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In-depth: Decoding the impact of new tariff regime on consumers, channels, cable and DTH players

The consumer will get the freedom to ration channels every month but bundled packs may cost more after TRAI’s pricing order comes into effect on December 29. analyses what the new tariff regime means for consumers

BARC data says 50% viewers watch not more than 30 channels but they are sold a bundled pack of 300 channels, which cost between Rs 250 and Rs 450 depending on whether it is a cable connection or DTH service.

After the new tariff order issued by the Telecom Regulatory Authority of India (TRAI) comes into play on December 29, consumers will be able to select and pay for the channels they want to watch. They will have to pay a minimum of Rs 130 to watch 100 free-to-air channels and can individually select pay channels. Simply put, the consumer will get the freedom to ration the channels every month.

Also read: New tariff regime: Here’s what you need to do to keep watching your favourite channels

TRAI says the new regime will promote affordability while giving consumers the power to choose. But the industry isn’t entirely convinced. It believes that consumers may end up paying more. TRAI, however, feels channels may end up reducing prices if they want to retain viewers.

The authority assured consumers that there won’t be any blackout of TV channels and the transition will be carried out smoothly.

Price list for base value pack

Star India: Rs 49 (13 channels)

Zee Entertainment: Rs 45 (24 channels)

Sony Pictures Network: Rs 31 (9 channels)

Indiacast: Rs 25 (20 channels)

Disney:  Rs 10 (7 channels)

Discovery Networks: Rs 8 (8 channels)

Times Network: Rs 7 (4 channels)

Turner: Rs 4.8 (2channels)

NDTV: Rs 3.5 (4 channels)

TV Today Network: 0.75 paise (2 channels)

How much will a consumer pay for monthly entertainment?

Under the new regime, a consumer will have to pay a base fee of Rs 130 + taxes for the primary set of 100 channels. This set will mainly comprise free-to-air (FTA) channels and won’t include popular ones offered by major broadcasters.

As a result, the consumer will have to select what additional channels they would like to include in the primary set. If the consumers choose the basic value pack, then they will have to pay a total of Rs 184 for 95 channels offered by 10 broadcasters. If that is not all, as per the new framework, for 20 additional channels, a network fee of Rs 25 will be charged. So, the consumer will have to pay extra Rs 100 as a network capacity fee for 95 channels.

Following the new regime, the consumer will end up paying Rs 450 every month for the basic value pack. The basic value pack is available only for SD channels and doesn’t include premium channels such as sports or regionals. For the HD users, the consumer will pay double the basic value pack. Also, if the consumer opts for a la carte pricing, the monthly bill will exceed Rs 400 as the bundle offered by broadcaster are at the discounted rates.

Prathyusha Agarwal

Prathyusha Agarwal, CMO, Zeel, said, “The consumer is going to relocate their monthly budget on channels they really love and on channels they won’t mind shelving. If we consider consumers who can pay Rs 350 a month then the pricing is in their budget. But for consumers who can pay Rs 250, a bit of reallocation will happen.”

Currently, consumers pay a monthly bill of Rs 250-350 for a cable connection, which includes sports and regional channels. Whereas DTH users pay around Rs 300-450 a month. The rates get discounted if consumers opt for six-month or annual packs. 

How will the new tariff regime affect consumers?

The new regime has been implemented keeping in mind the ‘affordability’ aspect. Going by the current pricing it seems like the consumer will have to pay quite a bit. The bundle packages won’t work and the consumer have to pay for each channel from different broadcasters. Now, broadcasters are offering bundle packs but each broadcaster has its own rates that differ according to markets. The consumer will need to spend extra for adding each channel.

Major broadcasters have bundled their own bouquets of channels, which are segmented into HD and SD channels. The base bouquet consists of popular channels clubbed with less-performing channels. The consumers can opt for these bouquets or can choose single channels on the a la carte (MRP) basis. The regulators have capped the price range at Re1 - Rs19. Broadcasters have offered their popular channels at Rs 19 while the niche and less popular channels range between Re 1 and Rs 10.

Sanjay Gupta

“Under the new regime, broadcasters are not offering long term but monthly contracts. Consumers can download and sign the agreement for the channels and based on the number of consumers they get every month, the price that is set will get paid,” Sanjay Gupta, Managing Director, Star India said.

Sudhanshu Vats

Not just for consumers, the pricing stays similar for DPOs, LCOs and MSOs. The distribution platforms can make their own bouquets but they will have to pay broadcasters the set price. “DPOs can bundle their own pack. But they will have to pay the broadcasters as per the proposed value pack. If the DPOs choose one of channels from the broadcaster, then they have to pay the proposed a la carte pricing,” Sudhanshu Vats, Group CEO & MD, Viacom18 said.

No fixed discount caps

Currently, the pricing offered by broadcasters are set on different discounts, which range from 35% to 55%. For now, there isn’t any fixed discounts cap. But the pricing will change if the Supreme Court upholds the ruling on a 15% discount cap proposed by TRAI on channel bouquets.

“If regulator asks us to change, adhering to the 15% discount cap, the pricing will change but right now at Zee we are looking at it as a behaviour change. We will study consumer feedback — what they are willing to pay and what not — and make changes accordingly. Currently, the bouquets are made looking at the staple and the value that one gets on surfing. It will take six months to settle down and we will be doing continuous research to understand. FMCG product pricing differs all the time and depends on the research of the market. With this ruling, our category will reach that stage, which is a very welcome move,” Agarwal said.

Vats and Gupta also agreed on the change in pricing if Supreme Court upholds the 15% discount cap.

“If you look at some total of the channels and the discount we are currently offering, it is higher than 15%, so by definition the channel pricing needs to be reworked. I don’t know if the pricing for the consumer will come down because we built it in a lot of discount,” Vats said.

Issues with DTH and LCOs

While the tariff order will bring in much-needed transparency across the industry value chain, the consumers will end up taking the brunt of high pricing. Consumers with cable/DTH connections are still in the dark about the pricing as they are yet to offer their listings.

DTH operators are arguing about the high pricing offered by broadcasters whereas LCOs are worried that the new regime will bring down their earnings.

Vats said the pricing will be high if the DTH operators total up everything. "The argument is if you aggregate everything that is available and say you have to buy everything, then it defeats the purpose of the tariff order. The order allows the consumer to choose what they want. If they choose what they want, then there is no need of totalling up everything,” he said.

According to the TRAI statement, the new framework brings in a structure of assured revenue for MSOs and LCOs under the network capacity fee. Furthermore, LCOs will also have the flexibility to negotiate their revenue share with the MSOs as per the structure provided under the Model Interconnection Agreement (MIA).

The regulator has mandated a 80%-20% revenue share between broadcasters and DPOs. Between MSOs and local cable operators (LCO), the TRAI has kept a 55%-45% revenue share. In the basic pack of 100 FTA channels, which come at a price of Rs 130, MSOs get 55% share whereas local cable operators take home 45%.

Also Read: TRAI lays out migration plan for new tariff regime, gives a month for smooth switch-over

In order to protect cable TV consumers’ interest, TRAI has capped Rs 500 as installation and activation charges for cable and DTH services. Under the new regime, Rs 350 will be charged as an installation charge and Rs 150 as an activation charge. The authority also directed local cable operators and Multiple System Operators (MSOs) not to compel any subscriber to buy or take on rent the Set Top Box (STB) from them alone.

Recently, on December 24, the Coordination Committee of Cable TV operators petitioned the district administration, opposing the TRAI move. The committee stated that the new move will hike the monthly cable bill to around Rs 800-900 a month. This hike will hamper their revenue as they are still recovering from demonetisation and GST. The committee also highlights the fact that digitisation is yet to be completed in some states.

Temporary respite for Tata Sky customers

The DTH operator had argued that the new regulation will revamp the DTH operator’s business model. Tata Sky is also fighting the rule of carriage fee and must carry clause. It argues that the new regulations will severely hinder the right to do a mutually negotiated agreement.

In May 2017, the DTH operator had challenged the order and interconnection regulation. The hearing was supposed to be held in the Delhi High Court on December 20 but has been rescheduled for January 10, 2019. Tata Sky appeals that the TRAI order and regulations violate Article 19 (1) (G) of the Constitution of India, which ensures citizens “to practice any profession, or to carry on any occupation, trade or business”.

TRAI has assured Tata Sky that it will not pursue any coercive action against it. During the hearing, Tata Sky had requested the court to restrain the TRAI from any coercive action. The TRAI counsel, responding to the request, said the body would not take any coercive action against it until the next hearing. Despite the assurance, the TRAI counsel insisted Tata Sky implements the tariff order and regulation.

No blackout of channels or extension in deadline

After December 29, blackout of channels was one of the main concerns. But the authorities said there will be no blackout.

The TRAI statement stated that the new framework does not alter the prevailing market structure under the MIA/SIA-based regime that exists since March 2016. The underlying Standard Interconnect Agreement (SIA) mitigates the risks of LCOs that can arise out of delayed failed negotiations.

"In the previous regime (before MIA/SIA-based structure), such delayed or failed negotiations could result in a blackout. However, availability of a fall-back mechanism under the SIA regime safeguards the interests of LCOs/ consumers from any eventuality of blackout or disconnection of signals,” the TRAI statement read.

Since there has been unsettlement over the new tariff order, broadcasters were hoping for an extension of the deadline. "We expect some initial chaos, which will take some time to settle. TRAI must lead this transition. And if all players aren't ready, TRAI must give some more time," Gupta had said.

But TRAI has stated that there will be no extension of the deadline and the order will be implemented on December 29.

Impact on advertising revenue

When consumers select their channels, the less performing ones will get dropped out in the process. The drop in channels will impact the advertising revenue. "Since there is no clarity, there will be disruption once again. The broadcaster must educate the consumers. For advertisers, it will be wise to bet on the popular channels," said a media planner.

On the other hand, Vats stated that the impact on the advertisers will be more due to the micro economic health of the country’s economy. If the economy is healthy, then there won’t be any change. However, he agrees that there will be some unsettling of revenues and some cost will be incurred.

Vats said, "Consumers will continue to watch as per their habit so the viewership will exist and advertisers should be ready to pay us to reach out to the viewership. The optimistic outlook of mine says that there won’t be any big impact on topline. We will continue to do programming and also introduce new shows to attract consumers and advertisers will continue pay for that viewership.”

BARC measurements on viewership

As there will be a disruption in the TV ecosystem, it will be difficult to determine the viewership. The sampling will change following the implementation of the new regime. Gupta said BARC must halt releasing viewership data for a couple of months once this order comes in place.

“We have 180 million homes measured through 40,000 boxes. If even in 10,000 boxes there is chaos, then the ratings won’t reflect. Everybody from the industry seeks to calibrate the sample again and BARC board has to decide the next step,” he said. “And that might clear up the things for advertisers eventually after a bit of initial chaos.” has learned that the decision to suspend television viewership data for next two months has been taken by industry bodies and could be announced by BARC India soon.

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