Last year was a year of turmoil for TV subscribers as the government’s attempt to streamline channel pricing turned into a nightmare, with cable bills doubling for several subscribers.
However, with the Telecom Regulatory Authority of India (TRAI) amending some provisions of the tariff order on January 1, 2020, cable TV bills could finally decline by up to 14 percent.
In a note on Tuesday, credit rating agency ICRA said the new changes in tariff could potentially lower the direct-to-home (DTH) / cable bills of subscribers by up to 14 percent from the present levels, and encourage subscribers to exercise their right to choose and opt for a-la-carte channels. The amendments are slated to come into effect from March 1, 2020.
Cutting tariff rates
Apart from reducing the price per channel to Rs 12 from the earlier Rs 19, the new tariff order puts a cap on the channel bundle discount at 33 percent, making channel packs less lucrative than before, and allowing customers to select only those channels that they want to watch. Broadcasters typically bundle the less popular channels with the popular ones to force-sell the less popular ones. Currently, discounts on channel bundles stand at over 50 percent.
Also read: Tariff amendments will benefit both consumers and broadcasters, believes TRAI
On Saturday, expressing its disappointment at the development, the Indian Broadcasting Foundation (IBF), the apex body of broadcasters in the country, had said that these changes would have significant and industry growth hampering ramifications for the broadcast sector. The association said the new tariff order would force a lot of channels to shut down and lead to unemployment in the sector.
“While the Government is looking at ramping up growth, these changes will have the opposite effect for the broadcast sector, which is recovering from the twin shocks of NTO in the first half of 2019, and the ad slowdown business,” IBF said in a statement.
Channel bouquet pricing
ICRA said the cap on bundle discounts is not expected to impact channel bouquet pricing. Sakshi Suneja, Assistant Vice-President, ICRA, said, “ICRA does not expect bouquet prices to increase, though the channel offerings under the bouquet are expected to reduce. While an earlier bouquet price of Rs 349 included 81 pay channels, the same is now expected to fetch only 51 pay channels. However, the same should not adversely impact subscribers, as their viewing is largely restricted to a few popular channels.”
The Tariff Order of 2017 had aimed at giving subscribers the right to choose, by mandating that broadcasters declare the nature of channels as free to air (FTA) or pay, as well as declare a-la-carte pricing of all channels. However, contrary to TRAI’s expectations, given the high channel pricing of the popular general entertainment channels (GECs) and sports channels (with 66 of the 330 existing pay channels being priced at the ceiling rate of Rs 19 per month), the very purpose of the Tariff Order was defeated, resulting in an up to 23 per cent surge in bills for subscribers (as per ICRA’s estimates) and continued dominance of bouquets in the subscription patterns.
TRAI has also increased the channel offerings for the network capacity fee (NCF) of Rs 130 (excluding taxes) per month to 200 standard definition (SD) (pay or FTA) channels from the present 100 SD channels. Furthermore, the 26 mandatory Doordarshan (DD) channels are now to be offered free-of-cost, over and above the 200 SD channels, in the same NCF of Rs 130.
The NCF to be paid for more than 200 channels has also been capped at Rs 160 per month (excluding taxes), as against the present NCF of Rs 20 for a slab of every 25 channels over 100 channels. This is expected to reduce the NCF burden on the subscribers, especially those opting for channel bouquets.
However, the overall impact of the same on subscription charges will be negated by the non-availability of discount of 15 per cent on the MRPs of channels offered under a bouquet to distribution platform operators (DPOs), which is being currently passed on to subscribers. TRAI has also capped the NCF to be charged for multi-TV homes to 40 per cent of the declared NCF for the first TV and introduced provisions for discounts on NCF for long-term subscription plans, both of which favour subscribers.
According to Kinjal Shah, Vice-President, ICRA, “For broadcasters, the recent amendments will adversely impact their revenues. The subscription revenues are expected to reduce (as subscription charges for a-la-carte channels will reduce and also due to the expected shift of subscribers from bouquets to a-la-carte selection). Furthermore, given the reduction in the number of channels that can be offered in a bouquet (for a given price), bundling of non-popular channels with established ones will reduce, thereby, impacting their reach and thus advertisement revenues for the broadcaster. This would, however, eventually lead to increased focus on content quality.” The Hindu Business Line