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MSOs in favour of distribution network model for wholesale pricing
MUMBAI: Most multi-system operators (MSOs) have weighed in favour of distribution network model under the integrated system for determining wholesale tariff.
However, the MSOs have proposed slight modification to the distribution network model suggested by the Telecom Regulatory Authority of India (TRAI) in a consultation paper titled ‘Tariff issues related to TV services’.
Under the integrated model, TRAI suggested three models, namely conventional MRP (maximum retail price) model, flexible MRP model and distribution network model.
Distribution network model
The distribution network model, which most MSOs prefer, envisages the separation of charges for distribution networks and subscription of pay TV channels.
In this model, broadcasters are free to notify the price of pay channels to customers under broader regulatory framework. The broadcaster may notify the retail price of its pay channels on a la carte basis. They may also have the freedom to form the bouquets of only pay channels and declare their prices.
Distribution platform operators (DPOs) will get the rental for the bandwidth used based on the number of channels subscribed by the consumer. The rental would cover expenses incurred by the MSOs and they would be able to recover reasonable amount of profit.
Conventional MRP model
The conventional MRP model provides freedom to broadcasters to notify MRP for their pay channels and bouquets of pay channels to customers.
The DPOs act as a carrier of TV channels and they are not allowed to repackage the channels and bouquets of channels from different broadcasters.
Flexible MRP model
The flexible MRP model, though very close to the conventional MRP model, provides that DPOs have options to make new bouquets from the channels in addition to bouquets available at their platform from different broadcasters.
The MRP for the new bouquets created by the DPOs is declared by them, while broadcasters continue to declare the MRP to consumers both for their a la carte channels and bouquets.
AIDCF’s views on the distribution network model
The All India Digital Cable Federation (AIDCF) said that the distribution network model would work best for the industry. It suggested that the manner of re-transmission of each MSO and the resultant revenue distribution to each link in the distribution chain.
In its submission, the federation said that the revenue share between the MSO and local cable operator (LCO) needs to be fixed. It suggested that the revenue share ratio between MSOs and LCOs for basic pack of a minimum of Rs 150 should be 70:30.
The revenue for pay channels should be distributed in the ratio of 40:30:30, with broadcasters keeping 40 per cent and MSOs and LCOs keeping 30 per cent each. The revenue share should be mandatory and not a fall back option, the federation said.
In its submission, Hathway Cable & Datacom suggested that the distribution network model would ensure transparency, non-discrimination and a level playing field between and within stakeholders. Moreover, subscribers will have full freedom to choose the channels and pay accordingly.
It said that the DPOs’ interests are also protected as they will be able to charge rentals, which will provide fair and reasonable return on their investment to deliver the signals to the subscribers.
Hathway has proposed that the DPOs should be allowed to charge Rs 130+ tax per set-top box (STB) as minimum delivery charges for up to 100 FTA channels. For every block of 10 additional channels (FTA/ Pay), the subscriber has to pay additional charges of Rs 10 + tax per block.
The rental charges will be shared between the MSO and the LCO in the ratio of 70:30 (DPO: LCO).
It also said that broadcaster must announce the MRP subject to genre-wise cap specified by TRAI. The MRP may differ from state to state, subject to taxes being levied in each state. The commission payable by the broadcasters to all DPOs should be non-discriminatory and uniform and should be published on the TRAI website .
It further submitted that the broadcasters should not be allowed to create their own bouquets, as they tend to push the non-driver, non-popular channels by keeping a la carte rate of driver channels at a higher price and heavily discounting the bouquet price.
It said that the broadcaster should necessarily provide all its pay channels on a la carte with rates of each channel prescribed directly to the consumer. There should be no option of bundling or packaging allowed to the broadcaster either for pay channels or for a combination of pay and FTA.
It also said that the present mode of collection wherein LCOs collect from the consumers and retain their share and pay to the MSO has to be done away with. In the new regime, there is an urgent need for the consumer to pay directly to the MSO and that has to compulsorily be made prepaid rather than today’s postpaid model where the LCOs collect money from the consumer and then after keeping their share, pass the rest to the MSO, which, in turn, is shared with the broadcasters.
Supporting the distribution network model, DEN Networks said that the MSOs deserve to be fully compensated for on a cost plus basis since their role in the distribution chain is primarily to encrypt and decrypt through its network.
It also submitted that an MSO needs to be compensated by way of carriage for the cost of network augmentation and expansion. It has suggested that the concept of carriage also needs to be built into the same with the continuation of current regulatory framework.
DEN said that the success of this model would also depend on fixing up of revenue sharing between the MSO and the LCO. This should be ensured by ensuring that a prepaid model is followed for DAS areas, the MSO said.
Siti Cable for regulated RIO
Siti Cable said that the regulated RIO model, in which TRAI would propose a price cap for each genre, is the most suitable wholesale pricing model. However, it would only be successful if it were mandated for all the platforms and not on choice of platform, as it would otherwise defeat the very purpose of this model.
Siti Cable submitted that in case the regulated RIO model is not found suitable, then the next model of choice is the integrated distribution model. In this model, the revenue share between MSO and LCO needs to be fixed, it said.
IMCL suggests modified regulated RIO
IndusInd Media & Communications Ltd (IMCL) suggested modified regulated RIO at the wholesale level. It said that the regulated RIO should be based on present bouquet offered by broadcasters. It also suggested having a state-wise wholesale RIO.
In terms of the integrated models, IMCL suggested distribution network with some modifications like basic carrying cost paid by broadcaster to DPO, network technical back end fee, and base pack priced at Rs 150 per month.
Asianet Satellite Communications suggested the distribution network model under an integrated model. Within the suggested models at the wholesale level, it supported the regulated RIO model.
The MSO said that price caps should be lowered to make a la carte a viable proposition. The RIO rate should be based on the agreements signed with various broadcasters. It said that there should be checks to prevent favour between broadcasters and DPOs related to or promoted by the same group to bring in non-discrimination.
As OTT is gaining ground, a regulation is needed to allow MSOs to provide OTT services on a non-discriminatory basis as broadcasters are denying content to MSOs since they have their own platforms, the MSO said.
Atria Convergence submitted that the regulated RIO model is the most optimum under the present business circumstances and market conditions. It said that the prices of channel should be affordable to the consumers. It also prescribed regulations for the regulated RIO model.
Considering the growth of the sector and consumer power of choice, ACT batted for the flexible MRP model among the integrated models. Moreover, considering the ground situation where there are major vertically integrated players and the relationships/deals between various service providers, the present market is not mature for an integrated price model, it added.
It urged TRAI to frame regulations that may lead to the integrated model over time.
Ortel Communications said that a la carte pricing should be made mandatory and no other type of deal with discounts should be allowed. Broadcasters should offer content to all DPOs on a non-discriminatory basis based on RIO.
TRAI should cap the margins charged by DPOs over and above the RIO rates of broadcasters.
The MSO proposed that DPOs should mandatorily provide FTA package comprising 100 channels.