Why PMO must intervene and rescue India’s broadcasting sector from the clutches of TRAI

When the Telecom Regulatory Authority of India (TRAI) asked broadcasters to comply with NTO 2.0, the regulator would not have calculated that this would backfire so badly. The country’s largest broadcasters — Disney Star India, Sony Pictures Networks India, Zee Entertainment and Viacom18/TV18 — declared their new rate cards, offering popular and driver channels on a-la-carte basis at higher MRPs.

India has 20 crore television households out of which only 3 crore households have DD Freedish. This implies that more than 17 crore Indian households that have digital addressable cable subscription and watch popular national or regional entertainment channels will be affected by NTO 2.0, which is set to shoot up their monthly cable bills.

Except for the digitisation of the cable sector, TRAI, through its overzealous policies and frequent regulatory interventions, has only added disruption to the already struggling broadcast sector at the cost of exchequers.

While introducing NTO, TRAI had claimed the new tariff order would provide better choices to the consumer and would lead to more transparency in the sector without understanding that the last mile was not equipped to deal with the requirement of the NTO, which is to encourage consumers to opt for a-la-carte channels. Under attack from all stakeholders, the regulator was forced to introduce a ‘best fit plan’.

History is repeating itself just after two years. As a result of the implementation of NTO 2.0, cable bills will go up by 30-35% per month. The pre-NTO system was working perfectly well as the hyper-competitive market was/is capable of taking care of the pricing mechanism.

When the idea of NTO was building up, the authority led by then TRAI Secretary Sunil Kumar Gupta and Chairman RS Sharma had a lot against the five largest broadcasters who own and operate over 220 channels, when they repeatedly said they will not let ‘those five broadcasters’ kill small broadcasters. They were misled by the cable operators’ conspiracy theories that large broadcasters are suppressing their businesses as they have more negotiating power with a large number of channels. No one knows how this is wrong in any manner in any business.

Having said that, the regulator kept devising new ways to stop broadcasters from taking their niche channels to viewers. While it maintained that broadcasters are free to price their channels according to their choice, it always opposed the discounts they were giving. If the broadcasters were offering 50% discount on bouquets, the regulator said they were doing this to force consumers buy their bouquets instead of a-la-carte channels.

The regulator said the broadcasters’ MRPs are hypothetical and arbitrary if they can offer this much discount. This is a completely bizarre and awful argument. Does this mean all the products offering discounts without ‘sale windows’ either online or offline are priced arbitrarily?

TRAI’s obsession to control pricing led to a Rs-19 cap on the MRP of a channel to be a part of any bouquet. It was later reduced to Rs 12 with twin conditions for forming bouquets without any due deliberations with the stakeholders.

The regulator kept raising questions if there was any mechanism to fix MRPs of content as it believed that any other product has a defined logic of pricing.

Is there a logic why a bottled water costs between Rs 20 to Rs 100 or why a packet of chips, which is made of potato worth Rs 2, has an MRP of Rs 30-80. Has the government ever tried to control this?

Moreover, does entertainment fall in the essential category that a regulator has to regulate its pricing? Isn’t the government earning and letting oil companies earn on petrol and diesel, both essential commodities, which is putting a huge burden on the people?

Why, in a free-market economy, is a regulator rattled with a broadcaster’s profit, which is neither an NGO nor a government enterprise? Isn’t it a regulator’s job to felicitate the growth of the sector rather than to prevent sectoral growth by saying they should earn a limited profit?

It is understandable if a distribution platform wrongly interprets that broadcasters are growing by using their infrastructure. But is it right on a regulator’s part to take sides in this battle of vested interest?

TRAI first killed the aggregation business where smaller broadcasters and channels were benefiting from bundling with large broadcasters. After that, the regulator started showing concern for the same small broadcasters when they said they will not allow ‘those five broadcasters’ to kill the smaller broadcasters. This raises a doubt if the regulator was ever bothered about small broadcasters and killed the aggregation business on the distributors’ complaints.

After segregating small from large, TRAI started pulling the large broadcasters down to the level of small in the name of bringing parity, only because just killing the aggregation business was not enough to satisfy one stakeholder.

It proves that TRAI does not have any knowledge about the content and IP business and for them, every content, be it of inferior or superior quality, costs the same.

The actions of the regulator were aimed at stopping the large broadcasters from pushing niche channels with driver channels. This led to closure of several niche but iconic channels, including AXN, FYI18, Star World and Baby TV.

The regulator was of the view that it could succeed in forcing all the premium channels to be offered at nominal MRPs or free of cost. With the broadcasters publishing new RIO under NTO 2.0, the regulator has failed to achieve this.

The other conclusion drawn from the regulator’s frequent overregulation is that it wanted most of the channels from large broadcasters to be offered on a-la-carte basis like a small broadcaster, which operates one or two channels, in order to bring parity. This is happening but at the cost of the end consumer’s suffering.

Gupta, in a conversation with BestMediaInfo.com, had said that the broadcasters should earn from advertising and not consumers. At a time when the world is moving towards subscription revenue, the regulator is pushing the advertising-led economy. The country has already seen what the advertising-led economy has done to news television.

While it is clear that Gupta and Sharma went horribly wrong with their reading of the broadcast industry, what is stopping the new team at TRAI from reversing their faulty policies to ensure orderly growth of the sector?

High time to pull out broadcast sector from TRAI’s clutches
In 2004, the Ministry of Finance had fixed a base price of Rs 70 for cable operators when there were 60 million cable TV households. They said it will go down when the subscriber base goes up.

The world over, a large consumer base means price reduction whereas cable TV in India is becoming costlier with a growth in subscribers. When DAS happened, the base price of cable subscription increased from Rs 70 to Rs 100, when cable TV subscriptions went up to 102 million. With NTO, it grew to Rs 130 but subscriptions reduced by 10%.

Now that the subscriptions are again at 2017’s level, the prices are set to rise. Is there any logic except the one that TRAI is listening to only one party?

The big picture that TRAI failed to understand was that the broadcast industry did need reforms but they weren’t to be done at the level of broadcasters but at the level of cable operators to ensure quality of service and proper billing to stop revenue leakages of both the broadcasters and exchequer.

One of the reasons TRAI initiated the NTO was because the cable operators alleged that there was a monopoly of big broadcasters and the operators weren’t able to make good commissions.

Can you as a customer change your cable operator (who functions as a local mafia) in your area? This is a natural monopoly. Opening up of the options has not happened at the last mile.

There’s a potential to add another 90 million homes and most of them will come through the cable operator network if the regulatory burdens are reduced. Instead of relying only on making money through bad business practices, they must see larger opportunities with a larger consumer base because this is what they earn from in the longer term.

If India has to improve TV’s reach, if India’s broadcast industry is to flourish, the government must revisit the role of TRAI.

Former Information and Broadcasting Minister Manish Tewari in his column on Outlook accepted that giving broadcasting to TRAI in January 2004 was a mistake in the first place and that it had hobbled the growth of the sector.

As the broadcasting businesses are nearing the inevitable, it is yet to be seen if the government comes forward to take it out of TRAI’s clutches and save the sector, which is one of the largest job creators. BestMediaInfo