NTO: Why frequent regulatory intervention is not helping consumers

A CRISIL February 2019 report had cautioned that the new network capacity fee and channel prices could lead to an increase in subscribers’ monthly TV bills

e4m by exchange4media Staff
Updated: Jan 29, 2020 12:43 PM

The New Tariff Order (“NTO”) was first introduced by the Telecom Regulatory Authority of India (TRAI) with effect from 1.2.2019. On January 1, 2020, within just eight months, the authority amended it.

Although the TRAI leadership assured stakeholders that they’d make “only small tweaking and modification” to the NTO, the current amendments have jolted the broadcasting sector. Broadcasters allege that these latest modifications were never discussed with them, nor did TRAI take cognizance of the memorandum submitted by the Indian Broadcasting Foundation (“IBF”).

It is worth recalling that, immediately after the implementation of the NTO, the Credit Rating Information Services of India Limited’s (“CRISIL”) February 2019 report, cautioned that the new network capacity fee (NCF) and channel prices could spike up subscribers’ monthly TV bills.

However, Ram Sevak Sharma, the TRAI Chairman, rejected the CRISIL report and said that it was prepared on an “inadequate understanding” of the TV distribution market. Separately, TRAI’s Secretary said that “In three months, we expect prices of various channels to go down”.

TRAI however, does not acknowledge the main reason for price hike - the NCF of Rs.130/- in addition to the amount customers have to pay for bouquet and a la carte channels.

Less than a year ago, TRAI determined that the maximum retail price per channel will be capped at Rs. 19. That amount has now been reduced to Rs. 12. Additionally, TRAI allowed DPOs to charge up to Rs.130/- (excluding tax) for 200 FTA channels and up to Rs. 160/- for more than 200 channels. On top of these charges, subscribers have to pay extra for pay channels, resulting in higher bills.

A KPMG report from August 2019 states that the Average Revenue per User has increased for many distributors, despite the fact that the number of subscribers has reduced. In small cities in DAS 3 and DAS 4 areas, bills have increased by 30-35%. This demonstrates that the NCF acts as a barrier for consumers and gives DPOs the unfair advantage of pushing their own channels.

There was an uproar from television viewing audiences, the media and the political class for the way in which TRAI rolled out the NTO. Quality of Service norms were implemented poorly and DPOs were ill-prepared to implement the provisions of the NTO. Consumers seemingly prefer a bouquet of channels because they’re less cumbersome to buy and cater to the varied needs of their households. India has more than 900 television channels and it would be tedious and unwieldy for households to select a la carte channels for individual household members. They may also have to spend more to choose the same channels from the a la carte list. Alternatively, they may have to buy DPO bouquets which will likely include channels they don’t want to watch. Consequently, this defeats the purpose of TRAI’s aim to empower consumers.

Broadcasters are seemingly worst-hit stakeholders. The NTO limits the revenues they can earn from subscriptions, increases their dependence on ad revenues and encourages the production of formulaic content to attract eyeballs. The curbs on bouquets restrict a broadcaster’s ability to subsidise quality content from ad revenues. Small broadcasters too will suffer. The new rules mean that the number of niche channels which can be offered in a big broadcaster’s bouquet will be limited. As a result, there is a possibility of these channels shutting down.

Such a scenario will lead to job cuts– artists, scriptwriters, lyricists, musicians, technical and logistics crews, will be unemployed. In a conversation with exchange4media, TRAI chairman said that that they “had no expectations of the so-called price reduction while implementing NTO. We only created a framework where consumers have full independence in choosing what to watch and pay for that only. So, if someone opts to watch all 500 channels his bill will obviously go up.”

This begs the question: Does the TRAI really understand the needs of a TV consumer? The authority’s interventions may provide an answer. Or the absence of one.

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