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HomeArticlesRoop SharmaTime to Review the Tariff Issues
Wednesday, 13 April 2016 06:17

Time to Review the Tariff Issues

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It is well known that we may write the success of Digitisation in cable TV industry on paper, in reality very little has been achieved in the last five years, much contrary to what time period TRAI had earmarked to complete the process. We have already added two years to the deadlines and if no immediate action is taken to rectify the situation, many more will be added. All TRAI regulations are in the courts and consumers are the biggest losers. 

• FDI is below expectations.

• The sector has been facing numerous litigations on regulatory and tariff issues.

• In spite of TRAI declaring that 60% digitisation has done, except seeding STBs  against consumer’s will nothing has been achieved. 

• None of the TRAI recommendations on incentivising digital migration has been accepted by the government till date.

• Since all regulations and tariff orders are subjudice and broadcasters refuse to obey any regulation, be it concerning tariff or quality of service, the industry progress has become static.

• Broadcasters refuse to provide their revenue sources and income details for their channels to the regulator to understand if the rates of the channels are reasonable and commensurate with the content they provide. On the other hand they try to influence the Government and the Regulator to make rules and regulations only to benefit them, blaming cable operators for leaking out their revenue. Some of them also exploit their political clout to create their dominance which even the TDSAT has now recognized but the Regulator did not take any action when complaints were sent.

• Small stake holders including LCOs, small MSOs and small broadcasters, all are suffering losses, only the corporate DTH players and some large media groups having interest in content production, broadcasting as well as distribution are gaining and increasing their monopolies under the very nose of the Regulator. 

Under such conditions no market forces are working in this industry and it is only the ‘Might is Right’ policy that works.

To date, consumer does not know the cost of each channel that he is made to pay for. Since TRAI has not insisted on declaration of retail price of TV channels, leaving sufficient loopholes for rampant manipulations at the wholesale level, leading to discriminatory practices, consumers are being cheated openly. The last mile operator, who faces the consumers is worrying for his survival rather than think of investing in his business for better service.

The existing tariffs orders and regulations have become the source of most of the disputes between stakeholders where the smaller networks are being forced to close down. It is irony that the last mile operators are asked to cooperate with the government in ushering mandatory digitization and persuade their consumers to pay more and after making the market ready, government wants them to handover their business to large players because the government thinks that as the only way to organize the industry. 

Tariff Exercise must start from 2004 as the Base

In the last 12 years of TRAI’s control, the industry instead of getting restructured and organised has remained in square one. It is a waste of 12 years of the industry. Whatever growth is projected in the consultation, it is due to continuous hardwork of LCOs, their ingenuity to provide affordable services to consumers inspite of all odds.

 Any exercise done to regulate the tariff in the cable Television industry must take into consideration, the ground realities as the industry is already in existence for the last 26 years and whatever tariff system existed till now has made every stake holder including broadcasters, MSOs, Cable operators and consumers benefit.

Broadcasters who started with just one channel riding on the already existing cable networks have added dozens of more channels over these years because whatever revenue they were getting was more than adequate. Similarly even the MSOs came to business in 1994 without having any last mile connections and still managed to expand their reach in all major cities making money from the LCOs, by just providing the aggregated Pay TV channels. As far as consumers are concerned their number grew exponentially because they were getting the services at affordable price from the last mile operators. 

LCOs, although were restricted in their own small areas, were running their business well, earning their livelihood all these years, working day and night involving their complete families. Even the government started charging service tax without giving a penny of relief or incentive to the industry in any manner like it had given to the private telecom operators or like our PM is promising to the start-ups now. We forgot these cable operators are the start ups of yesteryears. State governments made enough money collecting entertainment tax for Cable TV services that included even the government mandated Doordarshan channels, ranging from Rs 5 to 40% per month per household.  

It is unfortunate that complaints from the last mile owners are shunted between the Ministry and TRAI, each pitting the onus on the other, where TRAI says go to MIB since they have made the laws and MIB tells to go to TRAI since deadlines of four phases, Tariff, Interconnection and revenue share has been framed by TRAI. The result is, there is no option for them to approach TDSAT or other courts, for resolution since the courts operate within the legal boundaries. 

This is what has unbalanced the whole industry in the last four years. 

Thus any exercises to align the present system with a little organised one must have the sole aim of providing a similar tariff to the consumers, as far as content is concerned else, it will be rejected .

Wrong Perception of the Ground Level working

One basic wrong in our system is the perception in the mind of the government as well as the regulator, influenced by the powerful media conglomerate with their deep pockets, political clout and even the backing of their home country, who were literally dictating to the Ministry as well as the regulator in framing rules and regulations, that only the large players can work in organized manner to bring digitization faster. This has already been proved wrong because none of the big players have succeeded in consolidating the industry in a real sense working in complete compliance with the rules and regulations. The present chaotic stage has reached only because the ground realities in terms of millions of subscribers and thousands of small stakeholders that is LCOs who were serving the people till date has been ignored by all.

Once DAS was implemented every stakeholder tried to get the maximum benefit out of it by lobbying with the government and the regulator. This resulted in each stake holder blackmailing the other in extracting maximum revenue rather than care for the consumers by providing services as per the regulations. LCOs being the weakest stake holder and closest to the subscriber suffered from both sides, Broadcasters and MSOs forcing him to push all the channels to the subscriber and subscriber resisting to pay the demanded subscription if it was much higher than his analogue subscription. 

Pay TV must not be thrust upon the subscriber

We talk of 6000 MSOs and 60000 LCOs serving about 100 million households. This means on the average on LCO serves 1700  households which is not true. The 40% rural market is served by very small LCOs who have about 300 subscribers on the average. Most of them did not carry any pay channel or had just five to six popular channels. There was no demand of more channels in these areas. So an LCO could survive with a rate of Rs 100 or less. Equating a rural or economically weaker subscriber with an urban or a Metro subscriber for tariff is not justified. 

The 6000 MSO figure came from the maximum number of Pay channel decoders in the market of a single TV channel. It was only the sports channel ESPN that boasted of this number. Most of other channels had 3000 to 4000 decoders out in the market. Also, all these operators were not MSOs. Many were independent operators in far off places. Considering the size and geography of the market, this is not a very big number, Hence Pay TV broadcasters cannot claim the 100 million Indian subscribers as their 'Pay TV' subscribers. Pay channels came much later in the market, mainly after 2000. And mostly it were the FTA channels turning pay in an unregulated way, forcing LCOs to make increased payments even if subscribers were not willing and there was no addressability. Hence to make the tariff workable, pay channels should not be thrust upon the subscribers. 

Make MSO independent of Broadcasters

Control of these pay channel groups on the distribution platforms must be curbed to the maximum if we want broadband to succeed on Cable Networks.

Moreover, pay channels these days have many other options of making money like OTT platforms, distribution of same content in the international market, different types of advertisement and sponsorships etc. Thus they are not dependent solely on the MSOs or Cable Operators. Hence MSOs and Cable Operators must be given support for upgrading to broadband NextGen networks so that they can provide all broadband services.

ARPUs not affected by digitisation of Cable TV

At present every stakeholder particularly, the DTH and broadcasters, are expecting ARPUs to rise considerably after digitization is completed. We feel ARPUs depend more on the paying capacity of subscribers. If a subscriber cannot afford to pay, he will not accept the high end digital services. Even if there is slight improvement in the digital quality, he will resist paying more, particularly in Digital Cable many popular channels may not be delivered in the packages and given only as a-la-carte at additional payment, not accepted by a consumer. 

Cable TV Business survived only by giving differential pricing and not undeclaration, which is the normal perception among the broadcasters.

Only 25 million subscribers in India might be willing to pay more for better services, because they understand these services and have LED/ LCD TV sets to receive the digital quality signals. 50% of Cable TV households may fall in the poor categories of subscribers, having outdated TV sets that cannot provide any benefit of digital signals. They will resist paying more. The rest of 25% CATV households will try to get low cost packages only. This is the main reason why Broadcasters and MSOs avoid giving a basic package of Rs 100 and a-la-carte channels, else they will get even lesser ARPU than before. 

We should not forget the ARPUs in the digital market that have shown an increase are mostly due to service tax and entertainment tax which many LCOs were not collecting from subscribers, as they were not in the bracket of service tax. As far as entertainment tax is concerned, there was definitely an under-declaration, mostly as an understanding between the tax inspector and LCO/MSO and mostly it depended on the negotiated number of subscribers with the pay broadcasters. 

At the end, we wish to repeat what we have been requesting the TRAI since 2004, which is very important to organize/ restructure the industry for an organized growth and stability.

1. Keep LCO as the last mile owner. The Model interconnection agreement must keep the status of LCOs in tact as owners of the last mile networks and not leave a chance for the MSOs to exploit them in any way and take over their networks by coercion or other means.

2. Protect LCO from forced takeovers. As seen in the past, many MSOs who have strong political links conspire with the local administration to not renew his yearly registration in the post offices or registration is cancelled under a fabricated excuse like piracy. This gives the MSO an opportunity to cut off LCO’s signals and destroy his business. There are hundreds of such cases reported to us from Punjab, Tamil Nadu and other states. 

3. Ensure a minimum revenue share to make LCO business viable. We again reiterate that revenue share given to the LCOs, must have a minimum limit, enabling him to run just the basic services with reasonable profit providing quality of services, complying with the  regulations. TRAI should not assume the revenue from Pay channels as that will depend on customer choice. The fall back regulations giving him a share of 35% must be reviewed in this context. All the parameters of operating an LCO network of an average size are well known to TRAI and financials can be easily worked out. 

4.  MSO should not force his responsibility on the LCOs. Set-Top-Box procurement and supply is the sole responsibility of the MSO. Keeping this in mind, there should be a well defined system of supplying the STBs to the consumers through LCOs with proper documents like invoice, warranty or hire purchase agreement etc. There should be no opportunity for MSO to make LCO compensate if a subscriber STB does not function properly or becomes faulty requiring replacement. Faulty STBs must be replaced immediately to avoid disruption in service.  

5. Non Payment of Subscription by Consumer. Cases of non-payment by a subscriber due to any reason must be investigated by the MSO when brought to his notice by the LCO. Effort should be made to retain the connection rather than disconnect at the first opportunity. In many cases MSOs who do not own the last mile, force the LCO to disconnect such subscribers due to which LCO loses business.

We submit that all subscribers may not understand the implication of government directive of going digital and they may not like to pay more subscription due to:-

a) Cannot afford.

b) Subscribers TV set is old and does not give any benefit of digital Cable to him.

c) Subscriber does not get his choice of channels in the packages offered.

d) Subscriber only wants FTA channels and MSO does not offer the Rs 100 basic package.

In all such cases it is the LCO who suffers, both in business as well as goodwill. For an MSO, it is a new business, so he can afford to wait and watch but for an LCO it is a loss of subscriber he acquired years ago.

In many cases, MSOs do not listen to the problems put forth by the LCO and demand full payment of dues which is detrimental to LCOs business. Such cases must be avoided. 

6. Encourage integrated networks. regulations must bind MSOs and LCOs in a permanent or semi-permanent relationship so that together, they move towards building a well integrated network providing all broadband services and not just 300-400 TV channels.

7. Do not make Pay channels mandatory. TRAI must accept networks with only FTA channels. This will create a level playing field with the Free Dish DTH of Prasar Bharati which has started accepting private broadcasters and even pay channels are being allowed on the platform in FTA mode. Particularly in Phase-III and IV, many Cable Networks are operating only FTA networks, charging very low subscriptions, affordable by even the poor households.

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