Pay channel prices still in limbo as Zee disowns rate card; govt, cable trade not amused

NEW DELHI: It was supposed to be the day of reckoning for pricing in a post-conditional access regime. What it turned out to be was a comedy of errors as information and broadcasting ministry secretary Pawan Chopra flitted from one room to another trying to be the peacemaker between the broadcasters and cable fraternity --- initially seated in separate rooms in the ministry here.

It remains to be seen which of the protagonists in this unravelling drama blink first, or whether it turns into an eyeball-to-eyeball confrontation. Because by default, the pay channels may now get time up to 15 July to come out with more consumer friendly prices.

When the two key stakeholders of the industry were finally brought face to face, the stormy meeting turned out to be inconclusive in what could charitably be termed a fiasco. Though a paper was floated by Star, Sony and ESPN-Star Sports that quoted the wholesale prices (exclusive of distribution margin for the MSO and cable operators as well as local taxes) of various pay channels (see rate card) through tiering, Zee Telefilms denied being party to such a tiering saying it had "not been consulted."

The rates suggested also come with riders attached. A consumer can buy a la carte (which can actually turn out a cheaper option), but if he wants to buy the various tiers of service, then the Super Saver category is a 'must buy' tier to move into the other tiers.

The umpire was certainly not amused. A disappointed Chopra later expressed his feelings to waiting journalists in no uncertain terms and said, "I was disappointed that they (the broadcasters and the cable fraternity) have not had enough and adequate dialogue between them and were using the government presence to conduct negotiations, which is not acceptable to us." He added that the broadcasters should come back with a "serious offer" or else the government may crack the whip by taking "coercive actions" like amending the Cable TV Act and regulating the pricing of pay channels.

The broadcasting lobby had its own reasons. Star India CEO Peter Mukerjea told that they have arrived at a wholesale price of the pay channels through various tiers and that the MSOs and the cable operators can add their distribution margin to the prices indicated and sell it to the consumer. "I don't know how much they are spending on servicing a client, so how can I decide on their distribution margin?" Mukerjea reasoned his case.

Star India COO Sameer Nair felt that initially a 15 per cent distribution margin would be ideal for MSOs and cable operators.

The cable fraternity, of course, was livid that the prices floated today brought everything back to the square one as it was expected that the broadcasters should come out with maximum retail prices of pay channels, inclusive of the distribution margin for the service provider, at par with what they say are international parameters of between 40-60 per cent. However, according to an industry expert, distribution margins abroad are 30:70 in favour of the broadcaster.


Wearing the broadcaster's hat, Zee Telefilms additional vice-chairman Jawahar Goel disassociated his company from the rates floated saying, "India is not yet ready for tiering of (cable TV) services and we were not consulted (on the rates)." Switching his hat to that of an MSO, Goel thundered at an impromptu press meeting outside Shastri Bhawan that houses the I&B ministry, "The independent cable operators and MSOs have decided that we should be able to provide all the pay channels available at around Rs 200, a figure that has been mentioned by the I&B minister and that is justifiably so."

When quizzed by on making available cable TV service to consumers, including pay channels for Rs 200, K Jayaraman, CEO of Hathway Datacom, said, "Of course we would." Asked whether Hathway recognises the rates floated by broadcasters, including Star that has an equity stake in Hathway, he shot back,"That doesn't matter. We would like to make available a service that is viable and pro-consumer."

Today's meeting, which almost turned into two meetings, was attended amongst others by Star India's Mukerjea and Nair, ESPN's Manu Sawhney and Rik Dovey, Turner International India's country head Anshuman Misra, Sony's distribution head Shantonu Aditya, Doordarshan's director-general SY Quraishi, Zee Telefilms' and Siti Cable's Goel and Rajiv Khattar, INCableNet's Rajiv Vyas, Hathway's Jayaraman and independent cable operators Vicky Chowdhry, Rakesh Dutta, Tejinder Chawla and a representative from Sumangali, the Sun Group's holding company.


Reiterating that the government as of today sticks by the 14 July deadline of implementing CAS in the four metros, I&B secretary Chopra said, "We hope that the broadcasters would come back with a serious offer. However, if they don't, then those pay channels would have to become free to air or go off air."

Hinting that the government would not take things lying down, Chopra said that the paper the broadcasters circulated indicating wholesale price of pay channels is not good enough as the consumer may end up paying more if it's followed.

According to Chopra, the cable ops and MSOs identified during the meeting Star Plus, Zee TV, Sony, ESPN and Star Sports as the driver channels and opined that if initially these channels are priced reasonably and low, then it would drive CAS implementation.

What Chopra was attempting to say was that if entertainment channels are priced low, along with the sports channels, then there would be a demand for boxes from the consumers that would facilitate a smooth transition to a CAS regime. "I think the broadcasters are not averse to this," he added.

Pointing out that a lot of time has been "wasted" in discussions, Chopra said that the government hoped that the broadcasters would come back soon with a reasonable package and pricing and the government would not have to consider "interfering".

Though Chopra was not willing to give a time frame to the "coercive" actions that the government can take to make the broadcasters fall in line as "it was a political decision", he did indicate that amending the Cable TV Network (Regulation) Act aimed at empowering the government to regulate the pay channels' pricing is an option.

Asked whether the various stakeholders of the industry were using delaying tactics on CAS, Chopra rued, "They are not looking at long term benefits. All of them are looking at taking a larger piece of the cake during the transitory phase." He added that the government can go ahead with the CAS rollout even if pay channels don't announce their prices as it would be they who would loose viewership because pay channels mandatorily have to be routed through set-top boxes.

Asked about the demand for boxes, Chopra said the government cannot quantify demand at the moment. "There are about six million cable homes in the metros, the demand will depend on the prices of the pay channels.


Today's meeting had all the trappings of a Bollywood potboiler: two parties who are refusing to court and accommodate each other and a peacemaker trying to bring the two together by sometimes acting tough and at times giving concessions. In between you had the slanging match between the two parties, while the umpire threatened to walk out of the match if they did not behave.

Nothing could have been more ominous than the fact when the media were told that the cable ops were made to sit in the committee room, while the broadcasters had a meeting with government officials. As the cable ops grew restless and time ticked away with the temperature rising because of inadequate cooling facilities, government officials kept running between rooms assuring the cable fraternity that the meeting with broadcasters would happen soon.

That there was some chances of the meeting failing to come up with something concrete may have also resulted in the government serving a biscuit brand that highlights its 50-50 nature --- spicy and sweet.

Finally when the broadcasters entered the committee room amidst flashing cameras and TV cameras zooming in on them, fireworks soon started.

For a change, the broadcasters were prepared to take on the cable fraternity word for word and gesture for gesture. Words like "are you threatening?" and "this is not fair" did their rounds as participants spoke. One participant, most probably a cable operator, also threatened to move court.

Also for a change, Star India decided to take the bull by the horn and Mukerjea spelt out in no uncertain terms that the perception of Star being a stumbling block has to be removed and done away with. After six months of negotiations and hard work, the broadcasters have managed to come up with the tiering and their prices, Mukerjea is reported to have said during the meeting, admitting since it was the first positive move there may be some discrepancies also in the pricing structure.

While cable operator Chowdhry is understood to have taken on Mukerjea during the meeting on the pricing of pay channels and the alleged delaying tactics being adopted by the broadcasters, the latter hit the cable fraternity where it hurts the most: under-declaration. Mukerjea grandly declared that the pricing suggested through tiering was based on the fact that there are over 6 million cable homes in the four metros, while the broadcasters were getting paid (for pay channels) for slightly over a million. You people declare your full base and we may revise the rates, a seemingly aggressive Star India CEO told the cable ops.

Arguments also revolved around whether there were adequate number of STBs or would be made available. While another cable op Rakesh Dutta kept on insisting during the meeting that over a period of six months adequate number of boxes would be available in the market, a broadcaster questioned whether Dutta can ensure six million boxes by 14 July. "You'll have to wait for six months and that'll also happen," Dutta is reported to have replied.

But the best part of it was when cable ops insisted during the meeting on getting a confirmation from Zee's Goel whether he agreed with the suggested pricing --- something that Goel disassociated himself once the meeting was over.

In the end, all this drama was played out in the name of the consumer but there was no representation from the consumers' side. Will the consumer please stand up?

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