Comment: Divide and rule – TRAI's way of regulating the broadcasting sector

The regulator has been in a hyper mode for more than a decade.

MUMBAI: Indian broadcasting has been going through a challenging period not just because of competition from new digital platforms and falling ad revenue but by a hyper-regulator, the Telecom Regulatory Authority of India (TRAI). 

Unlike the telecom sector, which also TRAI regulates, where stakeholders are not so fragmented as is the case of the broadcasting sector, TRAI believes that in broadcasting, its relevance can only be seen and justified by micro-managing it. In other words, TRAI likes “controlling” rather than “regulating” the sector and so far succeeded in pitching one stakeholder against another like our British colonial masters. Quite simply the absence of a unified and well-balanced voice in the sector, gives the regulator an upper hand and thus hurting the interest of the whole broadcast eco-system.

As the industry consists of myriad numbers of stakeholders from content producers, broadcasters and distribution platforms like Multi-System Operators (MSOs), Last Mile Cable Operators (LCOs), Direct-to-Home Operators (DTH), Headend-in-the-Sky Operators (HITS) and Internet Protocol Television operators (IPTV) often they don’t see eye to eye even on simplest of matters. Like school kids they complaint against each other and knock on the doors of the regulator. In turn, TRAI tries to do a balancing act on an ad-hoc basis without conducting any scientific impact analysis of its decisions but going through the set of motions in the name of consultation with a predetermined mindset to fix problems which it believes is the role of a regulator.

The fundamental question for which no one has any clear answer is why it treats broadcasting sector, which is a non-essential service, differently compared to the telecom sector, which is an essential service. 

Since 2003, TRAI follows forbearance in the telecom sector where there are only limited number of players compared to the broadcasting sector with a presence of more than 900 television channels (328 pay channels and 573 FTA channels), more than 1200 MSOs, 60,000 LCOs, 5 DTH operators, 2 HITS operators, 2 IPTV operators and, in addition, a vertically integrated public broadcaster, Prasar Bharati. As can be seen there is no dearth of choice for consumers and competition amongst stakeholders and in the broadcast value chain one section will not be able to survive without presence and support of the other section. The Indian broadcasting market is dynamic and competitive and this ensured the consumers are spoilt with choice and the pay TV ARPU in India is one of the lowest in the world.

More often than not, regulations and orders issued by TRAI were challenged in various

judicial fora and were either set aside being inappropriate, arbitrary, lacking in transparency

or referred back to it for reconsideration. The sector has always been in a litigious mode and the resources of stakeholders put under heavy pressure because of the micromanagement of every aspect of service provision by the regulator and thus leaves little scope for free play of market forces.

Whilst at the upstream end, a broadcaster has to acquire content or rights by paying market prices to stay ahead of the curve in a hyper competitive broadcast market, at the distribution end, he is not only forced to stay at the right side of the stifling TRAI regulations but face the brunt of the distribution platforms as there is poor implementation of quality of service norms or declaring revenue accrued at that level by the sectoral regulator. Many of its directions and orders remain only on paper.

Privately TRAI officers admit that till the time cable operators, who are small and medium entrepreneurs with inadequate knowledge and exposure, are sensitised of TRAI regulations and their obligations, the problem in the broadcasting sector cannot be fixed. However, TRAI still pushes the broadcasters to a corner threatening their investment which they already committed.

The ready example of the wrong approach of TRAI can be seen by the way the news television channels have evolved in this country. Although more than 500 news channels are on air in India, there is not a single news brand which can seek a huge national audience leave aside global audience. Their business models are skewed mainly due to the absence of a viable distribution revenue as they have to pay heavy distribution cost leaving them no penny to invest in producing quality content. They are derided for their failure to perform as the responsible fourth estate of a robust democracy. 

As a result all of them have become free to air (FTA) channels and they depend mainly on advertising revenue for their survival. This is the reason all Indian news channels look and feel similar – their staple of offering is the studio-based shows with so-called experts shouting and screaming against each other and with no money to invest in quality content production and actual ground reporting.

Unfortunately, with the implementation of the New Tariff Order and the subsequent amendments, TRAI wants to drag the entertainment and niche channels down to the same level of Indian news channels.  Given the fact that the broadcasting sector is the largest segment of the Indian M&E sector and accounts for 44 percent of the sector’s revenue, the style of functioning of TRAI is going to be the death-knell for one of the “Champion” sectors of India.

The irony is that the Modi government from the day it took office in 2014 has been serious on improving India’s Ease of Doing Business index and providing its citizens Ease of Living but on both these counts TRAI’s performance has been disappointing.

In 2004, TRAI while freezing the tariff of the broadcasting sector as existed in the year 2003, it also made an assurance that this was a temporary measure, once the regulatory process is streamlined and there is evidence of effective competition price regulations would be withdrawn in line with the international practices. However, TRAI has been on a hyper mode for the last 15 years issuing series of regulations and tariff orders which were most of the time challenged in various judicial forums and were set aside lacking transparency.  As a result, the broadcasting sector is the highest litigious industry compared to telecom sector which is also regulated by TRAI. TRAI’s conduct is against the very principle of “Ease of Doing Business” as the micromanagement leaves no scope for attracting fresh investment and bringing in innovation.

The New Tariff Order was introduced in February 2019 without proper planning at the distribution end resulting in chaos and cord cutting by millions of TV households. TRAI in its own wisdom believes that alacarte offering of channels only is beneficial to customers rather than bundling or bouquet offerings. This is in contrast with TRAI’s approach of regulating the telecom sector where the telecom operators are offering their OTT products alongside a whole lot of conventional services. 

In a country like India, it would be an uphill task for the customers to choose from a list of 900 TV channels as they do not have time and adequate knowledge to go through the motion of picking up their choice of channels given majority of them are single TV households comprised of different age groups and their preferences. Such a differential approach by TRAI has put millions of TV subscribers in difficulty as the service providers are neither equipped nor understood customer’s needs coupled with the fact that the Regulator is unable to ensure quality of service by the DPOs.

Within a year of introducing making a tectonic shift TRAI without concerned about where the problem lies, TRAI has amended the tariff order yet another time making both consumers and broadcasters to go through whole rigour one more time.  This clearly shows that TRAI has scant disregard for the Prime Minister’s vision of making “Ease of Living” to the lives of millions of Indians.  

Rather than fighting battles in courts the leading voice of the broadcasting sector should sit around the table and resolve issues rather than allow the regulator to have free ride at the cost of the broadcast eco-system, which is the backbone of the Indian M&E sector.

(The author requested to stay anonymous. The views expressed are his own and may not subscribe to them.)

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