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TRAI’s tariff hike: Broadcasters to gain, content costs to climb for MSOs and DTH

MUMBAI: It’s advantage broadcasters as the Telecom Regulatory Authority of India (TRAI) has allowed for a 27.5% inflation-linked hike in tariff ceiling for non-addressable cable areas, with 15% coming into effect from 1 April 2014 and the balance 12.5% from 1 January 2015.

On the other side of the coin, the multi-system operators (MSOs) and direct-to-home (DTH) service providers will feel the pinch due to a rise in content costs while full recovery through the local cable operators (LCOs) will be tough. Average revenue per user (ARPU) at the MSO end is largely determined and controlled by the LCOs.

Cable TV subscribers will have to pay higher monthly bills with LCOs pushing for a raise in markets wherever it is possible. Though in digital addressable system (DAS) areas the retail pricing is left to market forces, the cable TV networks will use the TRAI inflation-linked hike as a garb to up monthly subscription rates.

The tariff for DAS areas will also see a jump as it is linked to non-addressable cable rates. Broadcasters cannot charge more than 42 per cent of analogue cable TV rates in addressable system.

For addressable platforms, putting channels on RIO (reference interconnect offer) will immediately become costlier. In case of fixed-fee deals, the bargaining power will rest with the broadcasters when the contracts come up for renewals.

Broadcasters to gain

If the TRAI had diluted the role of the content aggregators, the move to up the tariff ceiling will have a positive impact on the broadcasters. A 27.5% rate increase is substantial and broadcasters like Zee Entertainment Enterprises Ltd, Star India, TV18, Multi Screen Media (MSM) and Sun TV Network will have an advantage while negotiating with the distribution platform operators.

The contracts signed on RIO rates will inflate immediately. In case of fixed-fee contracts, broadcasters will be able to get sweeter deals when they come up for renewals.

Gurjeev SinghMediaPro COO Gurjeev Singh said, “The rate hike is a step in the right direction as it will help to increase ARPUs which are pathetically low in the country at this point.”

Singh also contended that while the content costs for broadcasters have gone up, there has not been a proportionate increase in prices. “It’s not that customers are not willing to pay for the content but somebody has to go and ask them to pay more. Even the price of a multiplex ticket has gone up but not the television channels,” he added.

Rajesh KaulMSM Discovery president Rajesh Kaul concurred with Singh’s sentiments. “We welcome the TRAI’s decision to revise non-addressable tariff. It was long overdue and I am happy that it is finally happening. While the end customers will obviously have to pay more, for the industry it is very important to increase ARPUs,” Kaul said.

While Singh feels that the impact of rate hike on addressable system will mainly be on a la carte channels, MSM Discovery’s Kaul opines that they will look at increasing rates not just for new contracts but also for existing ones.

“The addressable system rates will automatically go up as it is linked to non-addressable rates. We will raise rates not just for new contracts but also for existing ones. It has come after a long time and we will implement it immediately,” Kaul asserted.

MSOs and DTH operators stand to lose

With content costs climbing, MSOs can neutralise the impact by charging higher cable TV subscription rates. But they will have to sort out billing and collection issues before they can stand to gain from the inflation-linked rate increase provided by TRAI.

For MSOs and DTH operators, content deals on RIO basis are likely to rise. Dish TV and Hathway Cable & Datacom, for instance, have inked RIO deals with some broadcasters. The bargaining power of MSOs and DTH companies will also reduce in case of new fixed-fee deals.

jagdish-kumar01Hathway Cable & Datacom MD and CEO Jagdish Kumar, however, feels that the fixed-fee deals will see no negative impact on the MSOs. “The rate increase will depend on the negotiations between the broadcaster and the MSO. While the fixed-fee deals which are negotiated won’t see an impact, the RIO rates which are not negotiable might see an increase,” he said.

Siti Cable COO Anil Malhotra said that the rates for non-addressable system will certainly see an upside. However, whether it will impact addressable system rates is something to wait and watch out for.

Anil-Malhotra-COO-SITI-Cable“We have to study the tariff order carefully and see if we can change the rates of our bouquets in addressable areas because regulation says that the composition and rates of a bouquet cannot be changed for at least six months,” he explained.

In the same breath, he also added that the MSOs will have no option but to pass on the rate hike to customers should the broadcasters ask for an increase. “Let the broadcasters come out with their new rate card, we will evaluate then. We will go to the market and see if consumers are willing to pay. If they are willing to pay, we have no issues,” he affirmed.

Harit-NagpalWhile stating that the rates in addressable system will get impacted, Tata Sky MD and CEO Harit Nagpal said that operators who are taking channels on RIO will face the brunt. “Most of our deals are medium-term fixed-fee deals, so it won’t impact us. But operators who take channels on RIO will have to pay more as the a la carte rates will go up,” he expounded.

LCOs eye big gains

The LCOs are eyeing big gains, particularly since there is rampant under-declaration in analogue cable areas.

ROOP SHARMAarvind prabhoo“While broadcasters will gain the most, the second biggest beneficiary will be the LCOs while the end customers will be the worst hit,” said Maharashtra Cable Operators Federation (MCOF) president Arvind Prabhoo.

Cable Operators Federation of India (COFI) president Roop Sharma believes that the move is pro-broadcaster and anti-consumer. “How can the TRAI increase rates like that without due consultation process? Customers are not willing to pay more. The LCOs will have to face the wrath of the customers,” she said.

Also read:

TRAI notifies 15% hike in non DAS tariff
How TRAI worked out a 27.5% inflation-linked hike in non-DAS tariff
SC allows TRAI to increase non-addressable tariff
MSOs may feel the pinch as TRAI gets SC permission to revise tariff