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TRAI seeks industry view on amendments to interconnection regulation and tariff order

MUMBAI: With the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) setting aside three important clauses that cable TV operators were supposed to obey under digital addressable system (DAS), the Telecom Regulatory Authority of India (TRAI) has decided to relook at some of these vexing issues in its interconnection regulations and tariff order through a consultation process with the stakeholders before arriving at any conclusions.

The sector regulator has issued a consultation paper titled “Issues related to Interconnection Regulations applicable for Digital Addressable Cable TV Systems & Tariff Order applicable for Addressable Systems” to take industry feedback on the need to amend some of the contentious clauses in its earlier regulation and tariff order.

The consultation paper has been initiated in view of the TDSAT judgement on 19 October 2012. TRAI wants the industry stakeholders to discuss on mainly the three regulations set aside by TDSAT relating to carriage fee, placement charges and multi-system operators (MSOs) having a minimum channel capacity of 500 channels.

Carriage fee regulation

In its interconnection regulations for DAS, TRAI had prohibited MSOs from demanding carriage fee if they were seeking signals of a channel from a broadcaster (Clause 3(5) of the regulations). This was rejected by TDSAT as this provision is not there for the direct-to-home (DTH) operators and MSOs in non-CAS (conditional access system) areas. TRAI now wants the stakeholders to discuss on whether this provision should exist in the interconnection regulations for DAS.

A part of the discussion relates to whether the proviso which says “provided that the provisions of this sub-regulation shall not apply in the case of a multi-system operator, who seeks signals of a particular TV channel from a broadcaster, while at the same time demanding carriage fee for carrying that channel on its distribution platform” should be introduced in the clause 3(2) of the interconnection regulations for DAS.

According to clause 3(2) of the regulation, every broadcaster must provide signals of its TV channels on non-discriminatory basis to every MSO having the prescribed channel capacity and registered under rule 11 of the Cable Television Networks Rules, 1994, making request for the same.

TRAI has also asked whether clause 3(5) of interconnection regulation should be deleted. As per clause 3(5) of the interconnection Regulation for DAS, an MSO, who seeks signals of a particular TV channel from a broadcaster, shall not demand carriage fee for carrying that channel on its distribution platform.

Minimum channel carrying capacity of 500

Every MSO operating in DAS is required to have the capacity to carry a minimum of 500 channels by a specified date, according to clause 8(3) of the Interconnection Regulations prescribed by TRAI.

TDSAT had, however, observed in its judgement that this may not be regulated since market forces play an important and significant role in the matter of carrying capacity of the MSO. It had also stated that if the regulator deems fit, it may consider making provision for MSOs to have capacity to carry number of channels based on different categories of areas i.e. city/towns/rural area etc.

TRAI has now issued a consultation paper seeking stakeholder views on whether there is a need to specify certain minimum channel carrying capacity for the MSOs based on different categories (cities/town/rural area) of areas in the interconnection regulations.

Placement fee

Another key issue being discussed is whether there is a need for regulating the placement fee in DAS and how it should be regulated.

According to clause 11A of the interconnection regulation for DAS, MSOs can’t demand placement fees from any broadcaster. In its judgement, the TDSAT had, however, said that this “is bad in law” as the same restriction is not applicable for the DTH operators. Placement charges, if any, should depend upon the mutual agreement between the broadcasters and the MSO.

In view of the TDSAT order, TRAI feels that there is need to get the views of the stakeholders to arrive at a conclusion.

Tariff order

On the tariff order front, the authority has requested the stakeholders to offer their comments on the amended twin conditions.

TRAI’s formula in twin conditions to decide on a la carte channel price ceiling is as follows:

a. The ceiling on the a la carte rates of pay channels forming part of bouquet(s) which shall not exceed three times the ascribed value# of the pay channel in the bouquet;

b. The a la carte rates of pay channels forming part of bouquet(s) shall not exceed two times the a-la carte rate of the channel offered by the broadcaster at wholesale rates for addressable systems.

#ascribed value of a pay channels in a bouquet is calculated in the following manner:

1. Proportionate Bouquet Rate for pay channels [A] = Bouquet Rate x (Sum of a la carte rate of Pay channels) / (Sum of a la carte rate of Pay channels+ Total no of FTA channels x factor*)

2. Ascribed value of a pay channel in a bouquet = [A] x a la carte rate of a pay channel/ (sum of a-la-carte rate of all the pay channels)

*factor=1 if uniform rate of free-to-air channel is less than or equal to Rupees three. The factor = uniform rate of free-to-air channel/ 3, if the uniform rate of free-to- air channel is greater than Rupees three.

The ceiling is linked to the ascribed value of the channel instead of average value of the channel in the bouquet which gives freedom to the operator to link the a la carte price of a channel to the value being ascribed to the channel in the bouquet rate rather than flat average value, TRAI explained.

The “twin conditions” was amended following representations from DTH Operators Association and MSOs that the twin conditions were difficult to implement at retail level.

The objection was to these twin conditions at the retail level:

a. the sum of the a la carte rates of the channels forming part of such a bouquet shall in no case exceed one and a half times of the rate of that bouquet of which such channels are a part

b. the a la carte rate of each channel forming part of such a bouquet shall in no case exceed three times the average rate of channel of that bouquet of which such channel is a part

Taking note of the different types of packages offered by DTH operators, TRAI observed that the ceiling derived from the average rate of a pay channel in the bouquet happen to be much less than the RIO rate of some channels at wholesale level due to large bouquet.

Observing that mandatory offering of pay channels on a la carte will deprive subscribers of a large number of free-to-air (FTA) channels, which are almost 75 per cent of the total channels, the authority has proposed the deletion of the word ‘pay’ in clause 6 and 6(2) of the principal tariff order dated 21 July 2010.

The authority wants the a la carte provisioning of channels to cover both FTA and pay channels.

The stakeholders have also been requested to offer their comments on the proposed inclusion of the following provision after sub-clause 6(4) in the tariff order dated 21.07.2010, as amended:

“It shall be open to the subscriber of the addressable systems to subscribe to any bouquet(s) or any bouquet(s) and any channel(s)( pay or free to air) or only free to air channels or only pay channels or pay channels and free to air channels”.

TRAI has also asked stakeholders to comment whether the channels that require special type of set-top box (STB) be offered only on a la carte basis or as part of separate bouquets that consists of only those channels that require a particular type of specialised STB.

Background to the consultation paper

The interconnection regulation and the tariff order were notified on 30 April 2012, ahead of the first phase of DAS in the four metros.

However, some of the provisions of the interconnection regulation were challenged by three MSOs including IndusInd Media and Communications Limited (IMCL), Delhi Distribution Com. Ltd. (DDCL) and Digicable Networks India in the TDSAT.

After hearing arguments from all the parties, the tribunal in its order dated 19 October, 2012 set aside three provisions of the interconnection regulations pertaining to prohibition of demanding carriage fee by the MSO while seeking signals of a channel from a broadcaster, MSOs having a minimum channel carrying capacity of 500 channels and banning placement charges.

Link to the consultation paper: