18 Nov 2017
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TRAI’s proposed CPE tariff order to negatively impact DTH ops

MUMBAI: Taking objection to the Telecom Regulatory Authority of India’s (TRAI) proposed move to make buyback of customer premises equipment (CPE) mandatory, the DTH Association has said that the proposed tariff order would have serious commercial implications for direct-to-home (DTH) operators, who are already reeling under losses of Rs 13,000–15,000 crore (Rs 130-150 billion).

The association said that the proposed tariff order wherein DTH operators would have to provide standard buyback/refund mechanism to customers would lead to double taxation on DTH operators.

“The authority has not taken into consideration that in case of buyback and re-provision of the CPE, the taxes once remitted cannot be claimed back by the company in all situations. There would be similar problems with regard to availment of credit,” DTH Association said in its response to the regulator.

The association mentioned that the authority in its explanatory memorandum has said that 45 per cent of DTH customers have churned so far. The DTH industry has been making losses due to churn.

“Despite being in possession of said data, TRAI has not considered the impact of the churn,” it added.

Besides the taxation issue, the association regretted that the authority had failed to consider that a new subscriber would be unwilling to buy old CPE equipment.

It also said that the obligation to provide free repair and replacement of CPE for a period of five years is lopsided and is prejudicial to the interests of DTH operators, as it would add to their costs as the maintenance is usually outsourced to third party service providers who charge for every visit.

Furthermore, the association contended that a CPE might develop a fault and a repair is necessitated due to multiple factors not attributable to the provider of the CPE.

The association also argued that the authority has not taken into account several costs like refurbishing, loss on account of dealer and distribution commission, actual de-installation, freight and logistics, inventory holding, collection centre, testing and verification, and technology upgrade and changes while working out the buyback/refund price of CPE.

Noting that the previous tariff order on CPEs was limited only to SD set-top boxes (STBs), the association stated that it was unfair to include HD STBs in the standard schemes as the HD services are under forbearance. Moreover, the cost structures for both kinds of services are different and incomparable. It urged the authority to exclude all other kind of CPEs from the tariff order except SD CPEs.

The association said that the TRAI has not provided a rationale for fixing collection charges at Rs 150 since both installation and uninstallation of the connection can be done by a skilled technician. It suggested that collection charges should be the same as installation charges, which is Rs 350.

On the stipulation of a three-month lock-in period for customers, the association said that the minimum lock-in period should not be less than 12 months. The stipulation of three-month lock-in period would result in loss for DTH operators. It further pointed out that a DTH operator can make money only if the customer sticks with it for three to four years.

On capping of activation and installation charges at Rs 350, the association said that the charges should remain uncapped as activation charges include variety of costs and charges including activation vouchers, call centre, and data centre charges. Furthermore, these charges go up with the upgrade of services from SD to HD.

“The DTH operators must be allowed to fix the activation fee in accordance with the business model and the scheme offered to the subscribers,” the association said.

It said that the draft tariff order is not only commercially unviable but also legally untenable as TRAI does not have jurisdiction to regulate CPE tariff, as the same does not fall under broadcasting and cable services. It also added that the matter is yet to be settled by the Supreme Court.

TRAI had come out with a draft tariff order on CPEs after the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had set aside the earlier tariff order. The tribunal had made it clear that it would be open to TRAI to issue a fresh tariff order after taking into consideration the inputs provided by the DTH operators and addressing the issues raised by them.