Kerala HC order against LCN perpetuity clause will protect placement revenue of MSOs
Industry players say LCN for perpetuity regulation was bad for DPOs as they wouldn't have been able to change the LCN once allotted to a broadcaster whether they had the agreement or not
The multi-system operators (MSOs) can heave a sigh of relief as the Kerala High Court has disposed of All India Digital Cable Federation's (AIDCF) petitions while offering them some relief. The Bench of Justice Anu Sivaraman has set aside the regulation which mandated DPOs to provide Logical Channel Number (LCN) in perpetuity to broadcasters and reporting the details of placement deals to the TRAI. AIDCF is the apex body of MSOs in India.
The order means that DPOs, particularly MSOs, will not have to offer LCN in perpetuity. Currently, the LCN that is assigned to a TV channel depends on the placement agreement that a DPO signs with broadcasters. DPOs are allowed to place channels either genre or language wise. Secondly, the DPOs will not have to share details of their placement deals with the TRAI, industry sources say. The detailed order is expected to be published after two days from Monday.
As per the amended interconnection regulation notified by the TRAI on January 1, 2020, the authority had decided that an LCN once assigned will remain allocated to such television channel in perpetuity. Therefore, the authority had noted that there is hardly any obligation for a broadcaster to enter into placement agreements.
On the register of interconnection agreements, the authority had noted that the submission of placement/marketing/other agreements will help the authority to maintain an oversight over such agreements. The authority had noted that transparency is important to ensure a level playing field in the industry.
"The regulation that LCN once allotted to a channel cannot be changed in perpetuity would have impacted our placement revenue. The register of interconnect agreements would have been fine even if it was not set aside. If information about placement deals are not revealed then platforms would end up doing fixed fee deals. That can only be stopped if there is transparency. TRAI will definitely try to challenge this order before the Division Bench of the Kerala High Court," said the CEO of a cable TV company.
According to a senior official of a leading MSO, the Kerala HC decision will allow them the freedom to change the LCNs based on agreements with broadcasters. "The LCN for perpetuity regulation was bad for DPOs as we wouldn't have been able to change the LCN once we had allotted it whether we had the agreement or not. So for example if a GEC channel was allotted third slot on the LCN, then we couldn't have changed in perpetuity if this regulation had been upheld. Placement revenue is a very important revenue stream for DPOs, so this regulation would have impacted us big time," he stated.
A senior legal officer with a leading cable TV firm said that the MSOs have always argued that placement is not interconnection and TRAI is empowered to regulate only interconnection. "TRAI wanted to know the commercial dealings between DPOs and broadcasters as far as placement is concerned. We were apprehensive of sharing this information as it is sensitive in nature. Why should we share our confidential commercial information with TRAI?"
The officer also said that the regulation 18 (4) says that if an LCN is allotted once it will stay the same in perpetuity. Explaining the negative fall-out of this clause, the legal executive said, "In case a DPO wants to change the LCN, they had to take TRAI's permission. If the TRAI doesn't allow that then the appeal is to be made to the TRAI again. Once the TRAI rejects the appeal twice, the DPOs can challenge it legally. This clause gave unbridled power to TRAI officials. It was totally arbitrary and sans any logic. There has to be certain guidelines based on which TRAI would have accepted or rejected guidelines."
The officer said that the TRAI will challenge the order if it says that the authority has no power to regulate placement. If this regulation was set aside due to lack of consultation, then they will come out with a consultation paper.
It is pertinent to note that the DPOs will have to abide with all the other provisions of the interconnection regulation as the Kerala HC has refused to set aside other provisions that were challenged by the AIDCF. These include capping of carriage fee at Rs 4 lakh for SD channels and Rs 8 lakh for HD channels besides limiting the target market for MSO to state and mandating 5% as the discontinuation threshold for a channel will not have much impact on DPOs as those are already being complies with.
The TRAI had capped carriage fee for SD and HD channels to enable a level-playing field among various DPOs viz HITS, IPTV, MSOs and DTH operators. Further, the TRAI had limited the assignment of target market to a state or a union territory or within a state or a union territory in case of an MSO, IPTV or HITS service provider. In case of DTH operators, the target market is pan-India.
Further, the criteria for discontinuing a channel will take into account the actual proportion of the people in a target market who speak or understand a language. Earlier, the DPOs were granted the right to remove a channel having a subscriber base of less than 5% in the immediately preceding six months.
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