Consumers will not benefit from TRAI’s amendments to new tariff regime, say broadcasters

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Jolted by the Telecom Regulatory Authority of India’s (TRAI) modifications to the new regulatory framework, the leading pay-TV broadcasters under the aegis of Indian Broadcasting Foundation (IBF) came together to raise concerns over the new changes that they believe ‎will have far-reaching consequences for the sector.

The IBF press conference was attended by Sony Pictures Networks India (SPNI) MD and CEO NP Singh, who is also the president of the foundation, Star/Disney chairman Uday Shankar, ZEEL MD & CEO Punit Goenka, Viacom18 Group CEO, and MD Sudhanshu Vats, Discovery South Asia MD Megha Tata, India Today Group chairman Aroon Purie, Eenadu Director I Venkat, and Turner India MD Siddharth Jain.

IBF president NP Singh began the address by touching down on four key issues about the new amendments that the broadcasters find problematic. These are, 1) arbitrary reduction of MRP cap, 2) Imposition of twin conditions on bouquet pricing, 3) restricting incentives only to a la carte, and 4) impact of network capacity fee (NCF) on consumer pricing.

Singh noted that the broadcasters collectively incurred a cost of Rs 1000 crore on implementing the new tariff order (NTO). Over and above that, the industry lost 12-15 million subscribers due to the transition to the new regime.

Just when the NTO was settling, the TRAI came with these amendments which Singh said will “make further disruptive changes in an industry already grappling with the paradigm shift to an MRP based pricing regime”.

On the reduction in MRP cap, Singh said that the channel pricing should be determined through open market forces rather than through the arbitrary fixing of caps without any fundamental basis.

He further stated that the reintroduction of the twin conditions will negatively impact the pricing and packaging of bouquets. “Another fall-out of the twin condition restrictions is that it limits the number of channels in the bouquet, which in turn reduces the value delivered to consumers. Moreover, when SD and HD channels are clubbed together in a bouquet, the same price reduction is applicable to both in spite of HD being a premium offering.”

Singh also criticised the TRAI’s move to restrict incentives only to a la carte offerings by removing discounts on bouquets. “From the regulator looking at the interests of all stakeholders and the industry at large, we expect a market-facing and non-discriminatory approach to regulation.”

He also asserted that consumers prefer bouquets over a la carte offerings. He cited the example of festive offer launched by broadcasters in which the price of premier channels was reduced to Rs 12. Despite the price reduction, there was no major uptick in the a la carte offering. On the contrary, the broadcasters suffered revenue losses in this whole exercise.

Regarding the impact of NCF, Singh said that this is the single largest component of the end consumer price that is not being addressed. He also highlighted that in the current NTO if a consumer is paying say Rs. 275 per month as his/her bill, 60% goes to the distribution platforms, 15% towards taxes and only 25% comes to pay broadcasters.

“This when it’s the broadcasters who are creating the content, investing in talent and capability, and taking all the risks related to content development. Why then is the focus only on the broadcaster’s component of revenues, which is only 25% of the consumer bill?”

In response to a question, Singh said that the IBF and its members are contemplating whether to challenge the new amendments through the foundation or individually.

Star/Disney India chairman Uday Shankar noted that if the regulator is so concerned with bringing down the price for the consumer then why, in the name of an NCF, are cable operators, distributors being allowed to charge as much as Rs. 160 for free to air (FTA) channels. The same FTA channels are available on DD Free Dish for free.

He issued a warning saying that the long term effect of NTO 2.0 will be highly disruptive and will affect the quality of content. He said that he does not see a case of existence for the smaller channels as most of them will have to shut shop in the next couple of years. Further, consumer choice will go down.

He also stated that the ability of the broadcasters to go after things like sports rights and compete with streaming services will go down. The quantum of investment in content will be impacted. The longtail channels will get wiped out. It will affect things like the ability to create content, the range of content available and also the industry’s ability to employ people.

Shankar pointed out that the TRAI is punishing the broadcasters for the mess that it has created. “If a thoughtful, comprehensive, collaborative tariff exercise was done two years ago, then what is the need for this one? It clearly means the previous exercise was not thoughtful.”

ZEEL MD & CEO Punit Goenka said that the industry and consumers had just settled following the implementation of the MRP regime. He added that another change of this magnitude will cause inconvenience and disruption. He also stated that the amendments have been made keeping the consumer welfare in mind, however, the benefits may not be realised by them due to execution-related changes.

Viacom18 Group CEO and MD Sudhanshu Vats said the NTO in its original form has met the objectives by being beneficial for all stakeholders even as all the stakeholders were getting used to it. He said that the NTO has given choice to consumers, brought transparency and reduced litigations.

“Statistically, overall 94% of Indians are aware of the NTO and the choices they have because of the efforts made by the broadcast industry collectively. The month on month churn in the industry shows that people are continuously fine-tuning their choices. The other objective of NTO was transparency which it has also brought in. The question, therefore, is “what is the fundamental need to change again? In my opinion, there was no need,” questioned Vats.

He further added India is a heterogeneous country with different choices and abilities to pay. In every sector, there is a wide spectrum and that needs to play out more in Indian media as well. “This push for consistency shouldn’t come in the way of the industry’s and economy’s growth. In the M&E industry, there is a lot of dynamism and flux and hence the broadcast sector needs to be able to settle down. If there has to be any change we need to allow for enough time for its implementation and also changes shouldn’t be suggested so frequently.”

Discovery MD, South Asia Megha Tata called for a light-touch policy framework. She agreed that TRAI wants to micro-manage the sector and that could be detrimental to the industry’s growth. She noted that the country is already the cheapest market in the world in the broadcast space. She said that there is no evidence of market failure or of high channel pricing compared to other markets that warrant TRAI to have a cap on things like discounting and bouquet formation.

She asked if TRAI had taken the feedback of all the broadcasters before coming up with this amendment. She noted that a progressive policy framework must be impartial to all the stakeholders in the ecosystem. She argued that the new amendments will impact the equilibrium between the stakeholders in the industry. “We are here to express our concern as the future of this sector is in jeopardy with such micro regulations.”

India Today Group Chairman and Editor-in-Chief Aroon Purie noted that the government decided that a subsidised cable connection should be an essential commodity but he noted that it is not like food and clothing. That he said is the fundamental issue and broadcasters should not give up the fight on the way it conducts its business. He noted that market forces should have a say in things given that entertainment is not an essential commodity.

He said that a regulator’s job is to facilitate and ensure a level playing ground for everybody and encourage industry growth. But the regulator he said is strangulating the industry instead of facilitating it. He accused the regulator of killing the golden goose which lays the eggs with all the regulations. He likened the situation to someone having his/her hands and feet being tied and then being told to swim. “It does not work that way.” He said that the new TRAI regulations are not good for the country or for the industry.