Regulators

TRAI's tariff related consultation paper draws concern from IBF

TRAI issued the consultation paper on 16 August

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MUMBAI: The IBF notes with some concern the issues raised for consultation by TRAI in the Consultation Paper issued on 16th August 2019 (CP).  These issues strike at the very heart of the new MRP based tariff regime which TRAI made effective from 1st February 2019 (NTO).  It is fair to say the implementation of the NTO has resulted in massive changes in the distribution landscape. Nevertheless, with the support of all stakeholders including broadcasters, DPOs and the end consumer, the transition to the new regime is being managed relatively smoothly. Broadcasters, on their part, along with other stakeholders, have done their best to ensure a smooth transition without a disruption of services. TRAI itself has stated at several fora that over 90% of consumers have migrated to the new tariff regime by choosing channels and/or bouquets of their choice.

In  compliance  with  the  NTO,  pay  broadcasters  have  published  their  Reference Interconnect Offers (RIOs) pricing their channels in a la carte and bouquet formations in accordance with the regulations.  DPOs in turn have offered these channels both on a la carte basis and bouquets customized to meet the choice of their subscribers.  In fact, it was TRAI that mandated DPOs to offer their subscribers a “best fit” plan of a la carte and bouquets to encourage a seamless transition to the new tariff regime.

Surprisingly barely a few months after the commencement of the NTO and even before the industry at large and more importantly the end consumer has fully adapted to the new regulatory regime, TRAI proposes a fresh CP seeking to make fundamental changes in channel pricing and bouquet formation.  This goes against all norms of a stable regulatory regime so necessary for the economic advancement of any industry. TRAI’s CP proceeds on the assumption that consumers are being denied their choice of channels by excessive discounts on bouquets. IBF wishes to point out that the cap on bouquet discounts under the NTO was struck down by the Madras High Court as “arbitrary”. Further, the global practice in the television and cable industry is the offering of content in bouquets customized to meet the diverse needs of consumers. A report published by the prestigious thinktank,  the  Indian  Council  for  Research  on  International  Economic  Relations (ICRIER), in March 2019 indicates that given a choice consumers, even internationally display a preference for bouquets. A 2004 FCC report concluded that mandating a la carte for cable consumers in the USA would very likely harm new and niche channels and reduce choice to consumers. An evaluation of a similar proposal in Canada in 2014 concluded that “unbundling” could have adverse effects for the broadcasting sector and could result in 26% of the current channels becoming unviable. As per CASBAA, in a study of broadcast regulations in 10 countries, apart from India, no country mandated a la carte and bouquets were the choice of consumers. The NTO itself allows broadcasters and DPOs to offer channels both a la carte and in bouquets giving the consumer the freedom of choice. In fact, the basic tier mandated by the NTO of 100 FTA channels for Rs. 130 is itself a bouquet offering. Thus, the impression being created that broadcasters are gaming the system to push bouquets is incorrect.

The essence of a free market economy is that consumers make their own choices about the products they buy or the services they wish to receive. Broadcasters have not only published  their  channel  prices  a  la  carte  and  for  bouquets  but  also  publicized  their offerings through advertisements and promotions enabling the consumer to make an informed choice. As TRAI itself points out in the CP while a large number of consumers have opted for bouquets, many have also opted for a la carte channels. It is therefore incorrect and would be an affront to the consumer’s intelligence to suggest that they choose channels only on price and not on the quality of their content.

The Honorable Prime Minister’s call to make India a USD 5trillion economy by 2025 requires all industries to grow exponentially and contribute to overall GDP. Frequent tinkering with regulations and attempting to micro-manage free markets can lead to adverse consequences. Promoting a la carte at the cost of bouquets will deny consumers the choice they need in a country like India with such a large and variegated diversity of cultures and languages. Smaller as well as niche content channels will lose out and their viability will come under question. Broadcasters will be unwilling to launch new channels and producers will be unwilling to experiment with new content. All this will lead to fewer shows being produced which will have a knockdown effect on downstream production and on employment in the sector.

The broadcasting industry has gone through several major regulatory changes in the last few years moving from analogue to CAS to digital and addressable systems and now to an MRP pricing regime. Stability in policy formulation and “soft touch” in regulatory oversight is an absolute necessity for healthy industry growth. The Government’s focus on “ease of doing business” warrants minimal regulatory intervention. Hence regulatory intervention at this early stage in the implementation of the NTO is not only premature but will have disastrous consequences for the broadcasting industry. In these circumstances, IBF would urge TRAI to defer any further regulatory interventions and allow the industry and its stakeholders and especially the consumer more time to adapt to the new regulatory regime.
 

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