New TV channel pricing: Trai mandates provision of 200 channels at Rs 153

Analysts say move will lower operators' ARPU, which had shot up by 60% on an average after changes last year

The Telecom Regulatory Authority of India (Trai) has released amendments to the New Tariff Order (NTO), in which it has directed cable operators to provide 200 channels for Rs 153. It has also reviewed the pricing of channel bouquets compared to a la carte ones.
 
The regulator has now set January 15 as the deadline for broadcasters to announce their new pricing structure.
 
At present, direct-to-home (DTH) or cable TV operators provide only 100 channels for a network capacity fee (NCF) levy of Rs 153 (Rs 130 excluding taxes).
 
Analysts say this move is likely to lower the average revenue per user (ARPU) for TV operators. It had surged close to 60 per cent, on an average, after the NTO took effect. This would mean a lower share of revenue for broadcasters, who used to get almost 50 per cent share after the NTO came into being in February last year. Trai said it has analysed the comments of stakeholders, particularly to protect the interests of consumers, and has accordingly modified certain provisions of the new regulatory framework.
 
According to the NTO that was released last year, consumers were given the option to pay only for the channels that they chose to watch, at the maximum retail price (MRP).
 
Earlier, they were offered pre-set channel bouquets. The NTO was expected to bring monthly bills down, but it was the opposite that happened.
 
In order to address the huge discounts offered for bouquets, vis-a-vis the sum of a la carte channels, Trai has set two conditions to ensure the pricing of a-la carte channels does not become illusionary. First, the sum of the a la carte rates of pay channels forming part of a bouquet is not to exceed 1.5x the rate of the bouquet of which such channels are a part. Second, the a la carte rates of each pay channel, forming part of a bouquet, are not to exceed 3x the average rate of a pay channel of the bouquet of which the channel is a part.
 
Additionally, Trai has said only channels having an MRP of Rs 12 or less will be permitted to be part of a bouquet.
 
Karan Taurani of Elara Capital said this clearly implies discounts offered in a la carte vis-a-vis bouquet could not exceed 34 per cent. At present, broadcasters give discounts of 60-80 per cent on bouquets. “In addition, it has been decided that channels declared mandatory by the Ministry of Information and Broadcasting will not be counted in the number of channels under the NCF. Distribution platform operators (DPOs) have also been mandated not to charge more than Rs 160 a month, for giving all channels available on their platform,” said Trai.
 
Taurani added that there was no cap on the maximum number of channels in in the free-to-air (FTA) category in the earlier NTO, which implied that more niche channels will move towards the FTA. For homes in which more than one connection is active in the name of one person, DPOs can charge a maximum of 40 per cent of the declared NCF on the additional connections.
 
It has also permitted DPOs to offer discounts on long-term subscriptions (six months and above).
 
Under the existing system, subscribers had to pay at least Rs 153 a month regardless of the number of channels they watched. The second part of the bill comprises content charges that subscribers pay to broadcasters.
 
Taurani added that the move will negatively impact broadcasters’ revenue, which had grown 30-40 per cent year-on-year due to the higher share and increased ARPU.
 
“With Jio pushing JioTV that has access to channels free of cost, TV channel monetisation will go through a major disruption,” he felt.
 
To address the concern of huge carriage fees charged by DPOs, it has prohibited multiple system operators (MSOs), headend-in-the-sky (HITS) operators, and internet protocol television (IPTV) service providers from having a target market bigger than a state or union territory. Carriage fees have been capped at Rs 4 lakh per month.
 
Finally, the regulator has considered additional flexibility to DPOs to place TV channels on Electronic Programme Guide (EPG), and has mandated channels of one language in a genre to be kept together while placing channels on EPG.
 
Such EPG grouping is mandatorily reported to Trai, with no change allowed without its nod.