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Capping of carriage fee at 20 paisa per channel and MSO-LCO rev share in TRAI’s new interconnect regulation

MUMBAI: Following the go-ahead from the Supreme Court, the Telecom Regulatory Authority of India (TRAI) has notified the interconnection regulation that will govern the relationship between broadcasters and distribution platform operators (DPOs) like direct-to-home (DTH), cable TV, IPTV and headend-in-the-sky (HITS) operators.

TRAI has retained most of its recommendations in the regulation including capping carriage fees for standard-definition (SD) channels at 20 paisa per channel per subscriber per month and 40 paisa for high-definition (HD) channels.

In the draft tariff order issued in October 2016, TRAI had recommended a similar carriage fee structure that would slide down if the TV channel’s subscriber penetration increased. “The quantum of carriage fee should diminish proportionately due to increased revenue accruing from subscriptions to the DPO for that channel,” TRAI had then said.

Another key provision in the regulation is the prescription of a revenue share of 55:45 between multi-system operators (MSOs) and local cable operators (LCOs) for the network capacity fee (NCF) in case they fail to arrive at a mutual agreement.

Broadcasters will not have to pay carriage to distribution platform operators (DPOs) for a channel if it is subscribed by 20% or more subscribers in a target market.

For channels with a subscription of 5% or less, the carriage payable will be equal to the rate of the carriage fee per channel per subscriber per month.

If the subscription of the channel is more than 5–10%, then the carriage fee will be 0.75 times of the rate of carriage fee of active subscriber base of the DPO.

The carriage fee for channels with 10–15% subscription will be 0.5 multiplied by the rate of carriage fee. Channels that have been subscribed by 15–20% of the DPOs subscriber base in a target market will have to pay carriage at the rate of 0.25 x rate of carriage fee.

On the lines of ‘must provide’ clause for broadcasters, TRAI has also made it obligatory for DPOs to carry the channels of broadcasters through a ‘must carry’ clause on a first-come, first-served basis.

For spare capacity, DPOs have an obligation to allocate every alternate channel capacity in a sequential manner from the pending list.

In order to ensure that DPOs are not forced to carry non-popular channels, TRAI has allowed DPOs to discontinue carrying TV channels that have less than 5% subscription in the relevant geographical area in the last six months. The DPO, in its discretion, could refuse to grant further access to the channel for a period of one year.

Since the penetration of HD channels is very low vis-à-vis SD channels, TRAI has said only HD subscribers will be considered for the calculation of monthly subscription for HD TV channels.

Every broadcaster has to provide signals of their channels to DPOs within 60 days from the date of request. Similarly, every MSO will have to provide signals of TV channels to LCOs within 60 days from request or within 30 days for date of singing of interconnect agreement.

TRAI also said that all the interconnection agreements should be signed in accordance with reference interconnect offer (RIO), which should include all the terms and conditions including rates and discounts, to ensure non-discrimination and level playing field. The stakeholders have been mandated to submit a copy of the RIO to the authority for records.

On the issue of discounts, the broadcast sector regulator has stated that the sum of distribution fee and discounts offered to DPOs by broadcasters has been restricted to 35% of the maximum retail price (MRP). Similarly, maximum discount on the rate of carriage fee offered by DPOs to broadcasters will be limited to 35%.

While leaving the placement fee unregulated, TRAI has permitted service providers to offer transparent discounts to other service providers out of the limit of 15% if it is mutually agreed.

However, it has been decided that any agreement, for any kind of fee for a channel, between two service providers should be made part of the interconnection agreement and reported to TRAI to enable the authority to monitor the industry practices.

The clause requiring service providers to provide a 21-day notice to subscribers before disconnecting signals has been retained.

TRAI noted that these regulations will ensure transparency, non-discrimination and a level playing field across the values chain.

It has also prescribed model interconnection agreement (MIA) and standard interconnection agreement (SIA) to address the issues between DPOs and LCOs to protect the interests of both parties.

In order to ensure a smooth transition to the new regulatory framework, a period of 150 days has been provided so that the service providers can either renew or amend all their existing interconnection agreements in compliance with the provisions of the new regulatory framework. Existing regulations to the extent they are applicable for addressable systems have been repealed.

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