DTH operators, in face of OTT competition seek tariff forbearance from TRAI

Facing competition from over-the-top channels, direct-to-home (DTH) operators like Bharti Airtel, Tata Play, Dish TV, and others are seeking a telecom sector-like tariff forbearance to price their offerings.

Tariff forbearance is generally provided by regulators when it is felt that competition is high and the industry has matured in terms of pricing its offerings. Operators are free in such cases to set tariffs without any prior approval from the regulator, which in this case is the Telecom Regulatory Authority of India. However, operators need to file their tariffs within a week after implementation and if the regulator feels that changes need to be made, directions are issued.

DTH operators feel that the broadcasting sector has become highly competitive and also matured with the the coming of OTTs, hence tight price regulation is not required any more. In fact, forbearance will give them the required flexibility to compete with OTTs.

The DTH industry is currently subject to excess regulations, as apart from paying an 8% revenue share licence fee to the government, operators are also subject to price caps put by the Trai.

Trai is currently examining the submissions made by the operators and is likely to recommend changes in the regulations if there’s wider unanimity amongst the various stakeholders, officials said.

“Given the fact that the broadcasting industry is extremely competitive as is borne out by Trai’s own data, with the revenues of the sector already on the decline and lack of evidence of market failure, it may be prudent to follow forbearance and permit market forces to prevail and follow same light touch regulatory approach,” Bharti Airtel said in its representation to Trai.

Currently tariffs are governed by the New Tariff Order 3.0. According to industry executives, in the last five years since the implementation of NTO, nobody in the value chain — broadcasters, distributors, consumers, and advertisers — has benefitted.

In fact, the NTO has led to higher tariffs for consumers.

As per the current pricing regime, the price cap on individual channels within a bouquet is fixed at Rs 19. Apart from the bouquet price, consumers need to pay a monthly charge of Rs 130 or Rs 160 as network capacity fee (NCF) to the operators.

While the levy of NCF leads consumers to pay a higher monthly bill, the obligation to carry free to air channels, creates capacity constraint for DTH operators.

For example, if the pay-TV content costs Rs 200 to a consumer, with the NCF it increases to around Rs 400.

“Moreover, different platforms have different cost structures and hence a blanket regulation despite the different business models, does not work,” Tata Play told Trai.

While batting for forbearance, operators have also urged the regulator to not allow Prasar Bharti-owned DD Free Dish to carry private channels.

This is because Prasar Bharati does not charge any monthly or annual subscription fee from viewers for DD Free Dish service, so it distorts the level playing field.

According to a report by FICCI and EY, the number of pay-TV households was 118 million in 2023. The same is expected to decline to 83 million by 2030. The number of connected TV homes, however, is expected to reach 100 million by 2030 from 35 million in 2023. Financial Express