NTO 2.0: TRAI evaluates if first of the twin conditions is independently implementable
In a consultation paper, the regulatory body has agreed that the television broadcasting sector is facing challenges not only due to pandemic but also due to other geopolitical conditions
After smoking the peace pipe with broadcasters, the Telecom Regulatory Authority of India (TRAI) has finally initiated a consultation process to take care of the concerns of the stakeholders. While the TRAI has asked stakeholders to provide their comments on multiple questions related to New Tariff Order (NTO) 2.0, the regulator has also analysed the reasons that led to the introduction of the consultation paper.
While looking at the impact of video streaming services and the Covid pandemic on the revenue of broadcasters, the TRAI agreed that the television broadcasting sector is facing challenges not only due to pandemic but also due to other geopolitical conditions.
"It is important for a regulator to be aware and address the issues for enabling the industry. During the interactions, stakeholders have made it clear that implementation of Tariff Amendment Order 2020 in its current form will cause large-scale disruptions. This may aggravate the current issues faced by the sector," it added.
In the consultation paper, the TRAI stated that the total active number of DTH subscribers has decreased from 70.99 million to 68.89 million during the last more than one year. Similarly, the number of total active subscribers of major MSOs/HITS operators having more than 1 million subscribers, has decreased from 47.58 million to 45.55 million.
"The revenue of broadcasters, as well as DPOs, is projected to decrease in FY 2020-21. The advertisement revenue of broadcasters is also projected to decrease in FY 2020-21," the TRAI noted.
It also pointed out that the easy availability of the TV content on the over the top (OTT) platforms/ apps is also posing a serious challenge to the traditional cable/dish TV services.
Is there a need for twin conditions?
With the Bombay High Court setting aside the second of the twin conditions, the regulator has noted that the purpose of prescribing the two conditions has got impaired. In the consultation paper, the TRAI wondered if the first of the twin conditions is independently implementable or not.
"As the second of the twin condition has been set aside, the purpose of prescribing the two conditions has got impaired. One has to ascertain, whether the first of the twin condition is independently implementable or not. Furthermore, is it sufficient for fulfilling the desired objective?" the TRAI stated.
As per the twin conditions, i) the sum of the a-la-carte rates of the pay channels (MRP) forming part of a bouquet shall in no case exceed one and half times the rate of the bouquet of which such pay channels are a part; and ii) the a-la-carte rates of each pay channel (MRP), forming part of a bouquet, shall in no case exceed three times the average rate of a pay channel of the bouquet of which such pay channel is a part.
The regulator noted that the prime reason for prescribing the maximum permissible discount on the MRP of a bouquet was to enable consumer choice through a-la-carte offering and prevent skewed a-la-carte and bouquet pricing.
To bring home its point of perverse pricing by broadcasters, the regulator by way of illustration pointed out that the discount offered by broadcasters on pay channel bouquets is as high as 60% in many cases. It added that the price of bouquets becomes much lower than the sum of a-la-carte prices and even lower than the combined MRP of driver/ popular television channels.
"This reflects a possible example of perverse pricing, where a consumer is getting more channels in the bouquet while paying even less than the most popular/ driver channels included in the bouquet. Such amount of discount is anti-consumer as it discourages a-la-carte selection of channels," the TRAI stated.
The TRAI noted that this practice of offering high discounts on bouquets can only be curbed by capping discounts on the sum of a-la-carte prices in a bouquet. "Therefore, there is a reason to ensure that an effective a-la-carte choice is available to consumers without being susceptible to perverse pricing of bouquets and to maintain homogeneity in the type of television channels within a bouquet."
While noting that it is an advocate of light-touch regulations, the TRAI stated that the television channels constitute a specific product, one channel is not substitutable by another television channel.
Ramifications of NTO 2.0
On the removal of driver channels out of bouquets by the broadcasters, the TRAI stated that stakeholders have raised concerns that in case the New Regulatory Framework 2020 is implemented as per the Reference Interconnect Offers (RIOs) submitted by broadcasters, it will entail huge efforts in obtaining revised choices.
"Further in some cases, this implementation may lead to market disruption as almost every consumer would be required to submit fresh choices. As explained earlier, many consumers still provide choices manually and therefore such consumers may face inconvenience and service blackout owing to non-submission of fresh choices," it stated.
The TRAI also stated that the stakeholders suggested and requested TRAI that to a enable smooth implementation of the new regulatory framework 2020 and also to avoid likely disruption for consumers, some provisions of the New Regulatory Framework 2020 may be put up for revision through appropriate consultation.
During the implementation of the NTO, the TRAI also noticed that some consumers are not comfortable in selecting the channels of their choices, due to their inability to use IT systems and understand the packages offered by distributors/ broadcasters. "Stakeholders also suggested that in order to have a smooth implementation, popular channels of the broadcasters may need to be made available in the bouquets offered to consumers by broadcasters as well as DPOs," it stated.
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