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New TRAI rules to make HD channels cheaper by 70%, HD access fee illegal

New rules on the pricing of television channels are likely to make the viewing of HD and sports channels in India cheaper and make charges such as ‘HD Access Fee’ totally illegal.

The rules were issued on Friday and will come into effect within six months of it being published in the gazette.

The most important of the new rules is the imposition of a price cap of Rs 19 on all channels, HD or otherwise.

The only way for any broadcaster to price its channel above Rs 19 will be to take it out of all packages and sell it only as an individual channel — something that is practically impossible given the market situation.

As a result, the maximum price that any cable or DTH operator can charge for a single channel has, in effect, been capped at Rs 19 per month.

This is far below what cable and DTH operators are charging right now.

For example, according to Airtel Digital’s tariff card, almost all the HD channels are priced between Rs 50 and Rs 60 per month per channel.

Tata Sky’s pricing is more flexible, ranging from Rs 25 for regional channels to Rs 75 for sports channels. Videocon D2h, too charges between Rs 23 and Rs 60.

In other words, if you were to subscribe individually to 50 HD channels, it would cost you around Rs 2,500 per month. Under the new system notified by TRAI, it would cost only a maximum of Rs 950, but the actual number is likely to be much lower as explained below.

At present, individual channels are priced very high so as to discourage subscribers from purchasing channels one-by-one and instead go for one of the operators’ ‘packs’ — such as Gold, Diamond or Platinum.

When anyone subscribes to a ‘pack’, the DTH or cable operator is able to sell several extra channels as part of the pack in addition to the channel that the subscriber is looking for. In return for selling these ‘unwanted channels’, the DTH or cable operator gets money from the owners of those channels.

As such, they are keen to sell their channels in packs and never in the form of individual channels.

BREAKING PACKS

The new rules are designed primarily to address this issue of thrusting unwanted channels down consumers’ throats in the form of bundling.

Another rule has also been brought out towards this end. The second provision is that the total price of any pack cannot be less than 85% of the total price of all the channels contained inside it.

Right now, the price of a pack of 40-50 HD channels ranges between Rs 225-300 per month — or about Rs 6 per channel. The reason it is kept at this level is that if it is increased much beyond this range, consumers may disconnect or look for other options.

So, if the overall price of the HD pack has to be maintained at the same range, the average individual selling price of these channels cannot be more than Rs 7.05 per month due to the new 85% rule.

For example, if the individual price of these channels is Rs 10 per month, then the total HD pack price will rise to Rs 340-425. If the price is hiked to that extent, many HD subscribers will simply exit the pack and purchase 20 of these channels individually, which will cost them only Rs 200 per month. This is because most subscribers do not ‘need’ all 40-50 HD channels they get, but consume only about half of them.

HD ACCESS FEE

Tata Sky’s HD Access Charges

The second big impact of the new rules is the prohibition of the HD Access Fee.

Under the new rules, cable and DTH companies can charge money under only two headers — basic subscription and pay-channel charges.

The basic subscription charge has been stipulated at a maximum of Rs 130 per month, which enables you to buy 100 standard or 50 HD channels. If you need more channels, the operator can charge you a maximum of Rs 20 for every 25 standard channels per month. If it’s for HD channels, it is Rs 20 for every 12 HD channels.

For example, if you want to watch a total of 40 HD channels and 20 SD channels, you have to pay Rs 104 (40*2.60) as capacity charge for the HD channels and Rs 26 (20*1.30) as capacity charge for the standard channels. In addition, you also have to give pay channel costs which will depend on the channels. Going by market rates, chances are that these charges will come to around Rs 280 for the HD channels and Rs 15 for SD channels. Thus, the total will come to Rs 425.

At present, subscribing to all required packs to get all the channels that the subscriber wants costs between Rs 500-700 per month. So, many subscribers choose to let go of some channels and watch the packs suggested by the operator, which cost only Rs 425-550 per month.

The problem of bundling is more acute on platforms like Tata Sky, which charges something known as ‘HD Access Fee’ to watch HD content. In case of Tata Sky, the HD Access fee is Rs 175 per month on top of the pack charges.

Under the new scheme, all HD Access charges become illegal as they are neither capacity charges nor pay-channel charges.

NO MINIMUM LIMITS

Another factor to keep in mind is that the DTH or cable operator is free to charge whatever amount it wants, subject to the above caps. For example, even if Star Sports 1 HD is priced at Rs 19 per month, the DTH operator is free to sell it at Rs 10 per month if it is willing to take the loss. Similarly, it can charge less than Rs 130 as its basic (or capacity) charge.

Because of the way they have been framed, the new rules are likely to force many channels to reduce their subscription charges to zero to attract viewers.

The rules give “more flexibility to choose content (which) can make optimization of subscription budget easier at household level,” said Kotak Institutional Equities. “Barring top channels, price of most pay channels would be negligible (in the new system) and many channels would convert to free to air,” it added.

You can also read in full TRAI New Rules on DTH & Cable pricing.

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