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Confused by Trai’s new tariff order on TV channels? Let’s make it easy for you to understand

Confused by Trai’s new tariff order on TV channels? Let’s make it easy for you to understand

Confused by Trai’s new tariff order on TV channels? Let’s make it easy for you to understand
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By Farah Bookwala Vhora  Jan 29, 2019 6:39:25 AM IST (Updated)

When CNBC-TV18 asked people on the street if they were aware of the Trai’s new channel selection and pricing system, many said the flurry of advertisements on TV had intimated them of the new system but they did not fully comprehend it. Many confirmed they had not received forms for selection of channels.

For months now, TV viewers have seen channels flashing prices at the bottom of their screens. Broadcasters have also heavily advertised their channel value packs priced nominally. Yet, it seems few TV viewers fully understand the new channel selection and pricing system that will kick in on February 1; many though aware, are unsure of what needs to be done.

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When CNBC-TV18 asked people on the street if they were aware of the Trai’s new channel selection and pricing system, many said the flurry of advertisements on TV had intimated them of the new system but they did not fully comprehend it. Many confirmed they had not received forms for selection of channels.
With less than a week for the implementation of the TRAI's new framework, which comprises of the Interconnection Regulations 2017, Quality of Service & Consumer Protection Regulations 2017 and Tariff Order 2017, the transition to the new regime is mired in confusion and legal hurdles and inadequate on-ground preparedness.
Remember, the deadline has already been extended to February 1 from its original date of December 29.
“We’re talking about servicing 150-160 million homes, that's a pretty large number. So in terms of execution and change, I think there is a challenge,” said Sudhanshu Vats, CEO of Viacom18.
Understanding The Rationale Of The TRAI’s Tariff Order
First up, let’s understand what you as a consumer, should know about the new system. Presently, consumers are provided 300-400 TV channels, many of which are not watched at all. According to TRAI statistics, 80 percent of customers watch less than 40 channels. Only 15 percent of customers are likely to watch more than 100 channels.
TRAI says subscribers should not be pushed with unwanted channels, rather they should have the freedom to choose only those TV channels they want to see and pay accordingly. Under the new framework, viewers can choose channels on an ala carte basis and pay the channel's MRP as set by the broadcaster. Viewers can also choose bouquets by broadcasters or those by distribution platforms - DTH and Multi System Operators. SD and HD channels cannot be bundled in a single bouquet.
As mandated by TRAI, no channel can be priced above Rs 19 if it’s part of a bouquet.
In a bid to stay competitive, broadcasters have heavily rationalized their pricing structure, with networks like Discovery cutting channel prices by as much as 90 percent. Broadcasters such as Zee have also lowered prices of their value packs with experts expecting prices to further correct going ahead.
Understanding The New Structure Of Your Bill 
A viewer’s payment to his/her service provider has two components. The first is the Network Capacity Fee (NCF) which is like a rental charge of the TV connection to your home. The other is the price of the pay channels you choose.
A viewer has to at least subscribe to a pack of 100 Free-To-Air Channels. Since these channels are free, a viewer only has to pay the NCF, which is capped at Rs 130 excluding GST. Levying 18 percent GST, this adds up to Rs 154 a month. The pack of 100 FTA channels will mandatory include 26 government-run channels.
A viewer is free to add or remove SD & HD channels from this pack of 100 channels. One HD Channel is counted as two SD channels. For every pay channel the viewer adds, he has to pay MRP plus GST charges.
If a subscriber opts for more than 100 channels, he will have to pay an additional NCF of Rs 20 for every 25 channels along with the MRP of each channel. This sum would then see a GST levy of 18 percent.
Will Cable Bills Decrease Under The New System?
The arithmetic is clear, but the most significant question is – will cable bills decline under the new system? TRAI is clear it will not respond with a definitive yes or no, as the bill size will depend on how many channels a customer chooses to watch.
“If you are today getting 300 channels on your platform and you watch merely 30-40, but if you want to keep all 300 obviously TRAI cannot assure you of any price reduction or otherwise,” said RS Sharma, chairman of TRAI. “However, we are very sure that if you really choose, if you are a very price sensitive customer, and if you only take those channels that you want, then certainly your bills will come down. So that's the qualified statement I am making,” he added.
Abneesh Roy, senior VP at Edelweiss Financial Services said, “There are multiple facets to this. For some consumers bills will reduce. For example, restaurants that only has a sports channel, financial companies that subscribe to only one or two channels, will see a dip because they can choose ala carte. But in case of masses, it is highly unlikely it will dip. My sense is ARPUs will increase 5-10 percent. I don't expect much higher inflation because there's lot of competition from OTT apps already.”
Industry insiders say cable bills could shoot up by as much as 30-50 percent, as mass households with multiple members would opt for at least 35-40 pay channels to cater to every members' choices. While many argue that higher cable bills in lieu of fewer channels will discourage TV viewership, the telecom regulator slams these arguments as motivated and lacking genuineness.
If a shopkeeper is concerned about raising prices -- first of all he should be happy, because if prices go up your receivables go up so you have no right to be unhappy. Second, if your concern is genuine, it's in your hands to reduce the price of your goods,” argues Sharma.
Transparency & Changing Mindsets 
So if bills will not necessarily decline, why is this system being lauded as transparent and consumer friendly?
“The Tariff Order looks at transparency not just in letter but also in spirit. We are all used to overabundance of content, so whether we pay Rs 1000 or Rs 100, we expect that basket to contain everything. But now people have understood that if you like something, you pay for it. And the tariff regime actually brings about that change,” says Vynsley Fernandes, CEO of IndusInd Media.
Distribution platforms like MSOs which currently suffer deep losses, laud the TRAI for legitimizing the TV broadcasting ecosystem by defining the revenue sharing pact between each party.
“By bringing this new framework, the entire ecosystem is now legitimized. There’s now a paper trail to run your business,” added Fernandes.
Broadcasters believe the race for higher viewership will greatly boost content quality.
“As the distribution becomes more equitable, the quality of content will go up because content has to be driven more by pull and not necessarily through push,” said Vats of Viacom18.
Local Cable Operators: Making Their Displeasure Known
Not all stakeholders are buying into the buoyancy over the new TRAI regime. LCOs have instead been staging protests over claims of a potential loss in revenues.
At present, LCOs and MSOs share revenue in the ratio of 80:20, or as mutually decided. Under the new regime, the TRAI mandates the NCF of Rs 130 for 100 FTA channels be split between MSOs and LCOs in the ratio of 55:45, with no share to the broadcaster.
For paid channels, the broadcaster will receive the lion's share of up to 80 percent and the rest 20 percent will be shared between the MSO and LCO.
LCOs are demanding the entire NCF, and also seek a share in the revenue of paid channels. They also demand that GST be cut to 5 percent.
“The issue with LCOs is that the revenue share of 45 percent is too less; they cannot survive this to run their network. LCOs have to maintain their network, there is wear and tear, thefts in network,” said Roop Sharma, president of the Cable Operators Federation of India.
The current LCO standoff has impacted on ground rollout of the new regime, with many consumers not receiving any intimation from their service operators on choosing their preferred channels despite the deadline looming close.
With media reports claiming less than 50 percent of the country has keyed in its channel preferences, it is certain that the rollout of the TRAI order will be slow and piecemeal. The TRAI on its part, while firm that the deadline will not be extended, has assured customers who do not successfully migrate to the new system by January 31 that they will not face a TV blackout when the new system kicks in.
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