(14 April 2007 5:30 pm)

NEW DELHI: Annoyed with the Trai order on revenue sharing of the basic service tier (FTA), the Zee Group's cable company WWIL has decided to appeal to the Telecom Disputes Settlement Appellate Tribunal because "this order is against the interest of justice".

Trai has ruled that the Rs 77 that the subscribers pay for watching FTA channels would remain entirely with the Local Cable Operators. WWIL and other MSOs feel that this is a travesty of justice, especially because LCOs are getting a huge, two-thirds of the total revenue from the combined tariffs for FTAs and pay channels.

The Trai order (No 11-34/2006-B&CS, dated 13 April, says: "The issues raised by the stakeholders have been examined in-depth… and the rationale for revenue sharing framework in the Regulation by the Authority is unassailable. The arguments advocated by the stakeholders are untenable."

It has also said that the revenue sharing CAS regulatory framework has only become effective from December 31, 2006.

"It is premature to challenge the basic tenets outlined by the Authority at this stage, because both the multi system operators and cable operators have yet to give verifiable actual data (as against presumptive data) which could persuade the Authority for re-evaluating the revenue sharing framework," Trai has held.

Arvind Mohan, executive vice president of WWIL told indiantelevision.com: "Trai did not consider even the basics of our argument. We and also Incable presented a three-year projection on this issue. That too has been disregarded."

Mohan says Trai has assumed that the take from each Cas home would be around Rs 175, taking into count the FTA charges, revenue from about an average of 15 to 17 pay channels that people seem to be taking, plus taxes.

Besides, LCOs would also get 25 per cent out of the pay channels.

Mohan argues that this would leave the MSOs with as little as 15 per cent of the total revenue from one home, whereas broadcasters would get around 18 per cent and leave the rest, two-third of the total revenue in the hands of the LCOs.

The broadcaster's expenses remain the same, so does that of the LCO, argued Mohan.

"It is we who have to make the expenses, set up headends, purchase and give STBs on rent, which means we buy them cash down and get the money back incrementally over five years. Is this revenue sharing justified?" Mohan queries angrily.

Trai had originally issued a consultancy paper in this issue, and after the stakeholders had put in their responses, Trai had held a meeting on this issue on March 6.

In this meeting, WWIL had said MSOs ought to get 40 per cent of the FTA revenue arguing that "It would be appreciated that compliance with the Quality of Service regulations not only requires major capital expenditure, but also recurring expenditures.

"The stipulated revenue share of 30 per cent for MSOs (from pay channels) is totally inadequate and insufficient to meet the recurring and variable costs associated with the provisions of the services," Mohan had argued.

But Trai has not changed its earlier position and given the entire Rs 77 from FTAs to the LCOs.

Trai had in its order discussed three issues, after taking into consideration the points of views of all the stakeholders on them.

The first issue was, what should be the share of multi system operators (MSOs) and cable operators out of subscription charges for basic service tier? The basis for arriving at the distribution proposed should also be given.

Trai has said on this issue that among other things, that only one MSO out of 26 approved MSOs has claimed before TDSAT that the stipulated revenue share of 30 per cent is insufficient to meet the recurring/ variable costs

Trai did not heed the LCO demand that if there is a sharing of basic service tier revenue then they should get a share of the carriage fee, which as of now goes 100 per cent to MSOs, saying this would lead to frequent disputes since there is no transparent way of knowing the revenues.

The Authority held also that Siti Cable Network Ltd. had been requested many times to furnish copies of its annual accounts, business model and other calculations on the basis of which revenue sharing proposal had been made by it.

"No information was furnished by it in support of its claim regarding revenue sharing proposal made by it."

The second issue considered by Trai was what should be the share of MSOs and LCOs out of the 55 per cent that they would together get from pay channel revenue.

The third issue was, what should be the share of multi system operators (MSOs) and cable operators out of carriage fee, and the basis for fixing that share.

One interesting observation on carriage fees by Trai is that although the channel carrying capacity of the networks would increase manifold, the Carriage and Placement Fee are likely to remain in vogue for some time.

This is because, as the FTA channels would continue to be carried in analogue mode.

In fact there is a likelihood of getting carriage fee from more FTA broadcasters who may want their channels to be carried in digital unencrypted mode after introduction of CAS.

Therefore, Trai;s argument seems to be that MSOs already have a distinct area of revenue generation that cannot be touched by the LCOs, as per the original interconnection regulation orders of Trai that stand till date.

Besides, Trai has also said that digitisation opens other revenue areas for MSOs, like interactive services, video-on-demand and others, through which it could expand its network and growing number of subscribers would bring down the cost of operations.

Trai has concluded: "The issues as well as the inputs received from the stakeholders have been examined in detail.

"The analysis of the issues and inputs do not give anything totally against the Revenue Sharing Formula specified by the Authority for service providers in CAS notified areas.

"Therefore, the Authority is of the view that the Revenue Sharing Formula for service providers in CAS notified areas need not undergo any change at this point of time."