Regulators

Guest Column: TRAI's radical tariff & interconnect norms will usher in major changes

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At the onset one must appreciate the efforts put in by the TRAI in coming out with path-breaking orders involving tariff, services inter-connection and quality of services. The effort of the regulator is clearly to increase choice in the hands of consumers to pay for what they want to watch.

The TRAI guidelines are aimed at encouraging moving away from a push-based model to a pull-based one where demand and supply will be the deciding factors. Still, it’s a known fact that consumers themselves find it difficult to pick and chose, preferring packages instead. But time will tell how the Indian consumer behaves this time around. But if the industry and the government/regulator work together, a lot can be made possible. However, there are some actions that need to be acted upon urgently. In my opinion, they are the following:

1. TRAI guidelines pre-suppose that all distribution platform operators (DPOs) have the built in capability to create packages and also bill on a la carte basis. While it might be possible for the bigger DPOs who have invested in the backend to have this capability, I am less confident of smaller DPOs. Unfortunately, for many of them digitalization was just converting analog signals to digital. Such DPOs selected weak support players resulting in inadequate capabilities in the backend, which is the heart of digitalization (packaging and bundling). For them to make adequate changes will also mean making huge investment and technology upgrade. One way to make this possible quickly and in a cost efficient way is to implement infrastructure sharing at every level keeping advancing technology in mind. And, to make this aspect possible, it’s necessary to make licensing norms amendments in the statutory regulations relating to cable TV, HITS, and DTH.

2. As of today, the balance of negotiating power is clearly in the hands of broadcasters and, while the TRAI orders are quite exhaustive in terms of various provisions, lets us not underestimate the capability/ingenuity/creativity of the broadcasters. I personally do not think any broadcaster will absorb the DPO margins. As broadcasters have an in-built minimum return they expect from their channels, in all probability, they will add this margin to the channels’ prices. The regulator should consider setting up a mechanism by which it can review and intervene in a time-bound manner.

3. DPOs must move away from their analog mindsets and embrace digitalization and its implications by being more honest and transparent in their dealings with broadcasters and other stakeholders.

4. While TRAI has outlined the terms and conditions of providing TV channels to DPOs, it has been observed that commercial negotiations are fairly simpler than the legal terms and conditions. In my view, this is a result of legacy mistrust between a broadcaster and an MSO. I would, therefore, suggest that a model interconnect be prepared by TRAI, which must be the document entered into by the said parties till the industry settles down to this new environment and mutual trust develops.

5. Broadcasters and DPOs must work together to jointly grow the business. At the end of the day, both will benefit only if the consumer pays. I think a working group comprising representatives from various industry organizations like the IBF, NBA, AIDCF, DTH Association and TRAI/MIB should be constituted along with some independent experts to facilitate the process. This should be a small group that could make valuable suggestions. Trust and transparency will need to be the hallmark for the industry to move forward and litigations must be kept out as far as possible.

6. The government should provide more clarity on taxation issues; especially in view of the new GST regime set to be rolled out from later this year. Simultaneously, the government must seriously consider giving `industry status’ to the broadcast sector.

7. As far as the tariff order is concerned, DPOs have an opportunity, with the different margin structures, to set their houses in order. They need to invest in the backend, introduce VAS (value added services) and look at having some unique content.

8. From the tariff point of view broadcasters have a challenge on their hands as they know there is a price cap with restrictions on packaging (sports channels). They should seriously consider promoting events on short-term basis as there is no minimum period for subscription. We all know consumers by and large watch 12 to 15 channels. It will be interesting to see how competing broadcasters price channels in specific genres as consumers in the short-term are likely to cap their spends on TV entertainment.

9. DPOs in smaller towns should consider forming co-operatives to work together, while at the same time retaining their individual identities.

As a result of fresh TRAI orders, I hope there will be more discipline and transparency in the industry, which could also see mergers within platforms as this is a time to consolidate. The Indian broadcast and cable sector is on the cusp of major changes. Those who embrace change, will flourish, while the rest will slowly perish.

public://tony_0.jpg (The author, an Indian media industry veteran, is the former CEO-Media, Hinduja Group. The views expressed here are personal, and Indiantelevision.com need not necessarily subscribe to them.)

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