Reducing MRP cap, introducing twin conditions to discourage 'unfair bundling': TRAI to SC

The regulator contended that the bouquets prescribed by the broadcasters are created only with a view to increase their ad revenue

e4m by Javed Farooqui
Updated: Sep 6, 2021 2:08 PM

Reducing MRP cap to Rs 12 and introducing twin conditions in the new tariff order (NTO) 2.0 will ensure 'fair bundling' and discourage 'unfair bundling', the Telecom Regulatory Authority of India (TRAI) has said in its counter-affidavit to the Supreme Court. 
It has been filed in response to the petition filed by Indian Broadcasting and Digital Foundation (IBDF) against the Bombay High Court order upholding NTO 2.0, except the 2nd Twin Condition which was struck down, and the TRAI's power to fix tariff in the larger public interest.

The regulator said that the amendments in the 2020 regulation made small changes to the 2017 regime which introduced sweeping changes. These changes have been alleged by the broadcasters, to be draconian, constituting a whole new paradigm. This, the TRAI said, is far from the truth.

“The 2017 Regulations have been amended/revisited by the Regulator only in respect of those parts which were observed to being a basis for continued abuse qua viewers/consumers, who with the benefit of hindsight and regulatory experience, has made corrections which that experience and expertise showed to be necessary,” the counter-affidavit reads.

The two key changes made by the TRAI to the principal tariff order include reducing the MRP cap to Rs 12 from Rs 19 for inclusion in a bouquet. Secondly, the regulator introduced twin conditions. The second twin condition has been struck down by the Bombay High Court while the first condition is squarely to deal with the perverse pricing of bouquets.

The TRAI said that these two big changes have been brought about to ensure 'fair bundling' and discourage 'unfair bundling'. The regulator contended that the bouquets prescribed by broadcasters do not give consumers/households/members of the family a choice of varied content at an affordable price. They are created only with a view to increase advertising revenue of the broadcasters.

The regulator noted that broadcasters earn revenue from two streams (i) Subscription: and (ii) Advertising. Almost 2/3rd of the revenue comes from advertising due to which the focus is on maximising the ad revenue. Further, the ad revenue of a channel is directly dependent on how many persons subscribe to that channel or the reach of the channel.

“Popular or High demand channels get subscribers on account of that popularity. They don’t need to be pushed. They are called “Driver Channels”. Broadcasters however want the less popular/not so popular channels also to be in a position to claim subscribers — the higher the subscribership they can claim, the higher the Ad Revenue they will generate,” the regulator said.

According to the TRAI, the broadcasters use bouquets to bundle popular driver channels with those channels in which consumers/viewers have otherwise no interest. “Since viewers/consumers may otherwise say NO to taking this bundle and opt for the channel of their choice on an A-La-Carte basis, the strategy of perverse pricing is employed, namely artificially increase the A-La-Carte price of the popular/Driver Channel and then offer a bouquet containing that Driver/Popular Channel at a very significant discount.”

It added that the viewer/consumer take the bouquet not out of choice but out of compulsion, stemming from this perverse pricing. It also stated that in most cases, bouquet prices are the same as the A-La-Carte price of the Driver/Popular Channel. In many cases, the bouquet price artificially has reached such perversity that the it is cheaper than the Popular/Driver Channel in it.

The regulator noted that broadcasters then cite bouquet subscription as evidence of consumer preference/desire to make a virtue of a vice. Far from being in the consumer/viewer interest, the bouquets deprive consumers of choice, it averred.

Explaining the perverse pricing phenomenon, the TRAI said that the broadcasters price one or more popular channels at an artificially high price, so that a consumer/viewer finds it prohibitive to subscribe to. The popular channels are then included in a bouquet of channels at an extremely low price but with a catch that they cannot take it on a standalone basis but as a bouquet.

“So outrageous and brazen had this phenomenon of Broadcaster pushing of bouquets by creation of an artificial disparity in pricing (A-La-Carte vis-à-vis Bouquets) that broadcasters had started offering bouquets, whose bouquet price, in some cases, was cheaper than or the same as an individual channel in the bouquet. In other words, “the sum total or aggregate of many was equal to or less than one which was part of many”. This is what TRAI describes as perverse pricing and which the Madras High Court and Supreme Court have accepted as being perverse pricing by the creation of bouquets,” the TRAI asserted.

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