New TRAI Rules : Impact On TV Channel Rates, DTH, Cable Operators.

"Pay for what you watch" - this seems to be motto of the new regulations and tariff order of the Telecom Regulatory Authority of India(TRAI), applicable to channel broadcasters, DTH and cable TV operators from February 1.

Which are the new regulations?

The new rules set to revolutionise TV viewing are : -Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 and 'Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017, framed by the TRAI in exercise of powers under Section 36 TRAI Act.

They were notified initially in March 2017 and re-notified on July 3, 2018, fixing December 31, 2018 as the time limit for service providers to migrate to the new framework. This time limit has been extended to January 31, 2019.

What is the impact?

At present, the options available to consumers to optimise channel packages as per their tastes and preferences are limited. They end up availing packages having several channels, paying for many unwanted channels which are thrust upon them.

The new regulation and tariff order proposes to change this scenario by enabling subscribers to pay for only those channels they want to watch.

The significant changes in the new framework will be :

• Service providers have to offer a basic package of 100 free-to-air channels at a base price. The ceiling limit of base price has been fixed at Rs.130 per month, excluding GST
• Pay channels must be offered to customers on a-la-carte basis. This means, a customer desirous of watching a particular pay channel should have the option to subscribe to that channel alone by paying the price fixed for it, without having to purchase a package/bouquet of that channel with other channels at a higher price.
• Service providers can offer bouquets/packages of channels. The MRP of a pay channel offered in a bouquet cannot exceed Rs.19
• Discount offered on a bouquet cannot be more than 15% of the a-la-carte sums of the channels comprised in the bouquet
• The sum of discount on television channels and the distribution fee paid by broadcasters to a distributor of television channels, cannot exceed 35% of the maximum retail price of the television channel.
• Television channels cannot be priced differently for different distribution platforms.
• High definition and standard definition channels cannot be in the same bouquet of channels.
• Pay channels and free to air channels cannot be in the same bouquet.
• The MRP of the channels needs to be displayed on the TV screen through the Electronic Program Guide. In case of free channels, it should be indicated so.

The objective of new rules.

Presently, consumers are being provided a large number of TV channels, some of which may not be watched by them at all. According to TRAI statistics, 80% of customers watch less than 40 channels out of the 200 or so channels offered to them. Only 15% of customers are likely to watch more than 100 channels. The new framework stipulates that the subscribers will not be pushed with unwanted channels; rather they will have freedom to choose only those TV channels that they want to see and pay accordingly

The new regulations were challenged as unconstitutional by STAR group, and other broadcasters in the Madras HC first. The Madras High Court repelled the challenge by 2:1 majority. The matter was taken to Supreme Court. The Supreme Court also upheld the regulations and tariff order.In the judgment of SC authored by Justice Nariman, the reasons for these regulations are discussed.

The Court held that TRAI intended to regulate tendencies of large broadcasters to force customers to subscribe to large bouquet of channels. The TRAI acted with the objective to "facilitate competition and promote efficiency in the operation of broadcasting services so as to facilitate growth in such services" and "harmonize the interests of service providers and consumers".

Why discounts are capped?

TRAI found that bouquets were being offered at discount of 80-85% of the sum of a-la-carte rates, tempting customers to subscribe to bouquets. Therefore, the a-la-care options were illusory, as customers were forced to move to bouquets. Bouquets formed by the broadcasters contained only few popular channels. The distributors of television channels had to take the entire bouquet as otherwise they were denied the popular channels. Two problems were identified by TRAI due to this practise :-

• Public end up paying for unwanted channels, restricting choice
• Bundling of unwanted/unpopular channels in bouquets results in artificial occupation of network capacity by a broadcaster, creating barriers for entry of new channels.

So, discounts are capped at 15% of a-la-carte rates. Approving this, the SC observed :

"when high discounts are offered for bouquets that are offered by the broadcasters, the effect is that subscribers are forced to take bouquets only, as the a-la-carte rates of the pay channels that are found in these bouquets are much higher. This results in perverse pricing of bouquets vis-à-vis individual pay channels. In the process, the public ends up paying for unwanted channels, thereby blocking newer and better TV channels and restricting subscribers' choice"

Reason for capping the MRP of pay channel at Rs. 19 in a bouquet.

This is done to ensure that bouquet prices are not abnormally high. The broadcasters have full flexibility to fix prices of pay channels on a-la-carte basis. However, when they offer the channel in a bouquet, its price cannot be higher than Rs.19. On this, the TRAI observed :

Abnormal high price of a pay channel may result in higher price of a bouquet leading to adverse impact on subscribers' interests. It is an established fact that bundling of channels complicates and obscures their pricing. Prices are obscured because subscribers do not always understand the relationship between the bundle price and a price for each component. However, the bundling of channels offers convenience to the subscribers as well as services providers in subscription management. Keeping in view these realties and to protect the interests of subscribers, the Authority has prescribed a ceiling of Rs. 19/- on the MRP of pay channels which can be provided as part of a bouquet

The SC noted that INR 19 was an improvement over the erstwhile ceiling of INR 15.12 fixed by the earlier regulation which nobody had challenged.  

Why pay channels and free to air channels, HD & SD channels should not be bundled?

The TRAI opined that pricing free channels at retail level and bundling them with pay channels leads to price distortions by bloating the bouquet size. Also, creating separate pay bouquets will ensure consumers are provided true visibility of pay channel pricing.

HD channels cater to a more affluent section. Digital devices having high-end techniques are needed for enjoying HD channels. The customer base of HD and SD channels are hence different. So, TRAI prohibited clubbing of HD and SD channels together, so that bouquets prices are not escalated beyond affordability of SD customers.

Customer options

For a base price of Rs.130, a customer will get 100 free-to-air channels, which include 24 mandatory channels of Doordarshan

Out of the 535 pay channels, the customer has to give options of preferred channels.

Over and above the free channels, the customer can choose the pay channels, either on a-la-carte basis or by taking bouquets offered by operators.

For example, a customer who watches only sports channels, need only shell out Rs.130 (base price for free channels) plus the prices of the sports channels selected. The prices of Sony ESPN HD and Star Sports 1 HD are Rs.7 and 19 respectively. So, if the customer is choosing these channels in addition to the free channels, the monthly bill will be Rs.156(130+7+19) plus GST. The customer has thus the option to cut out other unwanted channels.

To illustrate further, bouquet offered by Times Network, having Time Now, ET, Mirror Now and Zoom is priced at Rs.5 per month. A bouquet of Tamil channels of Sun Network is available at Rs.45 per month.

This is likely to bring down monthly DTH/cable bills.

The TRAI has advised the customers to give their options to the operators. If the option is not exercised by January 31, pay channels will be disrupted from February 1 and the customer will only get the base package of free channels.

What if annual subscription charges are paid by a subscriber in advance?

In such cases, the already availed plan will continue without change until the expiry of the lock-in period.However, if the subscriber wants to switch over to a new package after 1st February, 2019 then the proportional balance amount of existing package as on the date of switch over may be adjusted for the new package prices after 1st February, 2019.

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(image sourced from here)