Summary of Impact of TRAI Tariff Order changes\n\n\n\nIndia Ratings, a unit of Fitch Group, said new tweaks to TRAI's 2017 tariff order -- scheduled to come into effect on March 1 -- are likely to reduce revenue for channel owners, be neutral for cable and DTH players and reduce costs for consumers.\n\n\n\n"India Ratings & Research (Fitch Group) believes that Telecom Regulatory Authority of India\u2019s (TRAI) amendments to the tariff and interconnection regulation are largely neutral for multiple system operators (MSOs) and negative for broadcasters. The amendments have focused on a reduction in the final customer price, resulting in broadcasters bearing the largest burden in the entire value chain," it said in a note today.\n\n\n\nTRAI on Wednesday announced tweaks designed to undo the sharp increase in monthly bills of cable and DTH services witnessed by the implementation of its 2017 tariff order last year.\n\n\n\nThe 2017 tariff order, referred to as NTO in industry circles, had given full freedom to channel owners to determine the selling price of their TV channels. Many channel owners responded by increasing the prices sharply, hurting end users.\n\n\n\nAccording to DTH operator Tata Sky, the amount of money collected from consumers and transferred to channel owners as pay-channel charges jumped by 40%-50% after the introduction of the new tariff order last year.\n\n\n\nThis led to a severe consumer backlash against the regulator as well as channel companies, forcing TRAI to come up with the latest tweaks.\n\n\n\nIn its modifications, the regulator reduced the maximum price that can be charged for a single channel to Rs 12 from Rs 19 earlier. Broadcasters can, however, continue to price their channels at any price they want, provided these channels are not made part of any bouquet or package.\n\n\n\nThe second major tweak was that the cost of a bouquet and that of the channels included in it must be largely aligned. The prices of the bouquet and the individual channels must be fixed in such a way that there is no huge jump in costs when a subscriber tries to opt for individual channels instead of going for the bouquet.\n\n\n\nThe regulator also gave respite to regional broadcasters. It placed a cap of Rs 4 lakh per year per channel on the 'carriage fee' that any cable or DTH operator can demand from a single channel.\n\n\n\nSimilarly, it also acceded to a demand by regional channels that their 'kick out' threshold of 5% should be calculated on the number of subscribers who speak the language in which the channel is transmitted, instead of the number of total subscribers of the cable or DTH platform.\n\n\n\nEarlier, it was possible for a pan-India operator to kick out a Tamil channel if that channel was not being watched by at least 5% of its pan-India subscribers. Under the revised rules, a DTH operator can kick out a Tamil channel only if that channel fails to attract at least 5% of the Tamil-speaking subscribers of that DTH network.\n\n\n\nAnother issue was the force feeding of junk channels onto cable and DTH networks by big broadcasting companies.\n\n\n\nUnder the new rules, it will be more difficult for big broadcasters to deny space to small broadcasters by flooding the cable\/DTH network with junk channels that nobody watches.\n\n\n\n"..the regulation on channel prices discourages bundling weaker channels with strong anchor channels in the same bouquet," India Ratings pointed out today. \n\n\n\n"Hence, while the earlier regulation favored broadcasters with a strong set of anchor channels along with a comprehensive set of weaker channels across genres, the revised regulation supports broadcasters with a strong set of anchor channels and relatively lean portfolio of weaker channels."\n\n\n\nSome big broadcasters have launched a clutch of 'junk channels' in recent years in an attempt to soak up all the space on cable and DTH networks and deny space to existing and upcoming competitors.\n\n\n\nOn the flip side, said India Ratings, the new rules -- while giving relief to consumers from high channel prices -- would also restrict the revenue of broadcasters. This would in turn restrict their ability to invest in expensive content -- such as cricket. \n\n\n\n"..the revised regulation capping prices of both a-la-carte channel and channel bouquet may curtail broadcasters\u2019 ability to invest in quality content. The risk is even higher for the sports genre, where content creation\/acquisition costs can be more than in the news genre."\n\n\n\nThere is already speculation that some broadcasters may take their expensive channels out of bouquets and sell them individually at high prices.\n\n\n\nDISTRIBUTOR IMPACT\n\n\n\nIndia Ratings doesn't seem much impact from the new rules on the revenue of distribution platforms such as cable and DTH operators.\n\n\n\nEven though TRAI has increased the minimum number of channels that can be accessed under the basic network charge to 200 from 70, India Ratings doesn't expect this to have much impact on the ground.\n\n\n\nMost cable and DTH operators already offer between 200-300 channels for a network fee of Rs 130 per month.\n\n\n\n"..MSOs anyways offer above 200 channels under the current price regime for NCF of INR 130."\n\n\n\nHowever, it noted that cable and DTH operators do get to keep a small portion of the pay channel charges paid by consumers, and a reduction in pay channel revenue for the channel owners can also result in a dip in the distributor margins earned by cable\/DTH operators.\n\n\n\n"MSOs earn content fees and distribution fees from broadcasters as a proportion of content cost. MSOs\u2019 realisations may slightly be impacted as the overall content costs and resultant content & distribution fees have also reduced. \n\n\n\n"However, MSOs can minimise the impact by offering more channels in the bouquet while keeping the overall price of the bouquet unchanged," it said.