Market couldn't have afforded a steep hike

If the task of a regulator is to keep consumers happy, the Telecom Regulatory Authority of India (Trai) has quite achieved that. But it has irked the stakeholders - both the broadcasters and the cable operators.

Pay TV broadcasters have been particularly gunning for a free price regime. Now they have to contend with an annual inflation-linked hike of just four per cent on the channels that they offer to the cable TV operators for consumers to view. This will put subscription revenues under pressure. Already, broadcasters are feeling the pinch of a steep rise in distribution costs as the bandwidth on analogue cable networks is choked.

The case is equally bad for multi system operators (MSOs) who are stuck with big investments on digital systems. Maintenance and other running costs will certainly be higher than what the broadcast and cable regulator has allowed them to rake in from their operators.

The truth, though, is that the market couldn't afford a steep hike. The broadcasters couldn't have charged more; nor could the MSOs from their franchisees or the cable operators from their subscribers.

The cable TV industry is in a tight market situation from the price point of view. And it will continue to be so until digital and addressable systems establish their grip in the marketplace.

Broadcasters have added up channels to create strong distribution bouquets, clogging the cable networks. With serious competition from direct-to-home (DTH) service providers looming on the horizon, price hike is also least in the minds of the cable operators who have successfully managed to push monthly subscription rates up over the last few years under the guise of new pay channels and high payout costs to broadcasters. The concern of the MSOs is to roll out digital boxes before DTH can settle down in the marketplace. They certainly wouldn't like discontentment to brew in the minds of consumers by hiking up rates before the launch of Tata Sky's DTH service next year.

In a way, Trai's price regulation of four per cent has become irrelevant. The market was working on a price mechanism of its own. Credit that to the regulator for indirectly creating such a situation. As Trai chairman Pradip Baijal would proudly say, prices needed to be under control to correct the market. The next stage is to allow competition to come in from all delivery platforms and free the market.

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