Even before the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) dismissed the Telecom Regulatory Authority of India’s (Trai) October 2007 order on fixing ceilings for cable television bills in different categories of cities as being ‘arbitrary and irrational’, it was always obvious the process of regulating television tariffs wasn’t really working. The reason is simple. As the broadcasters’ lawyers argued before the TDSAT, and the TDSAT accepted, Trai never really fixed tariffs right from the time it got the mandate to regulate this sector in 2004. All it did, in October 2004, was to freeze tariffs at levels already being charged in December 2003 assuming, in a sense, that retail tariffs represented costs (plus a profit). In 2007, based on an all-India survey of tariffs being charged by cable television operators (and some comparison of these rates with offers made by DTH and CAS* firms), it arrived at an all-India average and then used this to prescribe various ceilings for different cities; within this, bands were also fixed depending upon the number of pay channels being offered. So, if you got 30 free-to-air (FTA) channels and up to 20 pay ones in an A-1 category city like Delhi, the monthly cable bill ceiling prescribed was Rs 160 (Rs 140 for a B-1 city like Meerut); this rose to Rs 260 if more than 45 pay channels were offered in Delhi and to Rs 220 in Meerut.
But before we rush to condemn Trai for not doing its job, it is important to know why it never fixed price ceilings based on costs, which is the way tariff ceilings are set by all regulators across the world. Trai simply couldn’t get this data since many broadcasters argue the programmes they show are produced globally, so it is difficult to apportion costs for just the India part. To fix tariffs, Trai needs costs and revenues (ad revenues vary from 50-80 per cent of total revenues and broadcasters don’t share this data either) — in the absence of firm data, the market survey approach was probably the best Trai could do. Though the TDSAT has given Trai six months in which to come up with a fresh order in which it will look at such issues, how Trai will be able to address the issue is anyone’s guess.
Of course, Trai’s order had several infirmities as well. It prescribed tariff ceilings but, at the same time, froze rates. So, while the ceiling for 30 FTA and 30 pay channels for Delhi was fixed at Rs 235, if a consumer was paying Rs 150, his/her cable bill could only be Rs 150 plus a 4 per cent inflation, or Rs 156. Imagine the chaos with cable operators charging different households on the basis of whether they were old (Rs 156) or new customers (Rs 235) and the incentive to make old customers into new ones.
While another Trai order said rates in CAS areas should be lower than in non-CAS ones since a CAS/DTH operator cannot under-declare the number of subscribers, its 2007 order actually reversed this. CAS rates fixed by Trai were Rs 5 per pay channel (this is under challenge at the Supreme Court), yet under the ceilings prescribed for non-CAS, the rates vary from Rs 2.65 to Rs 4.06 per channel, depending upon the city and the number of pay channels.
Another specious Trai contention related to competition. Clearly, if there are enough competitors, there can is no need for regulating prices. While the broadcasters argue there is enough competition since there are already 270 channels offered by more than a dozen of them, and more are in the pipeline, Trai rejected this arguing, incredibly, “that competition will exist only if a channel can easily substitute for another channel, which is often not the case … each channel has certain uniqueness associated with it because of its content … thus a particular TV channel carrying popular serials cannot be replaced by another …”
That said, is there a case for regulating prices? After all, more people drink tea than watch TV, but tea prices aren’t regulated. Clearly there is, for while there is competition among channels, there is no competition at the consumer level — given the way the cable operators have their areas clearly marked out, the consumer has no option but to pay what the cable operator demands and accept shoddy service as well. This is precisely what Trai attempted to fix. And, if you fix cable ceilings, you have no option but to ensure cable operators don’t get rooked by broadcasters. So, Trai mandated that broadcasters have to sell channels to cable operators on an a la carte basis (otherwise cable operators have to pay for channels no one wants to watch) and the pricing between a la carte channels and bouquets which also have other channels has to be rationalized. But this is what the TDSAT struck down.
Moral of the story: Till the time the government mandates CAS all over the country (and several broadcasters are against this) and consumers actually have a choice, there is no getting away from regulating cable fees through a ceiling. And while Trai’s regulations have various shortcomings, there aren’t too many better solutions.
