Discovery moves Delhi HC against TRAI’s new CP on broadcast tariff

MUMBAI: Discovery Communications India has moved Delhi High Court against the Telecom Regulatory Authority of India’s (TRAI) consultation paper ‘Tariff related issues for Broadcasting and Cable services’. The Delhi HC has listed the matter for hearing on 19th September.

Terming it illegal and lacking in objectivity, transparency, and fairness of approach, the broadcaster wants the consultation paper to be quashed.

The petition dated 28th August states that the regulator is reviewing the New Tariff Order (NTO) in order to bring down channel prices. It has contended that the NTO has been implemented just seven months ago and needs time to settle down.

It also argued that the consultation paper fails to conform to the fundamental tenets of transparency and objectivity by proceeding with a pre-determined notion that channel broadcasters have distorted the broadcasting market and consumer choice through perverse pricing and deep discounting and have therefore called for suggestions on the ways and means to remedy the situation.

The petition also alleged that the regulator has already made up its mind to align individual channel prices with bouquet prices and therefore the entire consultation exercise.

It also noted that TRAI’s assumption that the unreasonable amounts of discounts offered by broadcasters’ results in illusionary perverse pricing affecting consumer choice is without any basis and not based on any study.

The petition also states that the regulations allow distribution platform operators (DPOs) to discontinue any channel having less than 5 percent of the average viewership of the DPO. This amounts to a restriction of carriage rights of niche channels having limited viewership, it argues.

Discovery Communications owns and operates channels like Discovery Channel, Discovery Science, Discovery Kids, Animal Planet and TLC 0.75% market share across its genres.

Through the consultation paper, the regulator has asked stakeholders to provide their responses on the 27 questions covering different aspects related to the NTO. Written comments on the Consultation Paper are invited from the stakeholders by 16th September. Counter comments, if any, may be submitted by 30th September.

One of the main issues that the TRAI seeks to address through the consultation process is that of mismatch between a la carte and bouquet pricing. The existing regulation has a clause that caps the discount on bouquets offered by the broadcaster at 15%.

The clause, which is currently in abeyance, mandates that the MRP of a bouquet formed by a broadcaster should not be less than 85% of the sum of MRPs of the a-la-carte pay channels forming part of that bouquet.

This has rendered the TRAI’s objective of offering choice to consumers meaningless since consumers are forced to take bouquets as a la carte price of popular channels are priced closer to the channel cap of Rs 19.

In its press release, the regulator has admitted that adequate choice to select TV channels has not been given to the consumers. However, there are some positives like transparency in TV channel packaging harmonised business processes in the sector, reduced disputes among stakeholders.

TRAI, in March 2017, notified the ‘New Regulatory Framework’ for Broadcasting and Cable services. The new framework came into effect from 29th December 2018.

The regulator lamented the fact that the broadcasters and distribution platform operators (DPOs) have lived up its expectation in implementing the NTO despite having the requisite flexibility. To the contrary, the TRAI stated that the flexibility was misused to throttle market discovery of TV channel prices by giving huge discounts on the bouquets.

Based on the tariff declared by the broadcasters under the new regulatory framework, the TRAI observed that broadcasters are offering bouquets at a discount of up to 70% of the sum of a-la-carte rates of pay channels constituting those bouquets.

“It indicates that in absence of any restriction on the discount on the offering of bouquets, broadcasters are making prices of a-la-carte channels illusory thereby impacting the a-la-carte choice of channels by consumers,” the TRAI noted.

While the Madras High Court had set aside the 15% discount cap on bouquets, the Supreme Court had upheld the TRAI’s powers to formulate pricing for TV content. The tariff order and regulations were also upheld by the apex court. The TRAI, however, chose to wait and watch before implementing the bouquet cap.

Data available with TRAI suggests that on an average discount offered on various bouquets of major broadcasters are in the range of 40-54%. It also observed that in some case broadcasters have declared MRP of their bouquet such that their bouquet price is equal to or less than the MRP of a single channel present in that bouquet.

Analysis of most selling bouquets of broadcasters revealed that heavy discounts are applied to bouquets making the a-la-carte prices of channels irrelevant in comparison.

MRP of the popular channels are declared at the maximum permissible limit of Rs 19/- so as to qualify to be the part of a bouquet and then these are bundled along with a number of other channels, mostly marginally priced non-popular channels.

By following this business model, the broadcasters gain in maximising their reach even for not so popular channels, increasing subscription revenues, the TRAI said.

“On the flip side, this perverse pricing strategy renders the a-la-carte subscription of the channels meaningless for the consumers and reduces the option of choice. They end up subscribing to channels not of their original choice and even paying for those channels which they are not inclined to watch without even taking notice of,” it stated.

The TRAI has asked stakeholders to comment if there is a need to reintroduce a cap on discount on sum of a la carte channels forming part of bouquets while forming bouquets by broadcasters? If so, what should be an appropriate methodology to work out the permissible discount? What should be the value of such a discount?

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