TRAI TARIFF ORDER: Calcutta High Court lifts stay, gives breather to LCOs

The Calcutta High Court has vacated the stay it imposed on the implementation of the new tariff scheme by TRAI, even as it gave extra time for cable operators to negotiate a deal with their feed suppliers.

The stay was imposed two days ago after cable operators said that the new rules would hurt them and make them dependent on the feed provider, also known as the MSO.

This was countered by the TRAI yesterday with the argument that the cable operators were not forced to sign any document, and that it was up to them to find a feed provider who would give them the terms that they want.

Upon this, Justice Arindam Sinha had said that he wants to make sure that the cable operators do in fact have this choice and if that was indeed the case, the judge had observed, he would lift the stay order.

Today, the both sides put up their arguments, and the judge lifted the stay order, presumably because TRAI was able to make out a case that cable operators were not being forced to sign away their rights as alleged by them.

The judge also gave cable operators time till Feb 8 to find a suitable feed provider and sign a signal supply agreement that they were OK with.

In case they were not able to sign it, they would not be able to continue to distribute channels from their existing signal supplier until they signed an agreement that was compliant with the new TRAI tariff regulations.

POWERLESS

The whole controversy revolves around the new ‘pro-forma’ agreement that TRAI has come up for use by cable operators and their feed suppliers.

Cable operators feel that signing the pro-forma agreement amounts to transferring away their customers to the feed provider. They approached the court saying TRAI was favoring the MSOs and their very survival was at stake.

TRAI countered by arguing that the pro-forma agreement was just an option, and that any cable operator can sign any agreement with any MSO as long as both parties were agreeable and the agreement was in conformity with the new regulations.

The latest move by the court gives cable operators a bit of a breathing room, but keeps them under pressure to find a suitable MSO to tie-up with.

It is also possible that cable operators may join together and float an independent MSO that does not impinge upon their rights, as has happened in many places.

However, what remains to be seen is if they have the time to pull such a move, and whether existing MSOs come to the negotiating table.

HISTORY

Feed providers are a later evolution in India’s cable industry, which was created by thousands of small cable operators who strung together cable from one house to another.

Eventually, they realized that instead of each cable operator setting up their own ‘head-end’ — a centralized facility that collected the TV signals using several dish antennas — they can ‘borrow’ the signal from a player whose only job was to provide such signals to cable operators.

Therefore, to save costs, cable operators started dismantling their head-end, and instead started taking the signals from a third party that eventually came to be known as the MSO or the multi-system operator.

This signal would then be amplified and supplied to the cable operators’ customers.

As things stand now, the cable operator can at any time cancel his agreement with his feed provider and either set up his own head-end or sign a feed agreement with another MSO.

In their complaint, the cable operators said that TRAI was trying to stand this arrangement on its head by handing over the customers to the feed provider and making the cable operator dependent on the MSO, instead of the other way around.

According to a particular provision or schedule in the new rules, the monthly bill will now be made in the name of the feed provider (MSO) instead of the cable operator, the association told the court.

“Referring to Schedule VI [the advocate for the cable operators] points out, the agreement will provide for billing of subscribers to be in name of Multi System Operators (MSO). MSO will receive payment of subscriptions paid by subscribers. Revenue share per clause 12.1 of the agreement shall be paid by MSO to local cable operator (LCO) on receipt of invoice from LCO,” the Calcutta High Court had noted in its stay order.

“This, if implemented, his clients will be out of business,” the court said, quoting the advocate for the cable operators.

This was countered by TRAI, which said that the Schedule VI was just a ‘model agreement’ between the feed provider and the cable operator, and that cable operators were free to enter into any mutually negotiated agreement with any MSO if they so wished.

However, the advocate for the cable operators said that such a possibility was remote, given that the TRAI had made things so favorable for the MSO in its model agreement.

“There is no possibility of MSO agreeing to any other term or condition apart from this heavily loaded in its favour, standard format agreement prescribed in Schedule VI,” he pointed out.

The advocate also pointed out that the model agreement stipulated that out of the 100 rupees collected, the feed provider would keep 55 rupees and the cable operator — the original owner of the network — will get only 45 rupees.

“… revenue share ratio is also unviable for his clients considering it is the cable network and equipment of his clients which will reach contents to the subscribers. Share of revenue of his clients [cable networks], is of lesser percentage of the amount in bills to be raised in name of MSO and money collected by it,” the advocate argued.

The court noted that the pleas of the cable operators “betray apprehension regarding them losing their livelihood.

“It is a matter of concern. Since Court does not have information regarding said order dated 18th December, 2018 having been stayed, Court is inclined to stay, till 18th February, 2019, implementation of the [TRAI tariff] policy..”

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