(6 March 2007 8:30 pm)

NEW DELHI: The first consultative meeting of stakeholders on the issue of sharing of revenue of the FTA package was held here today, with cable operators fighting hard to retain the present system of COs getting all of the Rs 77 charge levied.

The system should be there for at least one year to let things pan out properly, before making any changes, Roop Sharma of Cable Operators Federation of India held, stating that the arguments of MSOs in support of their demand of 40 per cent share of the FTA revenue were based on wrong facts.

Trai itself heard out the representations and no decision has been taken yet.

The MSOs and broadcasters had their own demands, with Star saying the arrangement should be worked out through commercial negotiations between MSOs and COs, though WWIL has suggested to Trai that the FTA be shared, with MSOs retaining 40 per cent.

Importantly, Set Discovery Pvt Ltd has demanded that the TRAI should leave price fixation, revenue sharing and related issues to market forces, more so now with effective competition through DTH and other technologies becoming a reality.

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

"The stipulated revenue share of 30% for MSOs out of pay channel revenue is totally inadequate and insufficient to meet the recurring and variable costs associated with the provisions of the services," Mohan has argued.

While MSOs are getting carriage fee, Mohan has said in his submission, this is a temporary phenomenon which may not be there in CAS regime because of digital delivery. In any case since the carriage is not a part of any interconnection arrangement and mainly a contractual matter.

This consultative process started when earlier, Trai had issued a notification for the process asking all the stakeholders, "What should be the share of multi system operators (MSOs) and cable operators out of subscription charges for basic service tier, and the basis for arriving at the distribution proposed should also be given."

The parties that attended the meeting were Wire & Wireless (India) Ltd. Indusind Media & Communications Ltd., Col.VC Khare (Retd.), a cable TV industry expert; STAR India Pvt. Ltd., Set Discovery Private Limited, and Cable Operators Federation of India.

IndusInd Media, represented by Ashok Mansukhani, has made the most detailed presentation, stating that they believe there are not three but four streams of revenue between Broadcaster, MSO and LCO in a total perspective.

These are subscription charges for Pay channels; subscription charges for basic tier in analogue; carriage placement charges and advertisement revenues of pay channels which are carried in MSOs and LCOs networks, by which they earn the revenue.

"Any legitimate sharing mechanism should take all the four factors, since IMCL consider that the business models of broadcasters are dependent on ad revenue generated and subscription revenue.

"MSO's business model is based on subscription amount of pay channels; delivery carrier charges of FTA (for basic tier); and placement carriage charges. In all the three cases the MSO should be able to get a share, which can at least, take care of the basic costs," IMCL has argued

Mansukhai gave IMCL's own example on how it has spent large amounts over the last few years for setting up the large fibre network up to LCO points at the its own costs; established centralised and localised headends too, ensuring a continuous supply by keeping entire infrastructure, etc., and even subsidy on STBs

IMCL has supported WWIL, expectedly, in the demand of 40 per cent of basic tier for MSOs, arguing that the basis for arriving at such a ratio can be the actual
investment costs of and the similar costs of LCOs.

Col VC Khare, the independent cable operations network, however, has demanded a ratio of 70 to 30 in favour of COs, arguing that the major cost for operating the system at the ground level is bourn by the COs.

Interestingly, Khare is the only one who has struck a different note on the issue of the quantum fixed for FTAs. "Rupees 77 per month does not measure up to the requirements of QoS conformity to Indian Standards," Khare has said.

Understandably, the COs and its representatives have the most to worry if the FTA revenue is shared and thus, the Federation has argued strenuously that this should not be done, as the MSO Alliance's claim to share revenue because they have spent a lot of money is not true.

Thus it is that Sharma has said that implementation of CAS has just commenced in the notified zones of the three metros catering to only about a million subscribers.

"This is only a trial phase and needs to be carefully handled for at least six months to one year. It is too premature to review the revenue share formula and interconnect agreement at this stage as all necessary parameters are not available to reach a viable solution," she has argued.

She added, "TRAI should think of changing the terms of interconnect agreement only after the stabilisation of the system. Till then fresh working of costs to stakeholders should be done to arrive at realistic figures in the present scenario, so that reasonable revenue sharing formula may be made."

"MSO Alliance's response to the interconnect agreement draft as attached with the consultation paper does not carry much weight at this stage because MSOs do not own the entire infrastructure, as given in their response. They own only the headend and the trunk infrastructure. Last mile infrastructure is entirely owned by the LCOs.

In fact, the COs' federation has asked why the MSOs are not talking of sharing of revenue from their local channels with the COs.

Sharma has argued that a month after the rollout of Cas, the MSOs' entire calculations have gone haywire, especially on the issue of 'perceived under-declaration by COs.

"Perceived under declaration by the LCOs is again no reason as facts may be very different from what has been presented. As an example, within one month of implementation of CAS the STB penetration has already crossed 25 per cent, which is higher than the 20 per cent the MSOs had presumed would be the final figure.

"In reality, it is only about 20 per cent subscribers that may opt only for FTA channels. Their whole calculations will go haywire as they progress in implementation of CAS," Sharma has stated.

The meeting also discussed interconnection regulation regarding the share of revenue of pay channel fees.