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TRAI outlines new revenue structure for MSOs, HITS and DTH in draft tariff order
MUMBAI: Breaking away from the traditional model, the Telecom Regulatory Authority of India (TRAI) has outlined a new revenue structure for distribution platform operators like multi-system operators (MSOs), direct-to-home (DTH) and headend-in-the-
In its new draft tariff order for addressable systems, TRAI has proposed that distributors of television channels should get a maximum amount of Rs 130 per month from subscribers as rental charge and 20% distribution fee from the broadcasters for collection and remittance of pay channel revenue.
Broadcasters can also offer to distribution platforms a discount of not more than 15% on the maximum retail price (MRP) of channels. For channels above 100, a subscriber will have to pay to the distribution platforms for additional network capacity in bundles or lots of 25 SD channels at a rate of Rs 20 per month.
In the new draft tariff order, the TRAI has thus proposed sources of revenue for the distributors of TV channels that are independent of the traditional model. Under the existing system, MSOs and DTH operators get a revenue share from the pay channel’s subscription income collected from subscribers.
The regulator has suggested an integrated distribution model by separating charges for distribution networks and subscription of pay TV channels.
In this model, distribution platforms are assured of a consistent revenue stream in the form of bandwidth charges payable by subscribers for receiving channels.
Besides the bandwidth fee, the distribution platforms will get 20% distribution fee from the broadcasters for collection and remittance of pay channel revenue.
Additionally, the tariff order is silent on carriage and placement fee.
The traditional content cost model, paid by the distribution platforms to the broadcasters, is also being overhauled. In the new draft tariff order, the subscribers will pay as per the MRP of the pay channels and bouquets.
New revenue model for distribution platforms
TRAI has proposed that distributors of TV channels can charge a maximum fixed amount of up to Rs 130 per month, excluding taxes, from its subscribers towards its network cost to carry 100 FTA SD channels including mandatory channels of Prasar Bharati.
A subscriber may request additional network capacity in bundles or lots of 25 SD channels at a rate of Rs 20 per month for subscribing to more than 100 channels. This accounts for additional bandwidth cost borne by the distributors.
The Rs 130 and Rs 20 for providing 100 and 25 channels are bandwidth cost payable by the subscribers to the distribution platforms. In addition, subscribers will also have to fork out subscription fee for pay channels they subscribe to. The subscribers will end up paying bandwidth to the distribution platform and pay channel cost to the broadcasters.
Distribution platforms are, however, not allowed to charge any amount, other than the rental amount, from its subscribers for subscribing to FTA or bouquets of FTA channels.
Broadcasters will have to pay 20% distribution fee to distribution platforms for collection and remittance of pay channel revenue. Distributors of TV channels will need to deploy manpower and other resources to collect revenue for subscription of pay channels or their bouquets from subscribers. Under the new system, broadcasters will have to declare the MRP of their pay channels to customers. The distribution platform operators will collect this amount and remit it to the broadcasters. In case a distributor of TV channels delegates the collection of subscription revenue to the local cable operators (LCOs), it will have to share it with them.
The authority has allowed a broadcaster to offer a discount of not more than 15% on the MRP to distributors of TV channels, in order to prevent perverse pricing of bouquets vis-a-vis a la carte price of channels.
The parameters of discounts need to be disclosed by the broadcasters in the RIO, which will be transparent and uniform for all distributors, the authority stated.
By making broadcasters declare MRP for pay channels and capping the discounts given by broadcasters to distribution platforms at 15%, TRAI has tried to ensure that the curse of discriminatory pricing is eliminated once and for all.
According to the regulator, the new tariff model enables distributors of TV channels to recover their respective costs, ensures a healthy growth of the industry, and protects the interests of consumers and service providers.
Packaging of channels
TRAI has said that distribution platforms cannot bundle pay and FTA channels in a single bouquet. There must be a separate bouquet for pay and FTA channels. Similarly, there has to be separate bouquets for SD, HD and premium channels.
The distribution platforms have been permitted to repackage the channels from different broadcasters to form a bouquet of channels.
However, a distributor cannot make smaller bouquets of channels for customers by disassembling the bouquets of channels for which the MRP has been declared by broadcasters.
A distributor also cannot form any bouquet containing any bouquet of channels for which the MRP has been declared by broadcasters.
Distribution platforms can offer a la carte pay channels of one or more broadcasters in the form of bouquet(s). They will have to declare the retail price of such bouquet(s) to be paid by the subscriber. The retail price of such bouquet of pay channels shall not be less than 85% of the sum of retail prices of the a la carte pay channels forming part of the bouquet. Free-to-air and premium channels have to be excluded from such bouquets. Also, these bouquets will not contain HD and SD variants of the same channel.
While forming such bouquets, a distributor of TV channels will have to include only a la carte channels of broadcasters.
The retail price of a bouquet of pay channels offered by a distribution platform shall not exceed the sum of a la carte maximum retail prices of the pay channels forming the bouquet.
Distributor of TV channels will have to offer at least one bouquet, referred to as basic service tier, of 100 free-to-air channels, inclu
TRAI has decided to keep pay-per-program
In order to make TV channel offerings affordable for consumers, the regulator has put a genre-wise price cap on channels. So, sports channels and GECs cannot be priced more than Rs 19 and Rs 12 respectively.
Similarly, there is a price ceiling of Rs 10 for movie channels. Kids and infotainment channel cannot be priced above Rs 7 and 9 respectively. The cap for news channels is Rs 5 while that for devotional channels it is Rs 3.
TRAI to keep watch on monopolistic behaviour
On the definition of ‘significant market power’, the authority has noted that the same is well demonstrated both by broadcasters as well as distributors of TV channels. It also does not want to identify and regulate the current significant market power since it is issuing a new tariff order.
TRAI, however, said it would keep a watch on the developments after the implementation of new framework and, in case of any monopolistic behaviour of significant market power, it may intervene in the future.
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- TRAI not to regulate significant market power in new tariff order; to keep watch on monopolistic behaviour