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The TRAI broadcasting & cable tariff order simplified

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MUMBAI: The industry could not have asked for a better Dusshera gift. On the eve of 11 October 2016, India’s telecom and TV distribution regulator  The Telecom Regulatory Authority of India (TRAI) announced two draft legislations  - The Telecommunication (Broadcasting and Cable Services) (Eighth) (Addressable Systems) Tariff Order, 2016 and Standards of Quality of Service and Consumer Protection (Digital Addressable Systems) Regulations, 2016 - that definitely look like progressing the stuck-in-quicksand-of-uncertainty broadcast TV and cable TV sector. More than that, they could possibly inject a modicum of organization, professionalism and structure to an otherwise disorganized-free-for-all TV distribution business.

The first of the draft legislation attempts to put in place a pricing framework for the heavily conflicted cable TV distribution sector. The second seeks to upgrade the quality of services that MSOs, cable TV operators provide to the consumers. Both have been much-awaited pieces of legislation.

The third which seeks to iron out the much-maligned and disputed subscription revenue stream that flows between broadcasters, MSOs, cable TV operators and consumers is expected to be announced soon.

Let’s look at the pricing draft whose purpose TRAI says is to ensure:

-       transparency, non-discrimination, non-exclusivity for all stakeholders in value chain

-       affordable TV services for customers

-       adequate choice to consumers

-       balance the commercial interests of broadcasters and distributors of television  channels to enable the distributors of television channels to recover their network cost and the broadcasters to recover their content cost.

The TRAI wants the new Tariff Order or the MRP pricing regime to become effective from 1 April 2017.In the new scheme, the authority has in detail defined the role of  broadcasters, LCOs and MSOs or HITS operators. This is an attempt to simplify the order for everyone to be able to understand it.

The role of the broadcaster

Under this, broadcasters will have to first declare their channels as a pay channel or a free to air channel, on an a  la carte basis, and in one of the following seven genres: devotional, general entertainment, infotainment, kids, movies, news and current affairs and sports. The TRAI has defined a ceiling on the maximum retail price (MRP) for each of the genres: devotional (Rs 3), general entertainment (Rs 12), infotainment (Rs 9), kids (Rs 7), movies (Rs 10), news and current affairs (Rs 5) and sports (Rs 19).

Each pay channel has to have a MRP  that can vary depending on the region, but which cannot be changed before the expiry of six months of it being declared. These rates will be platform agnostic – that is, uniform across the platforms (cable TV, DTH, HITS and IPTV) across a relevant geographical market, and will have to be declared on each broadcaster’s website and be transparently available to the TRAI, TV distributors and consumers.

The pay channels of a network or its subsidiary or holding company or subsidiary of the holding company can be packaged into a bouquet. This can be done while taking the precaution that the bouquet’s MRP is not less than 85 per cent of the sum of the MRPs of the a la carte pay channels forming a part of the bouquet. Similar conditions of holding prices for six months and in geographical areas also apply to bouquets.

The TRAI has introduced a category called a premium channel. Broadcasters are free to notify any channel as premium channel in their reference interconnect order (RIO). There shall be no price cap on maximum retail price notified by broadcasters for customers. For HD channels, the regulatory authority has, however, stated the price cannot be more than three times the MRP of the corresponding channel transmitted in SD. For those HD channels that do not have a corresponding SD channel, the benchmark will be the ceiling on the MRP of the genre it is in. These independent HD channels will have a price ceiling of three times the ceiling of the MRP of the genre.

As far as pay per view or VOD goes, the TRAI says it will bring it under its purview at a later date as these services are in their infancy in India and have minimal adoption.

The television distributor’s role

On the television distributor side, the TRAI has made them responsible to provide all channels on a la carte basis and it has also  proposed to formalize  a minimum subscription fee of Rs 130 per month per set top box from a subscriber for 100 SD channels.  Now if an HD channel is included in this, it will be equal to 2 SD channels.

The TRAI has stated that TV distributors cannot change the bouquets formed by broadcasters or its price, but they can form bouquets themselves of pay channels of different broadcasters provided that their price is not less than 85 per cent of the sum of the MRPs of the pay channels forming part of the bouquet. Free to air, HD and SD variants of the same channel and premium channels are not permitted to be included in these bouquets.

The authority says that the composition of the 100 channel basic tier should be left to the subscriber’s volition. It can consist of FTA, pay, premium channels, broadcast bouquets or even television distributor package bouquets. But it has to have the government mandated channels and at least five channels of each of the seven genres. If the subscriber opts for pay TV or premium or HD channels or broadcast or TV distributor bouquets, he will have to pay the retail price for these separately.

Subscribers wanting channels beyond the basic tier can opt for other channels by paying the TV distributor Rs 20 – excluding taxes-  for each slab of 25 channels and the broadcaster the MRP of each channel.

The TV distributors also have another responsibility. The electronic programming guide on the network must display the details of all channels and their MRP genre wise for easy navigation. Broadcasters who are relying on TV distributors to collect and remit the pay channel revenues will provide a 20 per cent distribution fee to them, which the latter can share with the LCOs who are actually doing the collection. Additionally, TV channels can also offer a maximum 15 per cent MRP discount to TV distributors to encourage them. Parameters for discounts will be disclosed by broadcasters in the RIOs that will be transparent and uniform for all distributors of television channels.

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