well as the overall growth of the broadcast sector.
Ceiling on MRP of channels in a bouquet
To begin with, TRAI has asked in the consultation paper if it should continue to prescribe a ceiling price of a channel for inclusion in a bouquet. It also asked about steps that can be taken to ensure that popular television channels remain accessible to a large segment of viewers.
In the Tariff Amendment Order 2020, the authority prescribed a ceiling of Rs 12 on the maximum retail price (MRP) of any channel to be part of a bouquet. However, in the RIOs published by the broadcasters, the MRP of most of the popular channels was fixed above Rs 12. As a result, most popular channels cannot be made part of bouquets and are to be provided to subscribers only on a-la-carte basis, TRAI said in the consultation paper.
The regulator pointed out that the stakeholders raised concerns that would not just mean additional requirements technologically but also be inconvenient for customers in the form of higher prices and so on.
Discount structure on bouquet pricing
The second issue that TRAI’s consultation paper deals with is discounts on bouquet pricing. The authority has asked whether there should be a ceiling on the discount on the sum of a-la-carte prices of channels forming a part of the bouquet.
It also asked whether channel prices in bouquets can be homogenous, and if the MRP of an a-la-carte pay channel that is part of a bouquet should be capped with reference to average prices of all pay channels in the bouquet.
In the 2020 framework, the TRAI proposed two clauses that prescribed a relationship between the sum of a-la-carte channel and bouquet prices.
The first clause said, “The sum of maximum retail prices per month of the a-la-carte pay channels forming part of a bouquet shall in no case exceed one and half times of the maximum retail price per month of such bouquet.”
The second read, “The maximum retail price per month of any a-la-carte pay channel, forming part of such a bouquet, shall in no case exceed three times the average maximum retail price per month of a pay channel of that bouquet.”
The second condition was claimed to have been introduced to ensure that a bouquet contains channels with similar prices.
However, the twin conditions were challenged in the Bombay High Court and the second clause was set aside.
As the second condition has been set aside, the purpose of prescribing the two conditions has been impaired, the regulator said.
Additional discount to DPOs
TRAI has asked whether discounts should be provided by broadcasters to DPOs on a-la-carte channels and bouquets.
The existing rules state that a broadcaster is permitted to offer a maximum discount of 15 per cent on the MRP of a pay channel or bouquet of pay channels to DPOs in addition to the distribution fee. However, TRAI observed that broadcasters offered the discount as an “incentive only on subscription of certain minimum subscription of bouquets of pay channels to DPOs”.
“The Authority also noted that offer of penetration-based incentives on the bouquets, by the broadcasters to the DPOs, may lead to pushing of bouquets by DPOs to consumers, in order to avail penetration-based incentives. This approach was defeating one of the main objectives of the new regulatory framework of promoting the consumer choice either to accept bouquet or a-la-carte channels as per his/her choice,” TRAI said in the consultation paper.
As a result, TRAI amended the rules and said the 15 percent discount will be provided only on MRP of a-la-carte pay channels (as opposed to bouquets earlier). However, during recent discussions with DPO representatives, they appealed that the discount on bouquets be reinstated, it said.
Written comments on the consultation paper are invited by May 20 and counter-comments, if any, by June 6.
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