WWIL, STAR, SET, COFI discuss revenue sharing for MSOs and cable operators

WWIL, STAR, SET, COFI discuss revenue sharing for MSOs and cable operators

Author | Pallavi Goorha | Wednesday, Mar 07,2007 9:00 AM

WWIL, STAR, SET, COFI discuss revenue sharing for MSOs and cable operators

WWIL, STAR, SET and COFI have given their views on the revenue sharing for multi-system operators (MSOs) and cable operators out of the basic service tier revenue.

WWIL feels that there should be revenue sharing of 40 per cent for MSOs and 60 per cent for cable operators out of the basic service tier revenue. It may be noted that TRAI had notified the quality of service regulations for CAS areas on August 23, 2006. According to WWIL, providing facilities/infrastructure in compliance of QoS regulations would not only require capital expenditure, but also entailed recurring expenditure. Hence, it submitted that the stipulated revenue share of 30 per cent for MSOs out of pay channel revenue was totally inadequate and insufficient to meet the recurring variable cost associated with the provisions of above-mentioned services.

STAR has stated that with respect to the first two issues of consultation concerning the shares of MSOs and local cable operators (LCOs) out of the subscription charges for 'basic service tier' and 'pay channels available for distribution', such shares should be determined through commercial negotiations between MSOs and LCOs.

SET submitted that the TRAI should leave price fixation, revenue sharing and related issues to market forces, more so now with effective competition through DTH and other technologies becoming a reality. It submitted that the entire issue of split of the subscription revenues generated amongst the three stakeholders (broadcasters, MSOs and cable operators), that is, the subscription charges for pay channels, subscription charges from basic service tier, and carriage fee had far reaching implications and the reallocation of these three revenue streams in isolation, without reconsidering broadcasters revenue share would be inequitable.

SET felt that TRAI should keep the following in mind – the service tier charge of Rs 72 was not based on any formal analysis of the costs and expenses of the companies to set up the basic infrastructure, which in any event had already been amortised / depreciated.

Meanwhile, the Cable Operators Federation of India (COFI) said that implementation of CAS had just commenced in the notified zones of the three metros catering to only about a million subscribers. This was only a trial phase and needed to be carefully handled for at least six months to one year. COFI held that it was too premature to review the revenue share formula and interconnect agreement at this stage as all necessary parameters were not available to reach a viable solution.

TRAI should think of changing the terms of interconnect agreement only after stabilisation of the system. Till then fresh working of costs to stakeholders should be done to arrive at realistic figures in the present scenario so that a reasonable revenue sharing formula might be made.

MSO alliance's response to the interconnect agreement draft as attached with the consultation paper does not carry much at this stage for the following reasons that MSOs do not own the entire infrastructure as given in their response. They own only the head end and the trunk infrastructure. Last mile infrastructure is entirely owned by the LCOs. Their response does not mention sharing of revenues from ads on their local channels and other value added services generated by them.

Only services of broadcasters have been taken into account. Perceived reduction of carriage fee after digitalisation is no reason to change the current regulations and perceived under declaration by the LCOs is again no reason as facts might be very different from what has been presented. As an example even in the present scenario, with in one month of implementation of CAS the set-top box penetration has already crossed 25 per cent, which is higher than the 20 per cent the MSOs have presumed as the final figure.

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