Trai must focus on regulating process, not prices : Broadcasters at CII Big Picture Summit

Trai must focus on regulating process, not prices : Broadcasters at CII Big Picture Summit

Broadcasters. DTH providers discuss impact of NTO 2.0 regulation


Mumbai: As a regulator, the Telecom Regulatory Authority of India (Trai) must focus on regulating the process and not the prices, argued broadcast industry stakeholders at the CII Big Picture Summit held on Wednesday. The discussion was around the impact of new tariff order (NTO) 1.0 and 2.0 on linear TV broadcasting and the need for light touch regulation.

The session was joined by Tata Sky managing director and CEO Harit Nagpal, Disney and Star India chief regional counsel Mihir Rale, House of Cheer Networks founder and managing director Raj Nayak, Ernst and Young Indian media and entertainment practice leader Ashish Pherwani and was moderated by Media Partners Asia co-founder and director Vivek Couto.

The pay TV industry in India is the cheapest in the world and not by a small margin. Broadcasting is the largest contributor to India’s media and entertainment industry. India's M&E industry accounts for 1.1 per cent of total GDP whereas in mature markets the contribution is usually 3-4 per cent. Panellists argued that excessive regulation by Trai is holding back the growth of the industry.

“We belong to the service industry,” said Harit Nagpal. “A product like Tata Sky is aimed at customers who are willing to pay five to ten per cent extra to watch premium quality content. But when Trai regulates the prices, even if the customer is willing to pay extra, we can’t increase the prices. There is no incentive to invest in quality.”

Trai’s intent seems noble on paper. The NTO regulations want to create parity in prices in linear TV broadcasting. However, there is a wide spectrum of customers in India that watch content. The players in the TV broadcast ecosystem understand the consumer’s needs and try to meet them with attractive prices. Trai’s regulation is akin to saying that a three BHK apartment must be priced the same whether you live in Cuffe Parade or the suburbs of Pune, remarked Raj Nayak.

“When the regulator framed and implemented NTO 1.0 the stated objective was a-la-carte needs to be pushed in the interest of the consumer. Today, we know that if the consumer picks a-la-carte then his/her content costs will go up,” said Mihir Rale.

Trai most contentious provisions in the NTO 2.0 were its twin conditions which mandated that average MRP prices of channels in a bouquet must not be more than 1.5 times the bouquet price. The second condition, which was struck down by a Bombay high court judgment, states that MRP of an individual channel in a bouquet should not exceed three times the average MRP of a channel in that bouquet.

Rale said, “Linking a-la-carte pricing to bouquet pricing is a fundamentally flawed approach. The ability of the broadcaster to subsidise the cost to the consumer is important. Bouquets have an intrinsic value from an advertiser standpoint. We can customise and tailor our prices to everyone’s ability to pay. Why should that be taken away?”

Stakeholders were of the view that Trai must step back and take a long hard look at the impact of NTO 1.0 regulation before implementing the amendment order. They said that consumer costs have gone up by 25-30 per cent and broadcasters have had to shut down a few of their channels. It was also noted that Trai must not assume every consumer is digitally savvy and will make the transition into the new regulatory mechanism easily. It is estimated that NTO 1.0 implementation resulted in the drop off of 12-15 million pay TV subscribers. 

“We are in a free economy and the regulatory has come and put a price cap saying it is in the interest of the consumer. In fact, since there is a lot of competition in the linear broadcasting industry the fact is that broadcasters can’t raise prices indiscriminately without losing market share,” observed Raj Nayak.

Trai has acknowledged that NTO implementation has yielded different results than what they expected. The need of the hour is for the industry to come together with the regulator and introspect on what’s best for the consumer.

“The M&E industry is a creative industry. What we call different parts of the industry is just distribution. There are 130,000 digital influencers in India. How did this happen? Not by a regulated creative industry," said Ashish Pherwnai. “The Indian media sector is $ 17 billion in size. How can regulation help us meet our targets in terms of percentage of GDP? Global companies like Disney and Lionsgate Universal get 50 per cent or more revenues from exports. In India that number is less than eight per cent.”

Pherwani also talked about how the top studios in the US spend $20 billion on content, and in Europe, the top studios spend $40-45 billion. If 10 per cent of that market comes to us, then it is a $4 billion opportunity on a base of $17 billion, he said.

The panellists hoped that the trust deficit between the regulator and broadcasting ecosystem can be dramatically reduced in the coming years and TV growth returns to 2017 levels.