By Roop Sharma, COFI
On 01 September 2015 the Bombay High Court directed the sector Regulator TRAI to settle the Interconnect Agreement issue between LMOs and MSOs within four weeks. The order was given in the case of Maharashtra Cable Operators Federation Vs the State of Maharashtra and others in WP No 122 of 2014. TRAI is now carrying out the exercise calling list of various interconnect issues from the petitioners and respondents where it can intervene.
In order to resolve the disputes between MSOs and LCOs and also between MSOs and Broadcasters, the DAS interconnect regulations and Tariff Orders need a relook and complete overhaul considering the ground realities that COFI has been trying to report to the TRAI and the MIB from time to time, including in all our responses to various consultation papers issued by TRAI since the implementation of DAS.
Although DAS was mandated in consumer interest for implementation by a private industry comprising of Broadcasters, MSOs, LCOs and Consumers, investing a huge amount without any support from the government, even the Regulations framed for addressable systems have not created an eco-system benefitting the consumers and encouraging the growth of all stakeholders. Almost four years have gone past since the process started in November 2011, consumers have not benefitted in any way except that they are being made to pay high activation fee for STBs and monthly subscriptions to the MSOs and ‘Pay’ Broadcasters and a huge amount in taxes to the Central government and the State governments. MSOs, LCOs and consumers are investing a huge amount on the mandate of the government but Broadcasters who have benefitted the most, have not spent a single penny for digitization of cable TV industry. Not even a single MSO has started giving itemized billing to consumers so far. TRAI’s frequent directions issued to MSOs fall on deaf ears. This indicates that there is something drastically wrong in our implementation.
This situation has arisen because TRAI refused to listen to LCOs who are closest to the consumers, for whom this whole process was set in motion by the Government. Both MIB and TRAI gave more hearing to the lawyer lobby of ‘Pay Broadcasters’ and research findings of trade associations like FICCI, MPA, ASSOCHAM, CII etc. who survive only on subscriptions and sponsorships of these large companies.
TRAI'S perception of functioning of cable TV business was not rea. It assumed that
a) All 150 million cable and satellite homes in India are the existing ‘Pay TV’ market. There are just 200 pay channels out of a total of 830 which are owned by just three or four large media groups out of a total of 368 companies owning all these channels. 80% of consumers would not be interested in paying for these ‘Pay’ channels if we do not force them. This is substantiated by experience of launching CAS in Chennai.
b) Another assumption of the Regulator is that all the 700 million population of India who view television are rich enough to afford a digital STB and pay for the pay channels whatever amount is demanded by the broadcasters and also every cable TV subscriber in India own a TV set that can provide the viewing experience of a Digital video.
c) TRAI also believed that MSOs have adequate funds or are capable of arranging enough funds to import millions of STBs within two to three years and complete the digitization much before the stipulated two years.
d) It also assumed that LCOs, who are more than 60000, spread all over the country are all educated, computer savy, have trained manpower and would be willing to adopt digital technology or give up their cable TV networks to become agents/ employees of MSOs because the Government thinks they need to get out of their 25 year old business since the economy of the country will not grow otherwise.
The result is a chaotic situation leading to numerous court cases. Every regulation or Tariff Order has been challenged in the court. According to TDSAT Chairman, out of 545 cases filed in 2015, 433 belong to cable TV industry. Sadly, now the courts are ordering corrections.
TRAI must follow the example set by the LCOs where they kept the industry alive and growing to its present state for 25 years, by looking after the interest of all category of consumers, rich as well as poor with differential pricing. Industry cannot afford to lose a single connection now as it involves loss of revenue to the LCO.
Pay TV- The root cause of all problems
It is well known that a-la-carte price of channels are so high that consumers can not exercise their choice. TRAI must fix the MRP of pay channels and formula for relationship between a-la-carte and bouquet price needs a relook. All prices should be available on public domain for the information of consumers. These prices should also be mentioned in Interconnect agreements, reviewed every six months.
FTA channels should be treated differently
TRAI has tried to bring all 630 odd FTA channels at par with 200 pay channels and make same rules for them. At present large Pay TV groups are creating more and more channels of different genre so that they package their own channels to give variety to the consumers at low cost, pushing back all other FTA and rival Pay channels who are finding it difficult to survive.
Popular FTA channels are being given a-la-carte at Rs 3 per channel because TRAI Tariff Order allows to raise the price of an a-la-carte channel three times it’s price in a bouquet. A-la-carte price of an FTA channel should not be more than Rs 1.
Basic Package must only comprise of FTA channels of consumer’s choice. Most of the MSOs are not providing an FTA package of 100 channels for Rs 100/- per month as required by the Tariff Order. Even where it is being given, channels are not of the choice of the consumers. Consumers are being forced to accept packages decided by the MSOs if they need a choice. This can be resolved if MSOs are asked to give a Basic package of FTA channels of an LCO’s choice.
Broadband on Cable Networks Ignored
Concept of making all cable TV networks capable of giving high speed broadband has been ignored. TRAI has not worked out a minimum investment needed to upgrade a last mile network to broadband enabled digital network and ensured a revenue share to sustain
Major Problems in Implementing Interconnect Regulations :-
a) Pay TV channels not differentiated from FTA channels.
b) LCO is the owner of his network. He cannot be treated as agent of an MSO or a broadcaster.
c) Revenue share does not ensure sharing of all types of revenues like ‘Pay TV’ subscription, carriage fee, placement fee, ad revenue of platform channels where as LCO’s network is being used for all this. So, LCO feels cheated. Only they are the losers in this process.
d) Revenue share does not recognize the LCOs need to have a minimum revenue to build and operate his business as a broadband network.
e) No incentive and future growth for LCOs in the present structure of the industry created by the regulatory environment.
f) No standard interconnect Agreement. Mutual negotiations will not work in the present environment where an LCO is completely dependent on an MSO for content as well as revenue.
g) Additional work and investment of the LCO including bill collection, tax collection, serving the digital subscriber, running a 24 hr call/ complaint centre, making consumers understand the new technology and convincing them to pay more for the same service not recognized so far.
h) Slow process of Registration of MSOs and impractical deadlines are demoralizing the industry when little has been done to create supporting environment by the government like indigenous manufacturing, duty exemptions, tax incentives etc.
i) Monopolies and cross media holdings: Pay TV broadcaster, MSO nexus is playing havoc in the industry. Government is not serious in checking this menace.
j) No regulations for platform driven TV channels and services.
STANDARDISE INTERCONNECTION AGREEMENTS
Cable Operators Federation of India (COFI) has suggested to the regulator to have a standard Interconnect Agreement like it was done for CAS so that it does not lead to exploitation of LCOs. ‘The regulator must make a “Standard interconnect Agreement” mandatory for all MSOs and put up on its website and also each MSO should display its standard Agreement on website for the information of all stake holders’.
Interconnect agreement should include commercials, quality of service, standards of Digital Signals, revenue share, billing, STB portability and taxes etc.
Interconnect Agreement should be submitted to TRAI and all agreements should be in public domain on the website of TRAI.
Interconnect agreements should have adequate safe guards for LCO/LMO business and protect their livelihood against any hostile takeover either by raising dummy operator, providing poor quality signals or raising exorbitant outstandings.
The term ‘MSO’ should be replaced with HSP (Headend Service Provider)
The ICA should be in compliance with other prevalent acts/laws like the contract or the competition Act etc.