TRAI says new tariff regime gives more power to LCOs

Smaller cable operators in India don’t have anything to worry from the implementation of the new channel pricing order from December 29, broadcasting regulator TRAI said, adding that the new regime will enhance their flexibility and standing.

The clarification comes in the wake of worries by some sections of the cable industry that the new regime — in which 80% of all pay channel dues have to be passed on to channel companies — will affect their earnings.

At present, local cable operators keep around half of the total revenue.

However, the new rules split the monthly subscriber charges into two — content charges and network charges. The cable operator can only get a share of the network charges, and a part of the 20% ‘distribution commission’ on pay channel charges.

In case of high-end packs, about 65% of the total amount paid by a subscriber can end up as content charges, thus denying local cable operators any share in about 55% of the monthly fees of high-end customers.

However, TRAI said such worries are misplaced.

“If a comparison is made between the two regimes, the new regime provides equitable revenue share,” it said.

“It is pertinent to note that the network capacity fee apply to total number of channels subscribed by the subscriber, therefore as the subscriber selects more number of channels over and above the 100 channels, the network capacity fee increases.

“In addition, the LCO gets its share in the pay channel rates in the form of distribution fee which is 20% of the MRP to be shared with MSO [feed provider],” it said in its clarifications on the new policy.

It also allayed concerns that the rules are part of an elaborate attempt to make local cable operators — technically the owners and operators of the last mile — redundant and irrelevant.

Such conspiracy theories first cropped up when TRAI came up with its digitalization guidelines in which the LCOs were reduced to ‘linemen’ whose job was to maintain the last mile and collect the monthly dues.

Most of the key functions, such as activation, billing, deactivation, formulation of various channel packages, automated activation of new channels and services etc., were made the domain of the feed providers or MSOs.

Instead of the cable feed provider serving at the pleasure of the local cable operator — as was the case since the beginning — the digitization framework sought to make the local cable operator merely an ‘agent’ of the feed provider, angering many operators.

Some of deviations have been corrected in the new order, as TRAI itself pointed out. Under the new tariff order, TRAI said, “LCOs can choose to generate bill, can do marketing and can help MSOs in forming the bouquet of both Pay and FTA channels.”

In fact, said TRAI, cable operators can now divorce the feed provider and set up their own channel distribution ‘head-end’, becoming a fully independent operator.

Part of the reason why smaller operators could not do so earlier was need to negotiate prices with channel owners.

A cable operator with only 10,000 subscribers would find it difficult to negotiate an attractive or even a viable price from channel owners, while a feed provider who supplies his signal to 500 cable operators would be able to get the channels at a much lower per-head cost.

The new regulation makes size irrelevant.

Under TRAI’s new tariff order, the price per connection offered by a channel owner has to be the same as that offered to a small cable operator with only a 100 connections.

Therefore, under the new tariff scheme, local cable operators “can become their own MSOs,” TRAI pointed out.

“Hence, the flexibility of LCOs in new framework has been increased,” it pointed out in follow up clarifications on the policy today.

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