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Implications of TRAI’s draft regulations legitimising carriage fee

The stakeholders raise concerns over infrastructure issues, carriage fee, entertainment tax and MRP

Raushni Bhagia | Mumbai | October 19, 2016


Distribution platform owners and broadcasters have raised serious concerns over the recent “draft interconnection regulations for TV broadcasting services provided through addressable systems” released by the Telecom Regulatory Authority of India (TRAI).

The authority has suggested that the carriage fee be capped at 20 paisa per channel per month per subscriber, which will go on decreasing with an increase in subscriber base till it reaches 20 per cent of the total subscriber base of the distribution platform, after which the carriage fee will not be levied on the broadcaster.

There are many other issues addressed by the regulatory body, including distribution charges, packaging of the channels and an indication on pricing and discounts. It has also raised serious concerns like revenue sharing between MSOs and LCOs and infrastructure sharing. spoke to a few distribution platform owners and broadcasters to understand the implications of this regulation.

Pankaj Krishna Pankaj Krishna

Explaining the direct impact of draft on carriage fee, Pankaj Krishna, Founder Director, Chrome Data Analytics and media, said, “Over the years, the carriage fee has seen a steady decline. As the Chrome Distribution Investment Index (a Chrome DM proprietary tool) shows, the carriage fee in 2011 was placed at INR 1.23 per channel per subscriber as opposed to INR 0.49 in 2016. According to the new TRAI proposal, the carriage fee for DTH platforms remains unaffected; this is largely in line with the push towards digitization. At Rs. 2.40 per channel per subscriber (annually), as per the new TRAI proposal, the move legitimizes the carriage fee for a platform like Freedish, which would add up to about Rs. 60 million (approx 25 million subscribers).”

On the other hand, the digital and analog players will be affected more as their carriage fee is considerably higher according to the findings below from DII (distribution investment index) by Chrome Data Analytics. This high carriage was an aberrant trend across digital and analog cable networks.

1.1                                  Analog (S-Band) + Digital (Basic Pack) - All India (Amount in Paisa for Existing Deals)
Year 2011 2012 2013 2014 2015 2016
DII R1 R2 R3 R4 R5 R6
Cost Per Subscriber (Amount in Paisa per month) 1.23 1.69 0.97 0.60 0.65 0.49
1.2                          Analog (S-Band) + Digital (Basic Pack) - All India (Amount In Crore for Existing Deals)
Year 2011 2012 2013 2014 2015 2016
DII R1 R2 R3 R4 R5 R6
Amount in Crore (per annum) 58.60 60.74 36.30 27.74 28.65 27.50
1.3                                               DTH CPS 2016 (Amount in Paisa per month) All India

“The process of digitization was aimed at bringing in transparency & the freedom for users to choose and pay for the channels they want to watch, but the on-ground realities are not yet reflecting that. By regulating the carriage fee, the process will be a lot more streamlined and organized. This entire TRAI mandate pushes towards the legitimisation of carriage fee," added Krishna.


Tony D’Silva Tony D’Silva

Tony D’Silva, MD and CEO, IMCL stated how the regulation will make some stakeholders happy and a few others unhappy. However, he appreciated the pain taken by the authorities and indicated the opportunities that the draft regulation has proposed for the industry.

He said, “The proposed regulations give tremendous opportunity to both the broadcaster and platform fraternity to sit together and develop a business that works for everyone. This is time to give and take, rather than going to court, which is not in the long-term interest for anyone.”

Gaps in the draft regulation

A broadcaster who didn’t wish to be named suggested that it was strange how TRAI had little clarity on a lot of issues in the draft. He explained, “There is no explanation of the way a-la-carte will be implemented by the multi- system operators who are facing major infrastructure problem. In addition, the capping done on the carriage fee is very unclear as it has cut out a single deal for all the genres and all channels.”

RC Venkateish RC Venkateish

RC Venkateish, former Dish TV CEO and a media veteran in Cable and DTH platforms, has another view. He feels that the regulation will mean removal of carriage fee, ultimately. “The major impact will be the elimination of carriage fee in due course of time. All the channels that pay carriage are the ones that want reach as much as minimum of 70-80 per cent of the distributor to develop a strong advertising model. With this, if the regulation is saying that the carriage will keep coming down till it is zero when the subscriber base reaches 20 per cent, it obviously means absence of carriage eventually. So how good or bad it is depends on which side of the table are you sitting. As for the MSOs, carriage is a major source of revenue.”

However, the broadcaster argued that this is the case only with mass channels like Hindi general entertainment and movie channels. Yes, it is true that it is only the GECs and movie genre largely that have a wide reach. Adding some other genres would be kids, news and music channels, but for the other high investment channels like infotainment, sports and lifestyle ones, carriage will be too high a cost, since discount rates are also prescribed to not cross a maximum of 35 per cent.

“It will only put extra burden on the niche genres which are already struggling with issues like underpayment and under measurement in terms of viewership,” said another broadcaster. Also, the regulation doesn’t talk about the placement fee at all, which is a very grave problem with the MSO and LCO distribution segment.

He also suggested that while the regulation has suggested the compulsion of a-la-carte channels, there is a major infrastructure issue here. “Every LCO and MSO will not have such a robust infrastructure to really cater to the needs of different packaging for each of its customers in the same geographical region. Ultimately, a customer who is getting all relevant channels for say Rs 300-400 will now have to either shell out more or will have to be happy with the basic pack.”

The broadcasters chose to not discuss the issue openly as they are planning to send an official communication to TRAI about their concerns.

Another major issue pointed out by D’Silva was how two main issues were not addressed with immediacy. “The first issue that could have been addressed is what happens to the entertainment tax? Will it be subsumed into GST or will it remain? I suggest it should be subsumed. That will be an important part while deciding the pricing model. The second issue is the urgency of infrastructure sharing, which should be implemented immediately to make DAS 3 and 4 successful.”

Another MSO player who did not want to be quoted mentioned how the regulation needed more clarity on the ‘MRP’, which is used in the regulation draft in a vague manner. He said, “We have asked for a meeting and we want clarification on a lot of issues before we can formulate our response and suggestions and send them.”

While the industry is pointing out too many problems and loopholes in the draft regulation, it is still premature to understand who will gain and who will lose as TRAI is waiting for the suggestions, responses and comments from all the stakeholders till October 28. The decision will be one of the most awaited ones, at least for the distribution platform owners.

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