Regulatory micromanagement has made PayTV uncompetitive: DTH body to TRAI

Regulatory micromanagement has single-headedly led to making the PayTV industry stagnant and uncompetitive, the DTH Association has pointed out, in its letter to the Telecom Regulatory Authority of India (TRAI) on its consultation paper on Issues related to New Regulatory Framework for Broadcasting and Cable Services.

The current NTO 2.0 framework laid down by TRAI is complex and poses limitations which restrict the operators, while causing inconvenience to the consumers in addition to the burden of higher prices, remarked the DTH Association.

The association opined that no ceiling is required. The authority should allow the DPOs to price and package their own plans/ bouquets without any restrictions in order to meet the demands of the subscribers, as was the case prior to introduction of NTO regime.

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The DTH operators feel that price forbearance for DPOs is the need of the hour.

There are multiple distribution platforms offering content to subscribers. With DD Free Dish and OTT not being regulated by TRAI, traditional distribution platforms have become uncompetitive in their price offering to subscribers. DoT is also proposing to waive off licence fee from IPTV. The subscriber base of DTH has fallen from 70.99 million to 68.89 million in last one year while that of MSOs/ HITS operators, having more than 1 million subscribers, has decreased from 47.58 million to 45.55 million.

Prior to NTO, the DPOs priced content based on the paying capacity of the subscriber and not based on cost of the content. As a result, the subscribers were happy with what they got, and the industry was growing. All this stopped with the introduction of NTO, which put the pricing decision in the hands of the broadcasters and the same price became uniformly applicable for all segments of customers, regardless of their paying capacity, said the letter.

“In this hyper-competitive industry, we request for price forbearance for DPOs as that would be best for the subscribers and the industry. Forbearance would also allow DPOs to price packages keeping in mind the paying capacity of the subscribers, which they know best due to their proximity to the customer versus the broadcasters,” said the letter to the TRAI.

Other important points raised in the letter are:

No prescription required

The regulator does not need to be prescriptive.
Market forces in a competitive environment would rationalise the prices which is making mass market subscribers suffer and forcing them to migrate to other unregulated platforms.

Regulation of all or none

Broadcasters offer their pay channels free of cost to DD Free Dish and either free or at much lower rates to OTT platforms, while the same channels are given at much higher, TRAI-notified rates to PayTV platforms.

This results in discrimination for subscribers and makes PayTV platforms uncompetitive as against DD Free Dish and OTT platforms.
To maintain parity of pricing, either all should be regulated or none.

Should there be any discount, in addition to distribution fee, on MRP of a-la-carte channels and bouquets of channels to be provided by broadcasters to DPOs? If yes, what should be the amount and terms & conditions for providing such discount?

Proportion of Discount needs revision

Today’s proportion of 20% fixed and 15% variable margin is too lopsided and discretionary and is the root cause of negotiations, disputes and litigation in a very straightforward content owner/content distributor relationship.
Moreover, the margin needs to be applicable on both a la carte and broadcaster packs as the same amount of effort goes into enabling the two, on the part of the DPO.
The construct and desired objective of NTO was to allow the subscriber to decide what channels he would wish to watch at a price he can afford. The DPO’s job was limited to enabling the channels and packs desired by the subscriber.
A study of conditions listed by the broadcasters for a DPO to achieve their incentive shows that bulk of the incentive can be earned by the DPO by providing the reach desired by a broadcaster for its channels. This contradicts the desired objective of the NTO. Hence the incentive needs to be of a fixed nature @ 35%, a fair share for the partner who invests in bandwidth and last-mile infrastructure. This would also remove a discretionary bias which results in either the DPO pushing unwanted channels or missing the incentive.
In the event any low single digit percentage variable quantum of incentive is proposed over and above 35%, the broadcasters should not be allowed to use ‘reach’ as a criterion for awarding the incentive.

Revision of Network Capacity Fee

NCF cost structure was determined in 2016, and even then, the distributors had stated that the NCF is inadequate.
No provision for increase has been made in the Tariff Order.
On the contrary, there has not only been a reduction in NCF, but also, we were asked to carry double the number of channels for the same NCF as well as asked to substantially reduce the NCF for multiple Set Top Boxes for the same affluent multi-TV home, despite having incurred subsidy for every incremental Set Top Box.
While we request the authority to bring in forbearance, but until forbearance is reached an automatic, annual inflation linked increment mechanism for NCF may be incorporated in the regulations, and any ceilings on Multi TV pricing should be removed considering multiple TVs are owned by the affluent.

License Fee regime

DTH platforms, which distribute both Pay and FTA channels, just as MSOs of Cable and HITS platforms, pay license fee @ 8% of AGR, while the MSOs and HITS platform do not, despite being security cleared by MHA, licensed by the MIB, and regulated by TRAI.
OTT platforms also carry most Pay and FTA channels, in addition to original content, go direct to home, yet they are neither required to be licensed or regulated nor pay any licence fee.
There is thus a significant disparity between the treatment meted out to the DTH operators as against other platforms, despite offering the same service.
Non-licensed activities may be excluded from the calculation of Licence Fee, as has been done by DoT for the telecom operators.
Recent media report highlight that DoT is considering waiver of the licence fee on wireline broadband services (including IPTV) offered by licensed Telecom Service Providers (TSPs). DTH and IPTV are substitutable services and extension of benefit to one service to the exclusion of other is arbitrary, unreasonable and would further widen the already non-level playing field.

The DTH Association has requested TRAI to remove the discriminatory licence fee treatment being meted out to the DTH Industry and provide a level playing field by either waiving off the licence fee from DTH or making the same licence fee applicable to cable, HITS, IPTV and OTT.