Broadcasters oppose TRAI’s second move to make TV channels cheaper

Pricing difference between channels and packs

TV channel owners have indicated that they may again take media regulator TRAI to court over its latest move to ‘unbundle’ televisions channels. TRAI’s latest move, unveiled in a consultation paper earlier this month, is the second such in the last three years.

Star India and Discovery Communications had taken TRAI to court in 2017 after a similar move, and managed to scuttle the implementation of a rule that would have enabled consumers to buy channels one-by-one, instead of having to buy them in bunches or packs.

At the time, Star India had managed to get a judgment from the Madras High Court striking down the TRAI rule that would have made individual channels much cheaper than they are now by linking their prices to those of their packs.

Not content with the extent of its victory, Star India appealed the Madras High Court decision in the Supreme Court, which, in retrospect, turned out to be a mistake.

The Supreme Court dismissed Star India’s appeal and upheld TRAI’s stand that package-related discounts were distorting consumer demand in the market and had led to anti-competitive practices.

The Supreme Court also held that TRAI was well within its rights to impose a ratio-based limit on the prices charged by broadcasters for their individual channels.

However, because the appeal in the Supreme Court was filed by Star India and not by TRAI, the Supreme Court did not explicitly strike down the Madras High Court’s order on pricing, as Star India did not raise the pricing issue in its appeal. According to the principles of jurisprudence, a court cannot rule on a matter that has not been raised by the petitioner.

“Hon’ble Supreme Court on 30th October 2018 dismissed the appeals, upholding the power of TRAI to regulate tariffs for broadcasting services,” TRAI pointed out in its latest consultation paper issued last week.

“The Hon’ble Supreme Court’s gave no specific decision on the issue of capping on discount on sum of prices of a-la-carte channels forming part of the bouquets as provided for in third proviso to clause 3 (3) of the Tariff Order, as the issue was not before the Hon’ble Supreme Court for adjudication. Therefore, the Authority felt it appropriate not to enforce the capping on discount on sum of prices of a-la-carte channels forming part of the bouquets at 85%, as provided for in the third proviso to clause 3(3) of the Tariff Order 2017,” it explained.

TRAI also said that it expected broadcasters to show some level of maturity in their pricing, given the comments from the Supreme Court upholding its position that broadcasters were forcing consumers to buy channel packs by making individual channel prices very high.

“..it was expected of the broadcasters to take a holistic view of the matter and give due consideration to the observations of while pricing their bouquets and channels. Reasonable expectations were cast upon the Broadcasters that they should exercise the flexibility granted to them in a fair and responsible manner with due consideration to the rights and aspirations of the consumers. However, this appears to be not the case.

“The Authority has observed from the tariff declared by the broadcasters under new regulatory framework that broadcasters are offering bouquets at a discount of upto 70% of the sum of a-la-carte rates of pay channels constituting those bouquets. It indicates that in absence of any restriction on the discount on the offering of bouquets, broadcasters are making prices of a-la-carte channels illusory thereby impacting the a-la-carte choice of channels by consumers and giving huge discounts on bouquets to push even those channels which are not the choice of subscribers.”

INDUSTRY RESPONSE

The Indian Broadcasting Foundation — which represents players like Star India, Sony Networkand Entertainment — has now challenged TRAI’s latest move to control the prices of individual channels.

It said the move should be abandoned, given that it was struck down by the Madras High Court.

It said TRAI’s move to bring individual channel prices in line with pack prices “goes against all norms of a stable regulatory regime so necessary for the economic advancement of any industry.”

“TRAI’s consultation paper proceeds on the assumption that consumers are being denied their choice of channels by excessive discounts on bouquets. IBF wishes to point out that the cap on bouquet discounts under the NTO was struck down by the Madras High Court as arbitrary,” it said.

The industry body said people are largely happy with the new system and pricing and have migrated to it in time.

BROADCASTERS VS DPOs

Meanwhile, the other half of the industry — distributors — are with TRAI in its latest move to bring individual channel prices in line with pack prices.

Like in the case of the end-consumer, the current pricing structure has also made it almost impossible for cable and DTH companies to pick and choose the channels that they want to carry on their platform.

For example, if a cable operator in Kerala wants to distribute only 3 popular channels from a group like Star or Zee, it may end up having to shell out Rs 40-50 per month for the same.

However, if the same cable operator is willing to carry 8 or 10 channels on its network, it would be able to get the above 3 channels at around Rs 10-15, going by prevailing prices.

This policy by channel owers has effectively forced cable and DTH operators to carry a lot of ‘junk’ or ‘unwanted’ channels on their platforms — clogging up their networks and preventing them from carrying the channels of smaller broadcasters. Most cable and DTH operators have a capacity to carry only around 400 channels or so, and must refuse more channels once this limit is reached.

The situation has led to problems for smaller broadcasting companies — such as those that have only 1 or 3 channels in total, in getting space on cable and DTH platforms, which have been eaten up by junk channels.

Distributors, such as cable and DTH operators, are therefore keen for the packaging system to be dismantled.

TRAI described the current situation in its latest consultation paper.

“Bouquets formed by the broadcasters contained only a few popular channels. The DPOs were often forced to take all channels of a broadcaster as otherwise they were denied the popular channels altogether. To make the matters worse, the DPOs had to pay as if all the channels were being watched by the entire subscriber base, when in fact only the popular channels might have high viewership.

“In such a scenario, at the retail end, the DPOs had no option but to somehow push all channels to maximum number of customers so as to recover costs. This marketing strategy based on forcing all the channels upon the subscribers through bouquets essentially resulted in ‘perverse pricing’ vis-à-vis the individual channels. Thus, in the process, the subscribers, in general, ended up paying for “unwanted” channels and this, in effect, restricted consumer choice. Bundling of large number of unwanted channels in bouquets also resulted in artificial occupation of distributors’ network capacity.”