Under NTO, MSO’s Earning From NCF Has Been Reduced To Rs 130 Per Household: TRAI’s SK Gupta

The roll-out of new tariff order (NTO) by the Telecom Regulatory of India (TRAI) has drawn ire, especially from broadcasters. TV Networks claim that the NTO has been devised in a manner that would have an adverse impact on their business while helping DPOs to earn more. In a conversation with BrandWagon Online, SK Gupta, secretary, TRAI, rubbishes these claims and states that NTO has been rolled out to create a level playing field. (Edited excerpts)

The issue was how to segregate the pricing model of distribution platform operators (DPOs) including direct-to-home (DTH) operators, multi-system operators (MSO) from that of broadcasters. For example, before the new tariff order (NTO) was rolled out MSOs on an average earned Rs 250 per household in medium level cities and would on an average pay Rs 60 to a broadcaster, allowing the latter to earn roughly 24% for content. In bigger markets such as metros, DPOs would earn Rs 300 per household and give Rs 75 to the broadcaster. So Broadcasters earned about 25% as a content fee and in lieu of this broadcaster would pay carriage fee and placement fee. Thus, the net realisation was less than 25%. Under NTO, an MSO which earned anywhere between Rs 190 – Rs 225 as network capacity fee (NCF), has now been regulated and brought to Rs 130. So how are DPOs earning more?

On bringing down the ceiling on channel price from Rs 19 to Rs 12 and its impact on broadcast business

Post the rollout of NTO, prices of nine channels were increased by 200% to Rs 19. These channels were priced in the range of Rs 3 to Rs 5, prior to NTO, while prices of 10 channels were increased by 100%. We had provided the flexibility of Rs 19 due to the sports channels. It was expected that everyone will behave in a very rational manner and they will also look after consumer interest. However, prices were increased to Rs 19 as these channels were allowed to be part of bouquets. When a consumer opts for a bouquet consisting of 10 channels at Rs 20, the first impression that the cost of each channel is about Rs 2. Actually that is not reality. Of that, about eight channels would be priced at 10 paise and one channel would be priced at Rs 19. Thirdly, bouquets were being sold at a 50% discount, which we had never suggested either to the DPOs or broadcasters. But if prices are being lowered in the interest of consumers, then it’s a good move. But the question is if bouquets are sold at discounted rates, then not provide discounts on a-la-carte rates. In such a case a channel that costs Rs 19 post a 50% discount would cost Rs Rs 9.5. Under NTO, we have provided a limit of Rs 12. Also, if a broadcaster wants to keep certain channels out of bouquets, then, in that case, there is no requirement to follow the ceiling.

On regulating carriage fees

Earlier carriage or placement fee was unregulated and now under the new framework, we have regulated and capped it to Rs 4 lakh. Regional MSOs have been told that a state or a union territory would be the target market and within that market, if it has a penetration 10%-15% carriage fees would further reduce. A DPO can charge 20 paise per customer in a market where it has a penetration of less than 5%. If a channel is watched by 15% viewers in any select market then broadcasters need to pay 5 paise as carriage fee per subscriber and if a channel is watched by 20% viewers then the carriage fees paid by a broadcaster would be zero. Regional channels usually have a good reach in their own territory. For example, a Malayali channel would have a good user base in Kerala, so there is a probability that userbase would cross 20%. So the carriage fee would be zero. As for those channels which broadcasters would like to beam across the country to tap into a bigger chunk of the userbase, even there we have set a cap of Rs 4 lakh. Now it depends on the broadcaster where he wants to run a channel.

On regulating the electronic program guide (EPG)

Under the earlier framework, DPOs could arm-twist broadcasters by not placing a channel in the guide. For example, a DPO would place news channels under a non-news genre or an English channel in regional GEC. This made it difficult for consumers to find the respective channel. In fact, there would be times when DPOs would pull the plug on a channel if it hadn’t received either placement fee or carriage fee. All this allowed DPOs to arm-twist a broadcaster and earn extra revenue. Now DPOs cannot remove channels for their genre line-up. For instance, news channels will be found under the new genre line up, however, the freedom to decide the placement still resides between DPOs and broadcasters.

On capping number of bouquets

Too many formations of bouquets lead to confusion among consumers. Also, no system can carry so many bouquets. Yet if someone thinks more bouquets are required, they can write to us and we will look into the matter.―Financial Express

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