21 Sep 2017
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No relief for LCOs on revenue sharing

MUMBAI: In a blow to local cable operators (LCOs), the TDSAT has not given any relief on revenue-sharing pattern of 55:45 (MSO: LCO) on the Basic Service Tier (BST) of Rs 100 and 65:35 (MSO:LCO) on the pay channel packages of Rs 150 (and above) as the appeal is already pending in the Supreme Court, which had ordered “status quo”.

Background

There has been a general sense of uneasiness among the local cable operators ever since the union government passed the Cable Television Networks (Regulation) Amendment Bill, 2011 that mandates digitisation of India’s large unorganised analogue cable networks.

While cable TV digitisation has been welcomed by everyone in the ecosystem, the response has been a mixed one as far as the local cable operators (LCOs), who number around 60,000 across the country, are concerned.

Whether it’s the revenue share formula, carriage fee or channel packages, the LCOs have been at the loggerheads with MSOs, broadcasters and TRAI (Telecom Regulatory Authority of India), the sector regulator.

Take, for instance, TRAI’s revenue share mechanism which calls for the MSOs and LCOs to share revenue in the ratio of 55:45 (MSO: LCO) for free-to-air (FTA) channels and 65:35 (MSO: LCO) for pay channels.

The revenue share formula mooted by the authority will come into force only when the MSOs and LCOs fail to arrive at a mutually agreed revenue share arrangement.

LCOs move the TDSAT

Feeling that their proportion of the share is inadequate, the LCOs opposed TRAI’s revenue share formula tooth and nail. The LCOs under the banner of United Cable Operators Welfare Association (UCOWA) challenged the revenue share in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).

The LCOs contended before the tribunal that the tariff order was arbitrary and irrational as it did not make provision for them to fix their rates.

The counsel for LCOs pointed out that the LCOs were getting 20 per cent of Rs 5.35 paise, the maximum retail price of a pay channel, in the Conditional Access System (CAS) regime and a sum of Rs 82 for FTA channels, which were being downlinked directly by the LCOs to consumer homes.

In comparison, the LCOs would get only Rs 45 out of Rs 100 for the Base Service Tier (BST) and Rs 52.5 out of Rs 150 for pay channels. The LCOs also argued that since subscribers would opt for 10 to 15 channels, the income of LCOs would come down to Rs 30 in DAS (Digital Addressable System).

The tribunal found this argument factually untenable. It also noted that unlike CAS, the DAS was for the entire country and operators would be entitled to 42 per cent of non-CAS rates as opposed to a price cap of Rs 5 per channel in CAS.

The tribunal also noted that the LCOs, unlike the MSOs, are not required to maintain head- ends in DAS; they are also not required to install or maintain any equipment. So in essence LCOs don’t need to make any investments, unlike MSOs who have to invest in expanding carrying capacity by installing digital head- ends. The MSOs also have to set up subscriber management system (SMS), and invest in content through deals with broadcasters.

Finding no merit in their case, the TDSAT dismissed the UCWOA’s petition challenging TRAI’s revenue share formula.

LCOs look at Supreme Court for relief

Not in a mood to give up, the UCWOA on 11 May challenged the TDSAT order issued on 19 October. The Supreme Court admitted the appeal filed by UCOWA challenging the revenue share model.

A three-member bench headed by chief justice Altamis Kabir, justice Vikramjit Sen and justice S A Bobde have issued notices to TRAI and I&B ministry. The court also decided to list for hearing the appeals filed earlier by IMCL and Digicable.