We are not anti-bundling, but want to give consumers choice: Trai chairman

'I don't believe there is no transparency', said Trai Chairman R S Sharma

On February 1, a new tariff order of the Telecom Regulatory Authority of India (Trai) comes into force. It directs the hows, whats and wheres of the relationship between broadcasters and TV signal distributors such as multi-system operators (MSOs), cable operators and direct-to-home (DTH) players. Vanita Kohli-Khandekar spoke to Trai Chairman R S Sharma on issues surrounding the tariff order. Edited excerpts:

What was the trigger for this tariff order?
 

We began the process of digitisation in 2011, which was completed by 2017. It solved the problem of capacity but still nobody knew who was watching what. In a (2015) dispute brought up by Noida Software Technology Park, the Telecom Disputes Settlement and Appellate Tribunal said there was a need to bring transparency. In November 2015, we started the process of consultation. Television is the only transaction where the price of what the consumer was being given was not clear. For instance, certain free-to-air channels were being sold by digital platform operators. Broadcasters were offering channels in an arbitrary manner to platform operators. 

They would do fixed deals for X rupees. Big broadcasters would offer 20 channels in a bouquet, how many consumers are interested in those? Big broadcasters were blocking capacity with this. According to the Broadcast Audience Research Council data, 90 per cent of the people watch fewer than 50 channels. The consultation tackled three things – tariff, quality of service, and interconnection. 

Even after digitisation, transparency-related issues exist. Much of this stems from confusion over last-mile ownership in cable, which reaches 100 million homes. Doesn’t that need to be sorted before embarking on something like this? 

I don’t believe there is no transparency. There is no opacity. The last-mile ownership is an issue between the cable operator and the MSO. The current regulation has clearly demarcated the functions, the revenue share has been specified, 45:55 (between broadcaster and distributor) is standard interconnect. The problem crops up when there is sudden disconnection (of signal from the MSO to the cable operator), then they negotiate based on the standard agreement. We are cognisant that the MSO-cable operator relationship is not equal. So we guard and ensure that lack of agreement does not lead to disconnection. Broadcasting brings less revenue than telecom but 80 per cent of the fights are from broadcasting because the relationships are vague. 

Even after allowing 100 per cent foreign direct investment, no one has come into cable in India.
 

The idea (behind this tariff order) is to reduce litigation, foster growth and investment.
 

India has four TV distribution technologies – DTH, OTT, cable and Headend-in-the-sky or HITS – competing with each other for a 197 million home market. Why then do we need price regulation? 

There is no price regulation. The order just tells you to state what the MRP is. And if it is more than Rs 19, then it cannot be in the bouquet. (An earlier version of the tariff order had ceilings on channels in different genres, which has been done away with). 

What is Trai’s issue with bundling? It is a global practice. It brings economies of scale on the supply side and helps cross-subsidise on the consumer side, everyone benefits.

We are not anti-bundling. What we are saying is give the consumer the choice to buy a bundle or a la carte. The pricing of a bundle should not be done in a manner that forces the consumer to buy a bundle. 

DTH operators claim they pay full taxes and licence fees which cable operators don’t. For this to work, cable operators have to be brought on a level playing field with DTH firms. Your comment.

These issues have been discussed in the consultation paper. Many people are now requesting that the GST be reduced, why? (Because full transparency means they will have to pay taxes on all homes, not just a few). We are hoping to collect Rs 1,000 crore more on taxes because of this order.

Where does this put DD Freedish (Prasar Bharati’s free DTH platform with an estimated 30 million homes)?

DD Freedish is not part of this framework.  Because this is meant for only digital, addressable systems. DD Freedish is unencrypted. 

How many changes has the original consultation seen before the tariff order came out?

There is no assured revenue stream for MSOs. So for the first time, we have separated the pipe and the carriage. There is a network capacity fee of Rs 130 (plus the GST at 18 per cent) for 100 channels which are only meant for MSOs and cable operators. If you take a 100 FTA channels, there is no extra charge. The draft had a cap of 15 per cent on the maximum discount allowed on a bundle, but the Supreme Court has dismissed that. 

Does price regulation aid variety or hamper it?

From a business perspective, there are two revenue streams – advertising and subscription. Because of bundling a channel would say it reaches 50 million homes, irrespective of whether anyone watches it. This will go. From hereon market forces will take over. Broadcasters will have to weigh whether they want to increase price or not; so market forces will bring equilibrium.
 

India has one of the lowest Pay TV rates compared to similar economies ($3-5 against $20-40 a month). So why this focus on tariff?

It is low but the volumes are large. I feel niche channels will come up, good content from small players will take off as a result of this (order). Some entertainment channels might decide to become ad-free.

How do you handle the issue of distribution companies that also own broadcast, say Dish TV-Zee or Sun TV-Sun Direct pushing their own channels in a bouquet they sell to subscribers?

We have made our recommendations on cross-media ownership (in 2014). They are with the ministry (of information and broadcasting). Hopefully, things will work out. 

What are the challenges in implementing this order?

There are no challenges, every stakeholder has told us not to extend the deadline (of February 1).