The cable contortions

What will this Friday bring?  That is the deadline for the implementation of the Telecom Regulatory Authority of India or Trai’s tariff order of March 2017. “It will create a lot of turmoil, it is too elaborate and convoluted for consumers”, reckons Dinyar Contractor, editor and executive director of Satellite & Cable TV magazine. That is, not surprisingly, the first immediate impact that almost everyone predicts. 

The order details the dos and don’ts of every aspect of the complex relationship between broadcasters such as Zee and the people who distribute TV signals. These could be multi-system operators or MSOs such as Hathway, cable operators and DTH firms such as Tata-Sky. From the revenue share (45:55) between broadcasters and distributors to the maximum a channel can be priced at as part of a bouquet (Rs 19) the order stipulates every little thing. 

Once it comes into force, a subscriber has to pay Rs 130 plus 18 per cent GST as a network capacity fee to get 100 channels. That is about Rs 154. Of these, 24 Doordarshan channels are mandatory, so essentially you will pay for 76 channels. The amount remains Rs 154 only if those channels are free-to-air. If they are pay channels, such as HBO, then you pay the price for each of these. Out of approximately 850 licensed TV channels about 400 are pay channels, reckons Contractor. An addition of 20 channels over and above the first 100 will attract a network capacity fee of Rs 25. This fee will be split between the MSO and the cable operator. 

The idea says Trai Chairman R S Sharma was to discourage bundling and bring transparency. 

India’s Rs 66,000 crore TV industry makes roughly Rs 39,300 crore from pay revenues. Of this only Rs 9,900 crore or one-fifth goes back to broadcasters according to EY. The figure is closer to 70 per cent in most pay TV markets. The idea was that digitisation would give consumers the choice to order à la carte and force transparency by getting cable operators to show their real numbers. It hasn’t quite worked. 

Of India’s 197 million TV homes, roughly 100 million are on cable. Of the rest eliminate the 20-30 million on Doordarshan’s DTH service, DD Freedish. That leaves just over 60 million homes with private DTH operators. Since DTH was digital to start with, each of these are accounted for. DTH pays more in taxes and revenue share to broadcasters than cable companies, say operators. 

The average cable operator in India has about 1,000 homes. How many of them have the subscriber management systems needed to facilitate 100 million homes choosing their own bouquets, channel by channel is a big question mark. You could argue that MSOs will make that investment — but will the operator give him access to each of his subscribers. Note that three years after 100 per cent foreign direct investment was allowed into cable, not a single investor has walked in. Last mile ownership remains a huge stumbling block. 

It is also the reason every attempt at transparency and addressability in cable has failed — from the Conditional Access Amendment to the Cable Act in 2002 to digitisation in 2011. “The last mile ownership thing is an issue between the cable operator and the MSO. The current regulation has clearly demarcated the functions, revenue share has been specified,” says Sharma. 

The second more long-term impact of the tariff order is that it will increase your monthly pay TV bills — because bundling subsidises. By forcing à la carte both sampling and actual TV consumption will go down. Contractor reckons cord cutting or people giving up their TV connections will happen. Maybe. But the fact remains even with inflated bills, pay TV rates in India remain among the lowest in the world. And there is huge headroom for growth — India has 267 million homes of which only 197 million have a TV. So a 5-10 million swing doesn’t matter. 

Sharma reckons (rightly) that un-bundling will unleash market forces. Broadcasters will have to decide between pay or ad as a revenue stream. Currently they use bundles to push the reach numbers for weak channels and make ad revenues on it even if very few people are actually watching it. 

However, for something born of a ‘consultative process’ the order faced quite a bit of litigation. It still remains very complicated. And it doesn’t solve the fundamental issue of last-mile ownership. It will be a full year before the implications are clear. Wait then for the end of 2019. 

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