Why TRAI is seeking comments on broadcasting, cable pricing framework

The Telecom Regulatory Authority of India (TRAI) has released a consultation paper seeking comments on pending issues pertaining to prices and discounts for television broadcasting and cable services.

The paper was issued based on the deliberations of a stakeholder committee constituted in 2021 to discuss the implementation of the New Regulatory Framework 2020. The issues pertain to the price of channels provided as part of a bouquet – an assortment of channels offered as a bundle; the discount structure on the pricing of bouquets, and additional discount offered by broadcasters to distribution platform operators (DPO).

DPO are distributors of television channels such as multi-system operators (MSO), DTH operators, headend in the sky (HITS) operators, and internet protocol television (IPTV) operators.

The New Regulatory Framework 2020 was notified by TRAI in 2020 and brought in amendments aimed at promoting competition and providing customers varied choices when it came to television viewing.

The Indian Broadcasting & Digital Foundation (IBDF) and others challenged its provisions in the Bombay High Court (HC), which upheld the regulation barring one of its provisions. It was also challenged in the Kerala HC, which also upheld the regulation. In 2021, the matter was taken up in the Supreme Court, but the petition was withdrawn a few months ago.

Considering that no interim relief was provided by the SC in this matter, TRAI issued a letter in October 2021 seeking broadcasters’ compliance with the provisions of the 2020 framework, which included lowering the price of a-la-carte channels and bouquets. Thereafter, the broadcasters submitted their reference interconnect offer (RIOs), a document with technical and commercial terms and conditions that an MSO needs to sign to get TV signals.

“New tariffs announced by the major broadcasters reflected a common trend i.e., the prices of their most popular channels including sports channels were enhanced beyond Rs. 20/- per month. Complying to the extent provisions, as regards the inclusion of pay channels in a bouquet, all such channels priced beyond Rs. 12/- (per month) are kept out of the bouquet and are offered only on a-la-carte basis. The revised RIOs as filed indicate a wide-scale changes in composition of almost all bouquets being offered,” TRAI said in the consultation paper.

These new tariffs spurred words of concern from DPOs, associations of local cable operators (LCO) and consumer organisations highlighting difficulties they may face in implementing these new rates in their systems and in migrating consumers to the new tariff regime.

On the basis of these concerns, TRAI again started engaging with stakeholders before finally formulating the stakeholders committee composed of members from the IBDF, All India Digital Cable Federation and the DTH Association.

The key issues are:

Ceiling on MRP of channels in a bouquet
In the Tariff Amendment Order 2020, the authority prescribed a ceiling of Rs 12 on the maximum retail price (MRP) of any channel to be part of a bouquet. However, in the RIOs published by the broadcasters, the MRP of most of the popular channels was fixed above Rs 12. As a result, most popular channels cannot be made part of bouquets and are to be provided to subscribers only on a-la-carte basis, TRAI said in the consultation paper.

The regulator pointed out that the stakeholders raised concerns that would not just mean additional requirements technologically but also be inconvenient for customers in the form of higher prices and so on.

In this regard, TRAI has asked in the consultation paper if it should continue to prescribe a ceiling price of a channel for inclusion in a bouquet. It also asked about steps that can be taken to ensure that popular television channels remain accessible to a large segment of viewers.

Discount structure on bouquet pricing
In the 2020 framework, the TRAI proposed two clauses that prescribed a relationship between the sum of a-la-carte channel and bouquet prices.

The rationale for the two clauses, also referred to as the “twin conditions,” was to prevent the ‘perverse’ pricing between a bouquet and individual pay channels.

The first clause said, “The sum of maximum retail prices per month of the a-la-carte pay channels forming part of a bouquet shall in no case exceed one and half times of the maximum retail price per month of such bouquet.”

The second read, “The maximum retail price per month of any a-la-carte pay channel, forming part of such a bouquet, shall in no case exceed three times the average maximum retail price per month of a pay channel of that bouquet.”

The second condition was claimed to have been introduced to ensure that a bouquet contains channels with similar prices.

However, the twin conditions were challenged in the Bombay high court and the second clause was set aside.

As the second condition has been set aside, the purpose of prescribing the two conditions has been impaired, the regulator said.

“One has to ascertain whether the first of the twin conditions is independently implementable or not. Furthermore, is it sufficient for fulfilling the desired objective?” the TRAI asked.

In this regard, the TRAI has asked whether there should be a ceiling on the discount on the sum of a-la-carte prices of channels forming a part of the bouquet. It also asked whether channel prices in bouquets can be homogenous, and if the MRP of an a-la-carte pay channel that is part of a bouquet should be capped with reference to average prices of all pay channels in the bouquet.

Additional discount to DPOs
The existing rules state that a broadcaster is permitted to offer a maximum discount of 15 per cent on the MRP of a pay channel or bouquet of pay channels to DPOs in addition to the distribution fee. However, TRAI observed that broadcasters offered the discount as an “incentive only on subscription of certain minimum subscription of bouquets of pay channels to DPOs”.

“The Authority also noted that offer of penetration-based incentives on the bouquets, by the broadcasters to the DPOs, may lead to pushing of bouquets by DPOs to consumers, in order to avail penetration-based incentives. This approach was defeating one of the main objectives of the new regulatory framework of promoting the consumer choice either to accept bouquet or a-la-carte channels as per his/her choice,” TRAI said in the consultation paper.

As a result, TRAI amended the rules and said the 15 percent discount will be provided only on MRP of a-la-carte pay channels (as opposed to bouquets earlier). However, during recent discussions with DPO representatives, they appealed that the discount on bouquets be reinstated.

TRAI has asked whether discounts should be provided by broadcasters to DPOs on a-la-carte channels and bouquets.

Written comments on the consultation paper are invited by May 20 and counter-comments, if any, by June 6. Money Control