Broadcasters urge TRAI to deregulate tariff, remove channel bundling restrictions

The Indian Broadcasting and Digital Foundation (IBDF) has urged the Telecom Regulatory Authority of India (TRAI) to deregulate broadcast tariff and remove restrictions on channel bundling.

Responding to the TRAI's consultation paper titled' Issues related to New Regulatory Framework for Broadcasting & Cable Services', the IBDF said that the time is ripe for the regulator to implement a forbearance model vis-à-vis pricing of channels and packaging of such channels.

To bring home the point, the foundation pointed out that TV broadcasters are losing subscribers as well as revenue. Referring to FICCI-EY 2022 report on the M&E sector, the foundation said that the time spent by consumers on linear TV fell 8% in 2021 from 2020 levels and was slightly lower than 2019 levels for Hindi speaking markets.

"There is, hence, a need felt to implement commercial decisions in order to retain and eventually increase viewership. Such decisions would require flexibility in pricing and offering of channels," the IBDF said in its submission to the TRAI.

The foundation reiterated that market forces of demand and supply are the best parameters for determining the prices of channels. It added that the broadcasters who are seeking to ensure the highest market penetration will be incentivised to invest in high-quality content and to price the same competitively.

"Broadcasters are conscious of market dynamics and are keen to make available good content at affordable prices to consumers," it stated.

While making a point that there is no need to tinker with the present regulatory regime (NTO 1.0), the IBDF said that the consumers presently have the choice to subscribe to channels as part of a bouquet or a la carte offering.

The IBDF pointed out that there was no evidence that consumers were exploited before the NTO 1.0 was brought into effect. India, it said, has always been and continues to be a market that provides the most affordable access to content across the world. "Pay-TV average revenue per user (ARPU) in India is one of the lowest in the world. Low ARPU of $4 per month makes Pay-TV one of the most affordable and preferable medium of entertainment in India."

The TV broadcasters’ body also noted that the average monthly TV bill should have been Rs 402 in 2018, however, it was only Rs 222 thanks to bundling. It added that the broadcasters bundle channels so that all their channels get the widest possible reach. Ad monetisation is dependent to a large extent on the reach that a channel enjoys.

"According to a survey commissioned by MIB, in 2004 the average monthly TV bill was around Rs 190 and the average household had access to around 80 channels. Adjusting for inflation, Rs 190 in 2004 would be equivalent to Rs 402 in 2018. However, thanks to bundling, the average monthly TV bill in 2018 was only Rs 222, being Rs 180 less than what it would have been if we accounted for inflation. Moreover, TV households had access to 315 channels before NTO 1, up from 80 in 2004. This is primarily because broadcasters were able to bundle channels to keep prices low for consumers," the IBDF said.

Key submissions of IBDF to TRAI:

On channel MRP ceiling

• No requirement for putting a cap on channel MRP
• TRAI should move towards forbearance and de-regulation.
• The price ceiling on channel or bouquet prices effectively curtails the fundamental rights guaranteed to content creators
• There is sufficient competition in the market to ensure reasonable pricing for all channels
• Twin conditions ignore the complex economics involved in the pricing of á-la-carte channels as opposed to the pricing of bouquets
• Pricing of a TV channel depends on direct costs incurred towards the production and distribution of a TV channel, the expected revenues, future plans including continuity/contingency plans
• Prices of bouquets are determined by taking into account the supply and demand factors of the ad market and TV broadcasting market for content

Restrictions on forming bouquets

• Pushing a la carte offering will put a burden on the backend systems of distribution platforms as there are more than 800 TV channels in the country
• On average, DPOs offer around 350-500 TV channels for subscription to consumers.
• Consumers prefer bouquets due to convenience and thereafter, if need be, subscribe to a few channels on an á-la-carte basis
• Ceiling on bouquet discounts will accentuate the problem of exclusion a greater number of channels from bouquets
• There is no linkage between a-la-carte and bouquet as a-la-carte is a subscription-led proposition while a bouquet is an advertising-led proposition.
• Nearly 80% of subscribers are still choosing to procure bouquets despite a decrease in the a la carte price of channels during NTO 1

Homogenous pricing

• Channel prices in a bouquet cannot be homogenous as that would forcefully try to equalise the price of each channel
• Homogeneity is antithetical to the very concept of bundling
• Homogeneity in a bouquet either with price or genre of the channel will defeat the very objective of bundling
• TRAI itself has found a lack of homogeneity by concluding that it is impossible to find a uniform cost structure for this industry.
• TRAI’s assumption that a consumer’s choice between á-la-carte channel and bouquet is merely determined on the basis of price is an oversimplification of consumer preferences

Bouquet discount

• Failure to extend discount offerings on bouquets will allow DPOs to push costlier a la carte offerings to customers
• For example - A DPO may cause a consumer to subscribe to 8 TV channels on an á-la-carte basis at INR 5/- for each TV channel (a-la-carte rate of 8 channels @ INR 5 each = INR 40), even though, the consumer may have wanted 10 TV channels, all of which are otherwise, available in a bouquet priced at say, INR 40/.
• There should not be any cap on the discount that broadcasters can offer to DPOs on the MRP of a-la-carte and bouquets
• Discounts are important market tools to incentivise a DPO’s performance
• Consumers are the ultimate beneficiaries of discounts
• TRAI should also allow discounts on bouquets since the same is evidently more preferable to consumers