Ease regulation imbalance

Why Trai-broadcaster alignment is crucial for industry growth

“36 tariff orders on broadcasters in just 15 years”. “Broadcasters take TRAI to court”. Recent news indicates a steep escalation in the tension between the telecom regulator (Trai or Telecom Regulatory Authority of India) and TV broadcasters. If this situation continues, it will result in an economic bloodbath and the ultimate loser will be the Indian consumer. Why this kolaveri?

The Trai recently released a string of tariff orders. The latest mandate caps individual TV channel prices at just Rs 12, a number derived by erroneously extrapolating and applying group discount pricing for each channel. The intent seems to be to provide consumers with cost-effective solutions and better choices in channel selection. This and other regulations have stirred up strong views and controversy. The entertainment segment is now consumed by turf wars and court battles instead of a collaborative focus to realise the high growth potential of the sector.

Entertainment is not a fundamental human right, and content is extremely expensive to produce. Apart from regulation, traditional TV is actively competing with an explosion of digital streaming services. In an attempt to stay afloat, broadcasters will be forced to lower the number of channels offered, implement severe cost-cutting measures including inferior content quality, and reduced headcount to survive with the proposed unrealistic prices. The industry employs over four million people. Surely we cannot afford this during an economic downturn!

The Trai probably anticipates that lower prices will increase the number of TV channel subscriptions. TV broadcasters aim to stay competitive with high-quality content, attractive pricing and packages, and draw more advertising and subscription revenue. When both parties clearly benefit from providing Indian consumers with top-notch content, isn’t it time to remove the handcuffs on broadcasters for the greater good?  

The Trai website states the regulator's mission as, “for growth of telecommunications” to “enable India to play a leading role in emerging global information society... Trai is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition”. 

For decades, the media and entertainment (M&E) industry has had a level playing field with multiple players and numerous options for consumers. The market grew to a staggering Rs 1,631 billion in 2019 at a growth rate of 13 per cent (KPMG). The global average is only 4 per cent. A fantastic achievement particularly during the time of a economic downturn with the economy projected to grow at only 4.6 per cent (State Bank of India) or 5 per cent (World Bank) in 2020. Promoting natural competition among players will enable more attractive prices and options for consumers, increase subscription, and draw more revenue. This will help the Trai succeed in its goal to “create and nurture conditions for growth of telecommunications”.

The Trai also aims to “provide a fair and transparent policy environment”. The pricing mandates, unfortunately, seem to create an imbalance between broadcasters and their partners, the DPOs or distribution platform operators. Broadcasters generate content for their channels and partner with DPOs to deliver the channels to the end user. In any business, the company that creates a product sets the MRP or maximum retail price, often factoring in distribution costs. However, with the New Tariff Order (NTO) released in 2019 and its amendment in January 2020, distributors gain greater leverage while broadcasters are boxed in. This is patently unfair.

Individual channels cannot be priced higher than Rs 12 and broadcasters have brakes on the number of grouped channel packages or bouquets they can offer. Additionally, individual channels cannot be offered at an MRP greater than three times the average price of any other channel in the bouquet. DPOs, however, can collect an increased service fee from subscribers known as NCF or network capacity fee of up to Rs 130 (excluding taxes). The regulator also wants to allow consumers to create custom channel packages. However, technology limitations on the DPO do not allow for this level of flexibility resulting in channel blackouts last year. The increased NCF and channel blackouts drove subscribers to streaming services. 

Under the current regulations, DPOs have the right to refuse to carry specific broadcaster channels on their platforms, citing bandwidth issues however non-existent. Broadcasters are required to offer their channels without discrimination to all DPOs.

This means broadcasters have to pay each DPO a carriage fee per subscriber to deliver their channels. The gains of the DPOs from collecting subscription fees are not shared with broadcasters. 

It is good to remember “Where there is anger, there is always pain underneath” (Eckhart Tolle). For the first time, 10 broadcasters — regional, national, Indian and foreign — stood united to voice their agony and suffering. If the Trai could just look past the sound and fury and tune into broadcasters’ genuine  pain, there is much opportunity to join forces and work out a real win-win. The partnership must prioritise the benefits to consumers and “enable India to play a leading role in emerging global information society”.

(Research inputs by Chandana Bala)

The author is president, Broadband India Forum, and founder & CEO, Advisory@TVR | Views are personal.