The Telecom Regulatory Authority of India (TRAI) finally announced on November 22 the implementation of the New Tariff Order (NTO) 2.0, delayed for three years because of disagreements with broadcasters.
TRAI has asked all the distributors of television channels to adopt the new tariff regime starting on February 1, 2023.
Broadcasters have welcomed the move, but will the new order mean costlier TV bills for consumers? Let us understand NTO 2.0 and the changes proposed by TRAI, and its implications for broadcasters and consumers.
What is NTO?
TRAI in 2019 had introduced a new regulatory framework, popularly known as the MRP (maximum retail price) regime for TV channels called NTO 1.0, to bring more transparency to pricing.
TV viewers had hitherto had little control over the channel packages and were unaware of the price they paid for each channel. The new tariff regime not only made subscribers aware of what they were paying, but also the way pay channels were priced.
In 2020, TRAI made changes to the new tariff order and introduced NTO 2.0, which lowered the cap on the price of a TV channel to Rs 12 from Rs 19 under NTO 1.0.
Broadcasters were upset by the change, which delayed the implementation of NTO 2.0.
What does TRAI's new order say?
In its latest order, TRAI has restored the old price cap on channels that are offered in a package, suggesting no major changes from NTO 1.0.
The regulator said channels forming part of bouquet should be capped at an à la carte or standalone price of Rs 19, the same as in NTO 1.0.
A bouquet refers to a bundle or a group of channels that a broadcaster offers; a premium package of Star TV, for instance, will offer channels like Star Bharat and Star Plus, among others. According to the new order, prices of individual channels in such packages cannot exceed Rs 19. So, channels priced above Rs 19 cannot be part of a package.
TRAI has not prescribed a ceiling on the maximum retail price of pay channels outside of a package, which means channels that are not part of a bundle or a bouquet will be free of any price ceiling. Examples of such channels include &Flix HD and &Pictures HD, currently available at Rs 19 monthly.
In addition, TRAI has increased channel bundle discounts, which now will be capped at 45 percent, compared to 33 percent in the earlier NTO 2.0 order.
This means that a channel can now be discounted by up to 45 percent if it is placed in a package; channels that are sold separately can be freely priced. For example, General Entertainment Channel (GEC) Star Plus, which is currently available at Rs 22.42 a month can be offered at a 45 percent discount, or Rs 12.3, if it is included in a package.
What does the new order mean for consumers?
Consumers, it is estimated, may have to pay 5-6 percent more to watch a TV channel.
On the price cap in a package, TRAI said broadcasters that offered a new pricing plan last year for TV channels priced many channels in popular categories like GEC and sports above Rs 12.
Sony priced its Hindi GECs Sony Entertainment Television (SET) and Sony Sab at Rs 24 and Rs 22.42.
Due to the price cap of Rs 12, such channels cannot be part of any package. So many broadcasters pulled out their popular channels from bouquets to offer them for standalone viewing.
TRAI, in its order, said some stakeholders were concerned that capping the maximum price of a TV channel in a bouquet at Rs 12 will cause a rise in consumer charges as it will skew subscribers' choice in favour of standalone channels.
Increasing the cap to Rs 19 will give consumers more options to choose from packages as these channels, many of which are priced at Rs 19 or close to that, can be part of bouquets.
It is expected that by increasing the cap to Rs 19, more popular channels could be offered at lower prices in a bouquet. On the other hand, prices of other channels could increase.
"Our recent consultation on tariff-related issues for television channels and bouquets is a result of multiple discussions with each group of stakeholders --- broadcasters, multi-system operators, DTH (Direct-To-Home) players and local cable operators. We expect the industry to respond with tariffs and prices that do not put undue burden on consumers," TRAI chairman P.D Vaghela said recently at the Confederation of Indian Industry’s Big Picture Summit.
What does the new TRAI order mean for broadcasters?
Experts say that with the implementation of the new TRAI order, broadcasters will now be able to raise prices and increase their Average Revenue Per User, or ARPU.
Broadcasters that did not hike prices of TV channels in the last three years because of the uncertainty around implementation of 2.0 will now be able to expand their subscription revenue, analysts said.
When compared to ARPU of streaming platforms, which is in the range of Rs 600-700 per month (please check), cable TV ARPUs in India are low at Rs 350, showing the potential for growth in TV ARPUs, said one analyst.
TV subscription revenue growth, which was estimated to increase by 3 percent, is expected to increase in the range of 6-7 percent due to the changes in NTO 2.0.
TV industry subscription revenues dipped at a compound annual growth rate of 2.2 percent in FY19-22 due to uncertainty around NTO 2.0.
On the maximum discount of 45 percent that can be imposed on a bouquet price, an analyst noted that this may not have a big impact on broadcasters because many TV networks are already offering their bouquets with discounts in a 35-55 percent range.Even so, this may hit subscription revenues of sports and mainstream GEC-led broadcasters that offer around 60 percent discounts.