The broadcast and television distribution fraternity raised many questions and concerns in context to the tariff order dated April 30, 2012 that the Telecom Regulatory Authority of India (TRAI) issued on Digital Accessible Cable TV Systems (DAS).
Speaking on the subject to Vikram Chandra, CEO of NDTV, the Chairman of TRAI, JS Sarma, clarified some of these issues in an exclusive interview on May 4, 2012.
Sarma said in the interview that he expected carriage fees to be in the range of 50 paise to 1 Rupee per subscriber per year and that anything 'beyond that level would be unreasonable'. He also clarified that there can be no placement fees in the post digitisation world and that there would be genre wise EPG listings. Stating that he quite confident that the industry, with digitisation, would be a much more organised than what it has been so far, he added that the relationships would be smoother and more streamlined. Finally, he felt that in the near future, cable should be delivering not just telecom and broadband, but access to educational and health services etc.
Some interview highlights
• TRAI chief says carriage fee should be moderate
• Expects a range of between 50 paise to 1 rupee per subscriber per year as carriage fee
• Anything beyond that level would be unreasonable.
• There can be no placement fee post digitisation
• There will genre wise EPG listings
• MSOs will be expected to keep increasing capacity as channels increase
• Expects sunset for carriage in a couple of years
Transcript of Vikram Chandra’s interview with TRAI Chairman
What was your main objective with the tariff order for DAS?
We are in the path of digitisation, which is going to bring several benefits to consumers, most important, and various stakeholders. It will bring transparency in the system, it ultimately improves the quality of the channel itself and then it brings additional revenue to the govt, because it brings transparency to the govt, so the entire amount that is collected is accounted for. Now it also, incidentally, vastly reduces the dispute in the entire system; otherwise if the system isn’t transparent obviously there is scope for disputes. It is to this context that we have recommended and the Ministry of I&B has taken up the task of digitization in the entire country in over three years. Now the two important things are tariff and the interconnection, it is this tariff order and the interconnection that we have issued few days back and that is what is currently under discussion.
We have been told that the process of digitisation is good for broadcasters, the industry, distributors and the consumer. Is process still on track to happen on July 1, as stated?
There is no reason to doubt that. Firstly, every stakeholder is committed to digitisation. As I see and the news I get, I don't see why there should be any delay in the implementation of this programme. I am quite confident that by July 1, you will have complete digitisation in the four metropolitan cities.
Broadcasters and other stakeholder have welcomed the order by and large. But some aspects have raised consternation, particularly the issue of carriage fee. From the govt in Parliament to what has been stated in the past, one of the major ambitions of digitisation was to change the business model so that carriage fee goes down, subscription is better reported and a new business model emerges. People are concerned that carriage fee has been legitimised.
I would not use the word legitimise. It's being regulated. Carriage fee is something that has been going on for some time. Who started it and why he started it is immaterial. The fact is that the carriage fee is big now and it is estimated to be in the order of Rs 1600-2000 crore.
Since it is totally underground, no one knows about it. What we have done is brought it on to the surface and regulated it. Now it's a regulated entity. We said that 500 channels must be provided by every MSO (multi service operator), now this is significant. Currently some people have 175, some have 200, some people have 300 and perhaps only 1 or 2 persons have more than 300. This means that even today, though there are about 500 channels, if a broadcaster wants a channel to be carried, there is always a scope for carriage fee. What we mandated is that from 1st January 2013, and for smaller people from 1st April 2013, the number of channels provided must be 500. There are about 800 odd channels in this country, out of them about 600 odd channels are active. Out of these all the English, all the Hindi, plus any one regional language will not exceed 470. That is why we mandated 500. If the number of channels goes up, it becomes 800 active channels, then we could actually increase this number.
You are saying 500 is not frozen, it can move?
500 is not frozen. You need to give MSOs some time to obtain those channels. In fact the rule under the Act also says that the number of channels 'as prescribed from time to time'.
You say it's being regulated. What I think is causing the greatest amount of concern is that you, in a sense, brought it above ground perhaps, but you have said that it is entirely the discretion of the MSO to decide what the quantum of the carriage fee is going to be, and if you consider it unreasonable, you will step in. Now that automatically calls for a lot of concern for broadcasters, because you don't know what level you might consider something to be reasonable or unreasonable
It is true that we have not specifically quantified any amount, because at this particular stage we felt that it is better to let the MSOs and the broadcasters settle it among themselves and let this market settle. You must understand that MSOs also can't run riot because there is always the threat of DTH. So the cable industry is competing with the DTH industry. Secondly we recognise that the carriage element is basically for the network transportation cost. We have figures with us, it is not that we don't have figures. We know that the per channel per subscriber cost is not very high. So any MSO who actually wants to charge more, first of all he has to publish it, we have stated that he should publish his charge. He should apply across all the channels, not any particular genre, but across all the channels in a uniform, transparent and non-discriminatory basis. Thirdly he can't change it for two years. And then most importantly, he should report the matter to us and we reserve the right to intervene, in the event we feel it is unreasonable.
I understand you did not want to state a figure in the order itself, but you are right that there is a certain figure which is the actual cost for carrying a channel, and it is not a very high figure. So I guess the big debate becomes what level of carriage is considered unreasonable? That's the basis on which one makes a plan. You have to understand that many broadcasters are not in a very good financial position either. What are the levels of carriage that you would consider unreasonable?
At this stage it is very difficult to put it down, but generally anything above 50 paise, per channel per year, would actually be something that needs to be noticed. And anything above a Rupee would then definitely need attention. In other words we would actually watch, is it going beyond a particular range
You are saying that anything above 50 paise per subscriber a year is something that you would notice, and above 1 Rupee, per subscriber a year, would be a level of carriage fee that you think would perhaps be unreasonable?
No, I think you asked me to put a figure
Trying to get a benchmark
Since you asked me to put a figure, I just want to mention that it is currently not in the regulation, but obviously we don't want astronomical figures. As is said, this is meant for the carriage of the channel. It is not any other money, because we are saying no to placement fee, because there is no need for placement fee in this particular scheme of things.
Is that also clear cut? Because I know you have defined placement fees, but you haven’t said that there has to be EPG by listing, you haven’t said specifically that there shouldn’t be a placement fee. So are you saying that that there will be no placement fee?
That's right. Unlike in the case of analogue, where you can place the channel at a particular place, the quality differs from channel to channel and brand to brand. Now here, that particular problem is not there, since everything is of uniform quality. So the question of placement, what is placement? It is the advantage that you get. You need to place it in the concerned genre. Now whether this one genre is before the other genre, this is immaterial. So in other words, while each of the MSOs can design their own EPGs, but the channel should be in the particular genre.
And no placement fee will be charged. Is this something that you can make explicit?
We are saying no to placement fee. We don't want another problem to come up. Getting back to carriage fee, we are not indicating any figure at this stage; this is what we have in mind.
When you are saying that what you have in mind, something like 50 paise per subscriber for a year...
...Yes 50 paise to 1 Rupee
Which is the benchmark that the MSO should keep in mind?
We don't want to get into a very rigid figure at this stage. We will watch. We will see how it goes. In the event we feel anybody is unreasonable, we will definitely intervene.
One of the things, just to look at the way that would work; a channel trying to reach at the 1 Rupee level or a channel to reach 90 million subscribers, pays around Rs 9 crore sort of a thing. For MSOs also, they would be able to reach a larger number of channels...
Because earlier they could only charge carriage fees from 50 and now they might be charging for 300 or 400 channels
It depends on how one wants to pay. You see we have said that there will be no carriage fee in respect of a channel that the MSO himself seeks. It is only in respect of the channels that ask to be carried, that the carriage fees can be charged. So these are the kind of things that are there. I don't know whether it would be 100 or 200 or 300 etc. You can say that in about a 500 channels capacity, a fair number would be seeking that 'must carry provision', which is available only when it reaches 500, because then, incidentally, the much provided clause kicks in alongside. Both right and duty go together.
Your position would be, in this entire issue of carriage fee, is at those sort of levels, at 50 paisa per subscriber a year. If that is to work for both broadcasters and MSOs, then everyone should be happy. If the rates are moderate then both sides should agree
If an MSO has 1 lakh subscribers, let's say in smaller areas, then to that extent that amount that is available is substantial. In any case it is not as if part of the carriage cost, that is the transportation cost, is also not being taken from the subscribers. The reason why I have said a range is, it is very difficult to get into one range in this large country. So you have to see how it is. First of all I am confident that the industry with digitisation will be a much more organised industry than what it has been so far. I am also sure that the relationships are much more streamlined and therefore I guess, as somebody was telling me this morning, they expect the carriage fee itself come down to one fifth, or so, by 20 percent in about 2 or 3 years. I don't know whether that will take place or not, but let us watch. The whole idea is that the digitization process should actually tend to professionalise the entire industry. It includes the broadcasting industry as much as the carriage industry.
One of the reasons that you have stated as to why this should be done is for the cost of digitisation from the point of view of the MSOs. Broadcasters are upset about that. They are saying why should they pay the cost for somebody else`s business, especially when they get the benefit of broadband and things like that.
Then the MSO would say why would I invest? After all I am the person who is investing and they must pay me some amount of money to carry. I think both sides are reasonable cases.
But at sometime do you see there being a sunset, once the investments have been made, it's a better robust economic system?
I think so. Though this is purely in the realm of the future, but in the course of the not too distant a future I admit that MSOs also are able to develop a lot more things. For instance, in telecommunication itself, we have decided that there will be unified licences. In the state level we are also suggesting that for TRAI there will also be a district level licence. Whatever happens, but in the state level surely and hopefully at the district level too, there would be a telecommunication licence which means a lot more things will be possible. I have been repeatedly saying that cable, as in other countries, should become the deliverer of plenty of services and broadband is a major thing, it is not channels alone. In fact channels will be one of the services that the MSO delivers. In my opinion, in the future, it would be delivering telecom, broadband, in fact it would be delivering access to educational services, access to health services and so on. With all this, the relationship between the broadcaster and the MSO will be far smoother than what it is now.
exchange4media has republished the entire transcript of NDTV’s interview May 4 with TRAI Chair JS Sarma, with permission of the channel. Interview has been edited for reading purpose