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TRAI tariff order looks to rationalise a-la-carte channel pricing

MUMBAI: Concerned with poor uptake of a la carte channels at retail level due to prohibitive pricing, the Telecom Regulatory Authority of India (TRAI) has stepped in to regulate the a-la-carte channel pricing, a move aimed at protecting the interests of the consumers.

The authority has modified the ‘twin conditions’ in the amended Tariff Order for Digital Addressable Systems (DAS) that regulate the a-la-carte rate of channels vis-à-vis the bouquet rates at retail level.

As per the ‘twin conditions’ the a-la-carte rates of pay channels forming part of bouquets shall not exceed two times the a-la-carte rate of the channel at wholesale level. Further, the a-la-carte rate of a pay channel forming part of a bouquet shall not exceed three times the ascribed value of the pay channel in the bouquet.

Despite resistance from broadcasters and MSOs, the authority has retained “twin conditions” that were provided in the draft Tariff Order issued on 4 June 2013.

The twin conditions ensure that the a-la-carte rates offered to the subscribers are reasonable vis-a-vis the bouquet/package rates, TRAI asserted.

The uptake of a-la-carte channels on DTH platforms has been very low due to exorbitant rates, the authority noted. In order to avoid this situation, the authority said it has devised twin conditions in order to ensure effective choice to the consumer, in the form of a-la-carte, bouquet or a combination of a-la-carte and bouquet.

Since, the free to air (FTA) channels, offered on a-la-carte basis, are to be priced uniformly, it is expected that market forces will ensure that such uniform rate would be reasonable, it added.

In order to provide further flexibility to the operators in fixing of the a-la-carte rates of their pay channels, the ‘factor’ has been given a fixed value of ‘1’ in the formula for calculating the proportionate value of the pay channels in the bouquet.

This effectively assigns a value of Rs. 1 to all the FTA channels, included in the bouquet for calculating the proportionate bouquet rate with respect to the pay channels, the authority stated.

The value of FTA channels as Rs. 1 has been used taking clue from the value assigned to an FTA channel when offered as part of the BST, which is mandatory for the multi-system operators to offer, who are providing cable TV services through digital addressable systems, it explained.

This, the authority asserted, is envisaged to provide realistic ceilings for the retail pricing of the channels/bouquets.

The authority opined that the linkage between a-la-carte rate of a channel and bouquet rate has been provided with an intention that the operator has flexibility to package the channels as per his business plan while, at the same time, the a-la-carte prices are not rendered illusionary to the consumers.

Considering the fact that the operators would be required to make appropriate changes, both in pricing and packaging, the authority has decided to make the ‘twin conditions’ mandatory with effect from 1st January 2014.

During the period from the notification of this tariff order till 31st December 2013, operators would be required to offer channels, complying to either of the two conditions, specified in the ‘twin conditions’.

The operators are, however, free to make their offering, complying to the ‘twin conditions’, if they wish to do so before 1st of January 2014, the authority stated.

Further, in case a channel forms part of more than one bouquet then the above conditions will have to be satisfied for all such bouquets. Further, if the operator offers discounts to its subscribers on bouquet rates, the above said ‘twin conditions’ should also be satisfied with such discounted bouquet rates.

The amended Tariff Order also clarifies the position that subscribers can either opt for channels on a-la-carte basis or bouquet or combination of both, as per their choice.

The authority has also deleted several contentious clauses pertaining to prescription of a minimum channel carrying capacity of 500 channels for the MSOs and prohibition regarding charging of placement fee by the MSOs from the Interconnection Regulations.

The clauses have been deleted since the authority feels that there are enough safeguards in the existing regulation. A provision has also been added to specifically bring in clarity that the MSOs cannot seek a channel from the broadcaster and seek carriage fee at the same time.

The amended Tariff Order and Interconnection Regulation have been notified by the TRAI today following an exhaustive consultation process with the industry. The draft Tariff Order and Interconnection Regulation were issued on 4 June 2013 for seeking comments of the all the stakeholders.

Many of the contentious clauses particularly in the Interconnection Regulations like carriage fee, channel carrying capacity for MSOs, and placement fee were earlier set aside by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) following an appeal by MSOs like Digicable and InCable.

In the amended Interconnection Regulations, the sector regulator has added a new provision that prevents MSOs from charging carriage fee from broadcasters while at the same time seeking signals of their channels.

The intention behind including the provision was to ensure that the broadcasters are not forced to supply their channel under ‘must-provide’ and at the same time pay carriage fee for the same channel. The inclusion of such a proviso prevents a distributor of TV channels from misusing the ‘must-provide’ clause.

The prescription of a minimum channel carrying capacity of 500 channels for the MSOs has also been deleted since the authority feels that there are enough provisions in the regulations that will take care of the broadcasters’ fear of MSOs creating artificial scarcity to demand unreasonable carriage fee.

Explaining the rationale behind doing away with channel carrying capacity clause, the authority stated that there is a ‘must carry’ provision in the Interconnection Regulation that mandates MSOs to carry regional language channels specific to a region and channels in Hindi and English languages.

The prohibition regarding charging of placement fee by the MSOs has also been deleted from the amended regulations since the Interconnection Regulation already has a provision that if an MSO, before providing access to its network, insists on placement of the channel in a particular slot or bouquet, such precondition amounts to imposition of unreasonable terms, TRAI stated.

The authority has also deleted the word ‘pay’ from the from the heading of clause 6 and also from the clause 6(2) of the principle Tariff order dated 21 July 2010 in order to bring it in sync with the amended the Tariff Order issued on 30 April 2012 that mandates MSOs to provide all pay and FTA channels on a la carte basis.

The deletion of word ‘pay’ will allow operators to specify a minimum commitment period, not exceeding three months for both ‘pay’ and ‘FTA” channels, subscribed on a-la-carte basis.

According to the authority, it was observed that around 75 per cent of all the channels permitted by I&B ministry are FTA channels therefore offering only pay channels on a-la-carte basis would deprive subscribers from exercising their choice of channels.

Therefore, the authority felt it appropriate to extend the a-la-carte provisioning of channels to cover both the FTA and pay channels carried over the network of an operator.

The authority has also added a proviso that enables a subscriber to choose channels on a-la-carte basis or bouquet/package basis or any combination of a-la-carte and bouquet/package basis to bring in parity amongst various addressable platforms as well as to ensure that consumers of these platforms are on equal footing.