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Subscriber Holds The Remote, And The Keys

The customer is king. And the king has a good life, but only when he is allowed to rule.

Unfortunately, till today, the broadcasting sector was ruled by broadcasters, large distribution platforms and local cable providers — each lording over their own domain. Through its recent action, the broadcasting regulator (TRAI) has empowered the customer and brought transparency and free and fair competition into the market. It has given the subscriber the freedom of choice.

You could say that the subscriber already held the remote to the set-top box. True, but if its keys were programmed by someone else, that’s not real choice. Or is it?

Let’s understand broadcasting and its distribution through an analogy with the restaurant and food delivery services. A restaurant may offer an all-you-can-eat buffet with a big spread from which you eat a few items. It works, however, because on an average everyone eats about the same. So, the restaurant can speed things up and save the cost of serving individual orders.

Restaurants may also offer a set menu (or a thali), where the full meal is pre-configured with a limited set of options, the total cost of which is less than the cost of individual items. This works too, you would eat most of what is included in the meal, but not otherwise. If you only want two of the seven items in the thali, you should have the option to order those without having to pay more than the thali itself.

TRAI’s new regulations require that individual channels must be offered by the broadcaster. This gives the subscriber the option to choose even a single channel. Today’s digital set-top box support this technically, so why should this option be denied to the consumer? That is at the heart of the new rules.

Now consider what happens when you use a food delivery service to order from restaurants. They usually charge a small fee (or take a cut from the restaurant) and deliver the food.

A restaurant cannot force its full breakfast buffet to be carried to the customer by denying sale of individual dishes. That would be preposterous. So TRAI wrote into the regulation that the delivery services may charge a small fee (network capacity fee or NCF) which cannot exceed the stipulated amount. They must then carry individual channels, bouquets offered by the broadcasters — and optionally, their own bouquets. Every choice is thus available.

That makes it possible for the customer to choose what suits him or her the best. The stakeholders in delivery supply chain too are free to negotiate commercial agreements with their upstream and downstream partners in a non-discriminatory manner.

The new framework decouples the layers and gives freedom of choice to the customer, without their hand being forced by limited offerings. The broadcasters and distribution platforms are also free, except to exploit the customer because of any monopoly over popular content.

Why was this change required? And why now?

Let’s go back to our example of food delivery. While home delivery has existed for decades, traditionally it was the restaurant that provided the service in its neighbourhood. Technology changed that. With smartphones came apps that allowed customers to order and pay for the food of their choice. It was a scalable model in which making the selection, ordering, payment, providing address location, sharing feedback on quality with other customers could be done without much effort.

Technology not only enabled the food delivery service, but also expanded the restaurant business. Many more people now order food because they can get exactly what they want. And new kitchens have sprung up to satisfy the customer demand, which no longer service a restaurant. It has resulted in the growth of the industry, spurred by more satisfied customers.

Technology has changed in the broadcasting sector too. Parliament enacted the Cable TV Amendment Act 2012, mandating a switchover from analogue to digital addressable systems (DAS) in the delivery pipeline. It means that the signals are encrypted at the headend, which may be individually decrypted by set-top boxes that have a unique address. The customer can thus get and pay for just what he or she wants to view. This capability reached all customers in March 2017 after the implementation of the DAS systems in four phases.

For the first time, therefore, we have the capability to deliver exactly what the consumer wishes to receive and to plug revenue leakages by under-reporting of subscriber numbers. This brings complete transparency and control (that each fairly needs) not only to subscribers but also to broadcasters and distribution platforms. And it ensures transparent revenue collection by the government as well.

It is a well-founded principle of economics that a functioning market automatically directs resources to support the production of goods and services that best meet customer requirements at the lowest possible price. What more can anyone ask for?

Well, one can ask that products and services be free, which is possible to arrange when production is supported by advertising or subsidy. However, advertising diminishes the signalling power of price in the consumer market: The bigger the advertisement pie, the greater the suppression of the consumer’s voice. Eventually, advertising may lead to the production of free yellow pages or product catalogues.

Traditionally television has garnered a large part of the advertising spend. This revenue, to an extent, depends on subscriber counts. You should, therefore, expect attempts by the broadcasters to increase their subscribers and to diminish those of their competition, using low price or other means. Since broadcasting is a complex industry with large entry barriers, stakeholders can resort to anti-competitive behaviour in many forms. Even the Supreme Court has pointed this out: “There is existence of perverse pricing of bouquets vis-à-vis individual pay channels. In the process, the public ends up paying for unwanted channels, thereby blocking new and better TV channels and restricting subscribers’ choice.”

While advertising would remain the mainstay of this industry, anti-competitive behaviour and price distortions can be addressed. This is what the new regulation achieves by introducing transparency and structurally supporting free and fair competition, though it may take some time for competition settle.

The regulator has delivered in full measure. The customer is now in the driver’s seat. The noise you’ve heard is nothing more than the clashing of teeth due to the change of gear.―The Indian Express

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