“Trai is going to write the obituary of the broadcasting industry,” said an exasperated senior executive from a leading broadcaster on condition of anonymity, hours after the telecom regulator initiated a review of the new regulatory framework for TV and cable services on August 16 by floating an exhaustive public consultation paper.
Even as Trai attempts to quell the furore over its consultation paper, broadcasters CNBC-TV18 spoke to express anger, dismay and even bewilderment at what they see as an attempt to control prices in the broadcasting industry, a move they say can have “disastrous consequences”.
The timing of the review process, coming only seven months after the implementation of the New Tariff Order (NTO), has irked broadcasters who say the industry was only just beginning to settle after a monumental shift to an MRP-based pricing regime. In a media release earlier this week, the Indian Broadcasting Foundation (IBF) termed the consultation paper “premature” and warned that “regulatory intervention at this early stage in the implementation of the NTO will have disastrous consequences for the broadcasting industry.”
Mirco-managing broadcasting sector
“As a regulator, Trai cannot micro-manage the broadcasting sector. Trai should be the last body to unsettle the apple cart. Post the implementation of the NTO, the TV industry has lost 10 million subscribers. If further amendments are suggested, after we have spent significant sums to align with the NTO, it can significantly damage the sector. Where will get the money to produce content?” argued the executive quoted earlier.
The Trai, on its part, has sought to allay broadcasters concerns by stating it has no intention to revise the NTO. In an interview to
the Economic Times, Trai Chairman RS Sharma said the regulator is not looking to fundamentally change the NTO, but only “fine-tune” the policy. Sharma has said that through the consultation paper TRAI was attempting to “bring perfection in the phenomenon observed in the last few months” as they are bound by “duty to protect the interest of consumers”.
Broadcasters dismissed Sharma’s “carefully worded” arguments claiming that Trai is merely attempting to calm flying tempers and prevent legal action by aggrieved stakeholders and that the “tweaks” that would ensue would be tantamount to altering the NTO. Many in the broadcasting industry have questioned the integrity of Trai, squarely suggesting that it was favouring distribution platforms under the garb of protecting consumer interest.
The public consultation paper, which is open for comments until September 16, has invited comments from stakeholders on nearly 30 questions pertaining to whether channels should be permitted to form bouquets, whether the 15 percent discount cap between the sum of a-la-carte channels and those when part of a bouquet should be reintroduced, whether broadcasters and DPOs were offering far too many bouquets and whether the ceiling price of channels in bouquets (Rs 19), needs to be re-examined.
The Trai, in its paper, states that the decision to review these aspects of the NTO follows numerous complaints received from consumers on not being able to exercise choice of channels and rising cable bills.
When asked why Trai isn’t justified to act on consumer complaints, broadcasters demanded to know how many complaints were received so far, a figure not disclosed by the regulator. A leading broadcaster argued that every attempt was made to smoothly transition 130 million households to the new framework and to initiate a review early into the system basis complaints from a small percentage of TV consumers was arbitrary and unfair.
Attempt to throttle discovery of market prices
Broadcasters have lashed out at Trai for accusing them of misusing the flexibility provided by NTO to “throttle the discovery of market prices” of channels by 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.
Broadcasters argue that channels bouquets are a common practice worldwide and are designed to offer maximum choice of content to consumers at reasonable prices. Broadcasters package less popular channels by bundling them with popular channels to get maximum reach and amortise the cost of content creation. A ban on forming bouquets and offering them at discounted prices, broadcasters warn, would mark the “beginning of the end of the industry.”
“Discounting is critical to keeping reach alive. The consequence of reach dropping is that it will lead to significant consolidation with small and niche channels folding up,” explains Jehil Thakkar, Partner and Head, Media & Entertainment, Deloitte India. ”While Trai’s desire to keep ARPUs affordable is laudable, prices should be decided by market forces,” he adds.
The decision to offer a large number of bouquets is designed to offer maximum choice of content to consumers while serving their pocket, say broadcasters. Broadcasters say they are surprised that Trai should come down heavily on the number of bouquets being offered as the regulator had “expressed happiness” during numerous consultation rounds on the large number of choices being made available to consumers
On the issue of lowering ARPUs, Sharma has stated that Trai is not attempting to regulate ARPUs, but broadcasters are not convinced. They argue that on one hand, cable TV ARPUs in India are lowest in the world, on the other, while consumer inflation rages at 7 percent, cable TV ARPUs have risen at a CAGR of only 4 percent. To control channel prices, despite cable/DTH services not being defined an essential commodity is discriminatory, say broadcasters.
Analysts say a balanced approach and sufficient time is the only way to keep the TV industry on an even keel.
“It is critical that Trai balances consumer needs with the economics of the sector. It is highly recommended that the NTO be allowed to play out for a year before any regulatory changes are implemented. This would allow all stakeholders, most importantly consumers, to fully comprehend the system and understand the choices they are making,” said Girish Menon, Partner and Head, Media and Entertainment, KPMG India.