Seven months after the implementation of the new regulatory framework for television, the Telecom Regulatory Authority of India (Trai) accepts that the framework’s primary objective of giving consumers adequate choice to choose and pay for what they want to watch has not been met, prompting the regulator to embark on a course-correction strategy.
On Friday, the Trai floated a public consultation paper on tariff-related issues for broadcasting and cable services, inviting stakeholders to offer their comments on a whole host of issues ranging from discounts given during the formation of channel bouquets, ceiling price of channels for inclusion in bouquet, need for formation of bouquet by broadcasters and distribution platform operators (DPOs), variable Network Capacity Fee (NCF) and discount on long-term plans.
In the paper, Trai has expressed dismay over broadcasters and distribution platforms not upholding the spirit of the new regulatory framework, which seeks to offer maximum choice to customers, and points out instances of how stakeholders are manipulating the rules to their favour; a feat made possible by the NTO’s many loopholes and shortcomings.
The Trai came down heavily on broadcasters and DPOs for offering bouquets at steep discounts to the sum of their al-a-carte prices of pay channels, thereby “forcing” consumers to opt for bouquets as opposed to picking individual channels.
“In all fairness, a lot much was expected from the broadcasters and the DPOs to use flexibility given under the new regulatory framework to address the concerns and aspirations of the consumers. However, given flexibility was misused to throttle market discovery of TV channel prices by giving huge discounts on the bouquets,” states Trai.
"It has been observed from the tariff declared by the broadcasters under a new regulatory framework that broadcasters are offering bouquets at a discount of up to 70 percent of the sum of a-la-carte rates of pay channels constituting those bouquets. It indicates that in the absence of any restriction on the discount on the offering of bouquets, broadcasters are making prices of a-la-carte channels illusory thereby impacting the a-la-carte choice of channels by consumers,” said Trai.
Illustrating how broadcasters had found a back-door route to push unwanted channels onto consumers under the new regime, Trai drew up the pricing structure of bouquets from five leading broadcasters and explained: “Heavy discounts are applied to bouquets making the a-la-carte prices of channels irrelevant in comparison. MRP of the popular channels are declared at the maximum permissible limit of Rs 19/- so as to qualify to be the part of a bouquet and then these are bundled along with the number of other channels, mostly marginally priced non-popular channels. By following this business model, the broadcasters gain in maximizing their reach even for not so popular channels, increasing subscription revenues.
On the flip side, this perverse pricing strategy renders the a-la-carte subscription of the channels meaningless for the consumers and reduces the option of choice. They end up subscribing to channels not of their original choice and even paying for those channels which they are not inclined to watch without even taking notice of.”
The Trai has also solicited comments on whether the 15 percent discount cap on bouquets should be reintroduced. Trai believes the non-implementation of the 15 percent discount cap on broadcaster’s bouquets has created a non-level playing field between bigger and smaller broadcasters.
“Broadcasters offering a large number of channels use the power of their popular channels and resort to heavy discounts to push their own not-so-popular channels as part of bouquets to subscribers, resulting in the non-level playing field. The ability of broadcasters offering a large number of channels to form bouquets and to hugely discount the bouquets is forcing small broadcasters either to exit from the market or convert their pay channel to FTA channel for survival.”
The Trai, in its Tariff Order 2017, had prescribed that the maximum discount a broadcaster could offer while offering its bouquet of channels over the sum of MRP of all the channels in that bouquet was 15 percent.
The Madras High Court, however, declared this move as “arbitrary and unenforceable” and subsequently, the Supreme Court did not pass any order in this regard, upholding the Madras HC’s verdict. As such, the Trai has not been able to enforce the 15 percent discount cap on broadcaster’s bouquet prices.
Trai has also pointed out that broadcasters and DPOs are offering far too many bouquets, mostly replicating each other, which is causing confusion among consumers. The situation is further complicated by DPOs offering a large number of bouquets as well.
The Trai states it is mulling the option of restricting the number of bouquets that can be offered based on a number of channels offered by the broadcaster or implementing a flat ceiling on the number of bouquets that can be offered by broadcasters. There could be a case of a combination of both also.
Observing that broadcasters were also manipulating the ceiling on the MRP of channels to be included in a bouquet, the Trai is seeking public opinion on whether the MRP of Rs 19 for pay channels should be reviewed.
"It has been observed that prices of some channels in both SD and HD format, priced more than Rs 19/- in earlier framework, have been reduced to Rs 19/- which is the upper ceiling for any channel to be carried as part of the bouquet. This also demonstrates that the intent of the broadcasters is to push the channels in the form of the bouquet rather than permitting consumers to take channels of their choice on an a-la-carte basis."
"It has also been observed that many channels that were Free To Air (FTA) in the earlier framework have been converted into pay channels and priced at token amounts for the simple reason that under the new regulatory framework FTA channels cannot be part of a bouquet,” states Trai.
The issue of Multi-TV connections and discontinuation of long term subscriptions is another area Trai seeks to address. On the multi-TV front, Trai claims to have received several representations on the issue of DPOs charging the same amount of Network Capacity Fee (Rs 130 + taxes) being charged for each TV connection and providing the exact same set of channels on all TV connections with no flexibility to choose channels for each set.Trai has also received several complaints from subscribers on the discontinuation of the long term subscriptions by various service providers. Trai is accepting comments on its paper until September 16, 2019.