TRAI TARIFF: Tata Sky waives network charges on some channels

With Sun Direct offering zero incremental network charge on all its channels, including free, paid and HD, market leader Tata Sky too is offering waive network charges, but only on select channels.

As reported earlier, Sun Direct is offering all its channels without network charges, provided the user pays the minimum amount of Rs 130 plus tax, or Rs 153 per month.

The only additional charge that Sun Direct users have to pay beyond the fixed amount of Rs 153 are content charges for pay channels.

Tata Sky too is offering a similar scheme, but not to the same extent.

Instead of removing network charges on all channels, Tata Sky has tied up with certain broadcasters to offer their channels without network charges.

Also, unlike in case of Sun Direct, this facility is largely restricted to free channels, and not as much on pay channels or HD channels.

WHAT IS A NETWORK CHARGE?

Under the new system of TV channel tariff mandated by the TRAI to come into effect from Feb 1, all cable and DTH providers will provide two bills for their customers.

The first bill, also called network bill, will be for their own services (pipe), while the second bill will be for the content that they are watching.

For example, most operators have decided to charge Rs 154 for a pipe of 100 channels.

This is the money that the customer is paying the DTH or cable company for the pipe or network that allows them to watch TV channels. This amount is used by the cable and DTH providers to pay for satellite links, cable maintenance and so on.

This bill, called the network charge, will vary depending on the size of the pipe that you subscribe to. You can subscribe to a 100-channel pipe, a 120-channel pipe or even a 600-channel pipe.

A 100-channel pipe costs Rs 154, while a 600 channel pipe can cost up to Rs 850 per month.

The minimum size of the pipe is 100 channels and this can be used to watch 100 normal channels or 50 HD channels.

If the user wants to watch more channels than that, then he or she has to increase the size of the pipe, and for this, the DTH or cable company can charge extra.

Most players are charging at the rate of Rs 1.20 to Rs 1.33 per extra channel. In case it’s an HD channel, it will be Rs 2.40 to 2.66 per channel.

The theory behind this network charge — also known as network capacity fee or NCF — is that if you are using a bigger pipe, then you pay more for the same.

This is similar to broadband service, where a user who has a 20 Mbps unlimited connection pays more than a user who has a 10 Mbps connection.

Once the user has purchased a certain capacity, he or she can then start filling up the capacity with the channels of his or her choice, just like a broadband user can use his connection to watch movies or chat or send emails.

Hence, after a person purchases a capacity of 100 channels by paying a network charge of Rs 153, he then proceeds to fill up that capacity by adding channels of his choice.

Here again, there are two types of channels — free and pay.

Free channels, also called FTA or free-to-air, are those that come with no content charges, and can be added by any subscriber without paying content charges as long as he has free capacity in his pipe.

As mentioned above, free channels do not come with content charges, and adding them will have no impact on the overall bill if the customer has free capacity in his pipe.

The second type of channel is a pay channel. These come with content charges ranging from 12 paise to 22 rupees per month.

So, even if you have free capacity to add channels, you still have to pay extra charges — called content fees — if you add these channels to your pipe.

In terms of an example, a person who has purchased a capacity of 120 channels for Rs 185 per month can subscribe to 120 free channels, and his total monthly DTH or cable bill will still come to only Rs 185. This is because there are no content charges involved.

However, if the customer chooses to fill up the capacity with 100 free channels and 20 pay channels, then the customer has to pay the Rs 185 plus the content charges on the 20 pay channels. The content charges vary from channel to channel and can be seen here.

WHAT HAS SUN DIRECT, TATA SKY DONE?

What Tata Sky and Sun Direct have done is based on the limitations of comparing the DTH and cable networks with a broadband network.

While a broadband provider incurs incremental costs when a customer requests for a bigger pipe, a cable or DTH provider does not.

For example, if a customer upgrades from a 10 Mbps connection to a 100 Mbps connection, the broadband provider has to spend more money to buy extra capacity from his upstream connectivity provider. He also has to make sure that the cable or fiber to the customer’s home has the capacity to carry 100 Mbps and not 10 Mbps.

As a result, he is forced to charge more from a 20 Mbps or a 100 Mbps customer compared to a 10 Mbps or a 2 Mbps customer.

However, this does not apply in cable and DTH.

Whether a Tata Sky customer watches 100 free channels or 200 free channels has zero impact on Tata Sky’s cost of operations.

It does not cost even a single extra rupee to a DTH provider if a customer is allowed to watch 150 free channels instead of 100 channels because the DTH provider is already carrying all those channels to the customer’s set-top-box whether he wants to watch them or not.

Just because a customer went from 100 channels to 200 channels, the DTH player does not have to book extra capacity on its satellite.

The only thing he has to do is activate the channels on the set-top-box once.

The only downside to allowing customers to watch 200 channels for Rs 153 instead of only 100 channels is that Tata Sky or Sun Direct loses the chance to get extra revenue from the customer in the form of enhanced network charges for going beyond 100 channels.

However, it is also a fact that most families do not watch more than 100 channels.

A player like Sun Direct realizes that the percentage of customers who go above 100 channels (50 HD channels) will so low as to be negligible.

Therefore, chances of making extra money by charging extra network fee above and beyond Rs 153 remains bleak.

There is also the other side of the equation — channel owners.

Many of these free channels are desperate to reach customer homes. So desperate, in fact, that they are willing to pay DTH and cable companies if they would activate their channels for their customers.

As such, a cable or DTH provider can make money from channel owners by providing their channels free to the customer and helping the channel increase its reach.

This could possibly be the reason why some channels are being pushed without a network charge, while others are not.

In this case, Sun Direct has simply removed all extra network charges on all channels, while Tata Sky seems to have removed it only for certain broadcasters like India TV, Manorama TV, Doordarshan etc..

In other words, you can watch all 330 channels of Sun Direct and still pay only Rs 153 per month as network charges. However, Tata Sky will continue to charge network capacity fee for about two-thirds of its channels, while making about one-third free of network charges.

Without this offer, if you activated all 330 channels of Sun Direct, you would end up paying around Rs 600 per month as network charges alone. However, because of the cap of Rs 153, you will pay only Rs 153 per month, thus saving about Rs 450 per month in terms of network charges.

The calculation is more complicated in Tata Sky because the waiver is only applicable to some channels. Without any offer, if you activated all 600 channels of Tata Sky, you would end up paying around Rs 700 as network capacity fees.

However, because of the waiver on network charges for almost 200 channels, you would now end up paying only about Rs 520 or so as network capacity.

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