Light touch or heavy hand: A reality check for TRAI’s RS Sharma?

A recurrent message ran across the five days of the first-ever virtual FICCI Frames summit: The urgent need for an overhaul of the regulatory framework governing the Rs 79,000-crore broadcasting sector. Moderators and panellists, some overtly, yet others tacitly, pointed to the less-than-desirous state of affairs in the heavily regulated broadcasting sector, clamouring for a “light-touch regulatory framework” - the new buzz phrase doing the rounds. This had little effect on the broadcasting regulator chief RS Sharma, however, who simply refused to acknowledge that the framework is burdensome to begin with, let alone in need of fixing.

In his opening remarks on the panel ‘Regulating Creativity: Overcoming Legacy Challenges to Shape the Future of M&E’, moderator Vivek Couto, Director and Co-Founder of Media Partners Asia, stated it was imperative the broadcasting sector overcome “legacy challenges” and “embark on course correction” in our market which has been “fundamentally burdened by the pressure of oppressive regulation in recent years.” Taking on these comments, Sharma – who will hang up his boots in September – denied the TRAI has used a heavy-hand to regulate the sector, instead relegating it to a matter of perception.

“The idea that there is a huge regulatory burden on the broadcasting sector is not true. The industry thinks that the regulator has a high-handed approach but the regulator thinks that their approach is a light-touch regulatory approach or virtually not regulating at all and everything is free – that’s a difference in perceptions,” said Sharma.

“The basic approach that TRAI has had since 2004 in regulating the sector is the light-touch approach and allowed the market forces to operate. Market is the best force to determinant and the best accelerator for adoption of new technologies, new demands and satisfying expectations of consumers. So long as there is fair play and transparency, non-discrimination, then we don’t really need to intervene,” he added.

It’s unfathomable if one should laugh at the irony of it all, be justifiably furious or simply dismiss them as yet another blow to the chest? That’s because anybody following developments in the broadcasting sector would know these comments couldn’t be further from reality.

Through the rest of the session, Sharma made statements that were contradictory, defensive, self-congratulatory or distinctly highlighted the TRAI’s partisan attitude towards different stakeholders, which has led to the litany of stakeholder disputes that take to the courts each year. Sharma also displayed nonchalance at the critique that came his way, either dismissing broadcasters’ concerns “as not being important” or imposing his idea of what he saw as a success. “I think that NTO framework has been quite successful, that’s my impression at least,” is one such admission. But more on that later. First, let’s look at Sharma’s claim that the sector has been allowed economic freedom and thrives on minimum governance.
It is no secret India’s broadcasting sector is heavily regulated. The TRAI, which regulates both the telecom and the broadcasting sectors, has treated the latter as a little step-child that needs to be made to toe the line by wielding the rod. Contrary to Sharma’s belief, this prescriptive regulatory mechanism has not allowed the sector to play to market forces of demand and supply as the industry would vouch for.

“The truth is that ever the since the TRAI was handed over the responsibility of the sector on the basis of a court directive in 2004, it has resorted to a step-motherly treatment towards the broadcasting sector. Over 16 years, this has made the sector uncompetitive, restricted growth and disincentivised innovation and investments,” said a senior broadcasting executive on condition of anonymity.

Tightening the noose on pricing
Sharma’s desire to underscore that the TRAI has not intervened in the sector and allowed market forces to operate is at odds with the direct and indirect price controls it has subjected the sector to since 2004. By his own admission, Sharma said genre-wise price caps on channel prices have been in place since 2004, which means prices of channels declared by broadcasters were restricted since 2004 and the market was never allowed to operate freely.
Then came the new regulatory framework for TV. Sharma’s strongest legacy includes the implementation of the New Tariff Order 2017, which was rolled out in February 2019 after years of litigations and delays. While the framework claimed to put the customer at its heart, striving for transparency and allowing consumers to only pay for channels they watch, the mechanism has not lived up to its ideals.

So what are we contesting here? First, the argument that NTO 1.0 freed consumers from paying for “unwanted channels” – a refrain often used by the TRAI to refer to niche channels – and gave them the power to decide what they want to watch while ensuring content producers can price their content at the rate they decide.
“The broad overarching objective of TRAI is to ensure interest of consumers and stakeholders, which are basically distributors, content creators, etc. and they are protected and at the same time there is healthy growth of the sector. The one thing that has been done is now there is absolutely no cap on any channel whatsoever,” Sharma said.
Fact check? The sector is still subject to price caps. The NTO 1.0 had introduced an indirect cap on channels by restricting price of channels that can form part of the bouquet to Rs 19. The amended NTO, dubbed NTO 2.0, further reduced this to Rs 12 while also introducing maximum 33% discount restrictions on bouquet formation.
Secondly, while NTO 1.0 brought clarity on the MRP of each channel, the Network Capacity Fee (NCF) of Rs 130 + taxes is the single biggest block of cost paid by customers for 100 Free-To-Air (FTA) channels over which consumers have little choice. This is also oxymoronic to Sharma’s crusade for customers to “know the value of every channel they watch” in a market he deems as “very price sensitive.”

As such, contrary to its stated objective to reduce cable bills, the NTO led to an average increase of 25% in cable bills, causing 26 million pay TV users to cut the cord as stated by the KPMG M&E Report 2020, wiping out an estimated Rs 85 billion in pay TV revenues – a fact that receives no mention from Sharma on any forums.
Above everything, why the TRAI felt the need to reduce cable bills in a market that offers the lowest prices is well beyond anybody’s guess. “The irony is that compared to the US, UK, China, Indonesia or Brazil, India has the maximum content available at the cheapest price, on the maximum number of platforms and definitions, be it TV or OTT, on SD and HD. To therefore micromanage the sector is to throttle its immense growth potential,” says Couto.

So far from the “healthy growth” Sharma claims the sector is seeing, the sector’s growth has dipped from an average 11% between 2009 and 2019 to 6% post the NTO’s implementation.

To bundle or not to bundle? Depends on who you are
Sharma’s aversion to bundling in the TV industry is well-known and was up for display at FICCI too. Couto says he was “shocked” when an exasperated Sharma began to tick off what the broadcast sector can and cannot do, accusing broadcasters of “misusing their freedom” to indulge in a “perverse exercise” of forming bouquets at significantly cheaper prices to their a-la carte prices, a marketing tool he says is aimed at making a “fool of consumers.”

Sharma’s disapproval of bundling is largely misplaced. For one, world over bundling is a norm and promotes maximum choice at lower price, a fact that has been repeatedly hollered down the TRAI’s hallways. What is amusing is that the TRAI has allowed bundling to its favourite child – the telecom sector – but has disapproved bundling in the TV sector, which ironically, is reliant on data provided by telecos in today’s era of convergence.

“The telecom sector has been allowed a free reign as we see from the Jio-fication of the industry, But the same isn’t permitted for the broadcast sector which isn’t even an essential service,” points out Couto.

“Regulatory agencies need to carefully understand how industry economics impact the creation and distribution of content and balance that against consumer competition and choice. I am not sure the TRAI has really done this to best of its efforts,” he adds.

But the critical aspect is how the rules of the game are tweaked for different stakeholders under the garb of customer-centricity.
The TRAI has disincentivised bundling by broadcasters through indirect price caps as explained earlier. The TRAI however is unable to explain how the NCF fee of Rs 130 for 100 FTAs and the ‘Best Fit Plan’ introduced by distributors isn’t akin to bundling. Do consumers have a choice to choose the set of channels that they would want to opt for under the Best Fit Plan? What purpose does it serve? By Sharma’s own admission: “There should be an assured income to the distributors of the channels so TRAI introduced the concept of NCF which is a fixed amount”.
A fixed income for distributors but price caps for broadcasters, irrespective of its impact on consumers’ cable bills? Who exactly is the regulator batting for?

The curious case of shifting goal posts
To have Sharma say he thinks the NTO 1.0 was “quite successful” on an international stage is being self-congratulatory at the very least.
The exercise has been arduous and expensive for both broadcasters and distributors and left consumers mired in confusion over the plethora of bouquets introduced by distributors, broadcasters and the painstaking effort it takes to change one’s choice of channels at the operator level.
More importantly, it begets the question: if the NTO 1.0 was a success, drawn up after a long consultative process with stakeholders, why did it require a round of amendments barely 8 months later? On his part, Sharma says the NTO 2.0 was required to rectify a few “aberrations” under NTO 1.0. Few would agree.

“NTO 1.0 is itself a burden on the stakeholders. It is over-prescriptive on all business aspects and pricing. NTO 2.0 introduces more restrictions on broadcasters in terms of discounts on bouquets and incentives provided to distributors,” said the broadcasting executive quoted earlier.
NP Singh, President of the Indian Broadcasting Foundation (IBF),in a statement in January said: “IBF believes these amendments will severely impair broadcasters’ ability to compete with other unregulated platforms and adversely affect the viability of the pay TV industry.”

The big red-flag is of the regulator’s shifting priorities, which does not bode well for the industry. “On quite a few occasions, a piece of legislation has been enacted only to have the goalposts shift. This means neither the industry nor the consumer know where they stand, it’s chaotic,” says Couto.
As Sharma walks away from the centre stage, it is important to credit him for the things done right during his tenure. The digitization of the cable TV industry starting 2010 is certainly worthy of applause. His legacy, however, will also be a strong testament of overreach in an industry that was brought to its knees by overregulation, micromanagement and was left to bleed in the wake of the coronavirus pandemic.

The next TRAI chairman certainly needs to do better.

(The author, Farah Bookwala Vhora, is a communication expert.)

Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com.