Protect TV's diversity

Trai should minimise intervention in channel pricing

A new consultation paper from the Telecom Regulatory Authority of India (Trai) on the subject of cable television channel pricing has set alarm bells ringing in the sector. The paper views the increasing number of channel bundles on offer as a problem; such bundles usually come with discounting of channel prices, which permits cross-subsidisation. However, it also means that the choice before consumers can become confusing, even if they are saving money on their bills overall. The paper proposed additional regulations on pricing, including a cap on the amount that bouquets could discount their prices, and a possible change to the ceiling price of Rs 19 per channel. This has caused concern in particular to smaller channels, with a niche viewership. These channels can manage to continue only if they are essentially cross-subsidised by more popular channels as part of a bouquet, or if they are priced higher than Rs 19 in such a way that their costs are covered.

There is little doubt that Trai is attempting to solve a problem that it has itself created. Its regulations on tariffs that were implemented in end February were meant to ensure that customers paid only for what they wanted to view. However, it has in practice led to chaos, because consumers have found themselves without their favourite channels or have felt their average bills would increase. There has been a consequent ratings jump for free-to-air channels — which broadcasters attempted to get around by using bundling to make their package of channels look attractive. Some broadcasters were offering discounts of as much as 70 per cent on the total a la carte prices of their channels, according to Trai. This, the regulator feels, is the cause of the confusion, and not its own intervention in pricing. Indian regulation has a habit of viewing greater choice for customers as “confusion” and discounts as exploitation — neither of which is particularly justifiable on economic principle. 

The economic principle that could apply here, however, is protection of competition: If large broadcasters are using bundling — in this case, channel bouquets — to edge out smaller competitors, then there is considerable logic to intervention. This was the argument, for example, against Microsoft bundling Internet Explorer for free with its Windows operating system. However, Trai has not made an evidence-based case that this is what is happening with bouquets in the cable TV space. In fact, according to the broadcasters’ association, it is smaller channels that are most at risk from Trai’s new proposal. A further reduction in the diversity of channels available to consumers in India is surely not the regulators’ aim. The broadcasters have noted that popular channels are charged more; and that if those channels are bundled with less popular channels, the bundle does not cost as much as the individual channels would. These are not surprising results — this is exactly how the markets could and should work. It seems odd in this context, therefore, to reduce the discounts on offer, or to reduce the price cap on individual channels. Indeed, the price cap should be increased well above Rs 19, so more premium content is made available to niche subscribers.