Twin conditions ensure broadcasters do not engage in ‘perverse’ pricing: TRAI

Duty bound to tackle issues arising out of bouquet pricing, said the regulator.

Mumbai: The twin conditions introduced in the New Tariff Order (NTO) 2.0 seek to ensure that broadcasters do not engage in “perverse pricing”; that consumers do not get a raw deal; and that choices offered by and to all market participants remain real. Both conditions are important in their own ways, observed Telecom Regulatory Authority of India (TRAI).

The regulator made these statements in its counter-affidavit submitted to the Supreme Court quashing the writ petitions by the Indian Broadcasting Foundation (IBF) and other broadcasters to halt the implementation of NTO 2.0.

The twin conditions introduced in the NTO 2.0 seek to discourage unfair bundling, stated TRAI. The first condition prescribes that the aggregate a-la-carte (MRP) prices of channels in a bouquet must not be more than 1.5 times the bouquet price, hereafter referred to as the “Aggregate Test”. So, if a bouquet has five channels A, B, C, D, and E (with their individual a-la-carte) and a bouquet price of X, the total/aggregate of A+B+C+D+E should not be more than 1.5 times X.

The second condition, which alone has been struck down by the Bombay high court judgement, states that the MRP of any individual channel in a bouquet, i.e., its a-la-carte price, should not exceed three times the average MRP of a pay channel in that bouquet, hereafter referred to as the “Average Test”.

TRAI alleges that broadcasters want to maximize their advertising revenue and hence are bundling their popular channels along with less popular channels to claim higher subscription and advertising revenues. The high-demand channels that do not need to be pushed, henceforth called driver channels, are bundled with those channels in which consumers otherwise have no interest.

“In a large number of cases bouquet prices are the same as the a-la-carte price of the driver/popular channel. In many cases, the bouquet price artificially has reached such perversity that the bouquet price is cheaper than the driver channel in it,” observed TRAI.

This perverse pricing compels the consumer to pick a bouquet over a-la-carte channel not by choice but out of compulsion, it alleged. 

In a prior hearing, SC expressed three concerns with NTO 2.0 order: a) Whether the "Average Test" in the twin conditions formed a part of the pre-consultation process b) Are broadcasters and DPOs being treated equally c) Is "Average Test” severable from “Aggregate Test”.

Referring to a) TRAI responded, “Both twin conditions were fully deliberated on prior to making of the 2020 framework. There is ample correspondence between TRAI and the broadcasters concerning the implementation of the twin conditions. Even the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has found broadcasters to be in violation of such twin conditions prescribed by TRAI in the past, and held that all reference interconnect offers had to be in consonance with those conditions.”

TRAI denied discriminating between broadcasters and DPOs stating that there are exhaustive notes on the subject matter that point to the contrary.

Referring to c) TRAI responded, “The 2020 framework seeks to address two major issues arising out of the formation of the bouquet by broadcasters. The first concerned heavy discounting of bouquet prices, and the second related to ‘pushing’ of unwanted channels to consumers.”

“TRAI is duty-bound to resolve both issues, in order to safeguard the interest of all service providers and consumers,” it said. 

The next hearing will be held on Tuesday 7 September.

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