For Telecom Regulatory Authority of India (TRAI) chairman Rahul Khullar, who will hang up his boots in May next year, 2014 has been a fascinating year. The regulator gave recommendations on game-changing issues like cross-media ownership, DTH licensing guidelines, and platform services channels. However, one that had immediate impact and major ramifications for the broadcast sector was that related to content aggregators.
The last one, in particular, had a cascading effect on the distribution sector. Flooded with complaints about the content aggregators in doing content deals with distribution platforms particularly cable TV, TRAI disallowed bundling of channels from more than one broadcaster, thereby dealing a body blow to distribution joint ventures (JVs) like MediaPro, MSM Discovery, Zee-Turner and IndiaCast UTV.
The regulation made the very existence of content aggregators irrelevant. The content aggregators came into existence at a time when the cable TV sector was largely analogue and non-addressable.
Bandwidth constraints on analogue cable TV, the menace of carriage fee and low realisation in the form of subscription fee prompted broadcasters to joins hands to gain bargaining power vis-à-vis the multi-system operators (MSOs). The onset of cable TV digitisation, which saw 41 cities getting digitised in the first two phases, only acted as a catalyst in the dismantling of content aggregators.
The first victim of the regulation was MediaPro, the JV between Star DEN and Zee Turner. With more than 70 channels from Star India, ZEEL, Turner, NDTV and MCCS, MediaPro was the most powerful bouquet. Next in the line was the JV between IndiaCast, the content monetisation arm of TV18 and Disney UTV. Zee Turner, the oldest JV in the country, also crumbled after the demise of MediaPro. MSM Discovery (operating under TheOneAlliance brand), a JV between Multi Screen Media (MSM) and Discovery Networks Asia Pacific, was the last one to go.
Another major reform done by the regulator was making vertical integration a possibility by allowing broadcasters to own distribution platforms. This came with a caveat, though, as TRAI recommended that broadcasters can own only one distribution platform either direct-to-home (DTH) or cable. This recommendation of the TRAI came as a rude shock to media companies like Essel Group and Sun Group which have a presence in cable as well as DTH.
In order to guard a non-vertically distribution platform from discrimination, the authority has disallowed vertically integrated broadcasters to do fixed-fee deals. They can only do content deals based on charge per subscriber (CPS) basis. The vertically integrated will have to do CPS deals on non-discriminatory basis. However, the regulator has provided for a slab system which would accommodate distribution platforms of various sizes.
This apart, the authority also brought cheer to the DTH industry by recommending reduction of licence fee from 10 per cent of gross revenue to 8 per cent adjusted gross revenue and a 20 year licence period for DTH operators compared to 10 years. The DTH operators might save 2.5–3.5 per cent in licensing fee as per the new recommendations.
The only disappointment from the TRAI’s new DTH guidelines was excluding content cost from being a pass through.
Another radical reform measure suggested by the TRAI was in the form of recommendations related to ‘Issues related to Cross Media ownership’.
In its recommendations on cross-media ownership, the authority suggested radical measures like restricting corporate entry in media, ban of private treaties, formation of news media regulator, ban on entry of government and religious bodies in media, and a news media regulator for television and print.
The authority had also recommended that a media company which has a 32 per cent market share in both print and television will have to dilute its control in one of the two segments.
While the cross-media ownership recommendations is pending with the government, media analysts believe that the guidelines will not have much impact on the media companies because 32 per cent market in print and television is too big a threshold for any single company.
The year ended with the TRAI coming out with recommendations on platform services (PS). To bring PS under the regulatory framework, the authority has outlined the registration mechanism for PS and the content that can be offered.
Significantly, it allowed MSOs to run local ‘affairs’ cable channels without capping their foreign direct investment (FDI).
It also capped the number of PS that a distribution platform can offer at 15 and 5 for addressable and non-addressable areas. The regulator asked the government to bring ground-based local cable channels under regulatory framework.
These recommendations are awaiting government approval.
Known for being unabashed, Khullar also crossed path with the new government on the issue of DAS (digital addressable system) extension for Phases III and IV. When the Ministry of Information and Broadcasting (MIB) was considering extending the DAS deadlines, the TRAI chairman wrote to the Prime Minister’s Officer stressing that the momentum would be lost if the government went ahead with the extension.
Notwithstanding Khullar’s strong pitch in keeping with the original deadline, the Narendra Modi-led BJP government went ahead and extended the DAS deadline to December 2015 and 2016 for Phases III and IV.
The biggest miss for the regulator has been the non-implementation of billing for Phase I and II areas. The tussle between MSOs and local cable operators (LCOs) over revenue share and billing rights meant that billing remained an unresolved issue.
During TelevisionPost.com’s digital seminar in Pune, TRAI principal advisor N Parameswaran had said that implementing billing remains the top most priority for the regulator.
The authority had also directed MSOs in Phases I and II of DAS to ensure delivery of individual subscriber bills, provide option for online bill payment and electronic acknowledgement to the subscriber for the payment made.
With its efforts failing to yield any result, the TRAI mooted imposing financial disincentives on MSOs and LCOs for non-implementation of billing by amending the Quality of Service (QoS) regulation.
TRAI proposed a financial disincentive of Rs 20 per subscriber on the MSO and/or its linked local cable operator for first contravention of regulations 15(1) or 15(5) and Rs 50 per subscriber for each subsequent contravention. In the case of non-compliance of regulation 16(2), the authority had proposed to impose a financial disincentive of Rs 100 per subscriber on the MSO.
The authority also recommended that the tariff order applicable for addressable systems will apply for cable TV operators who are implementing DAS before the cut-off dates notified by the government provided that these service providers get registered and establish digital addressable cable TV system (as prescribed in the Cable Television Networks (Regulation) Act, 1995 and the rules made thereunder).
The regulatory prescriptions relating not only to the tariff but also to the interconnection and quality of service (QoS) shall be the same as those applicable to cable TV services offered in DAS, the authority said adding that it wants to facilitate and incentivise cable TV operators who implement DAS before cut-off date.
The authority also amended the tariff order for commercial subscribers in which it disallowed entities like hotels and restaurants from obtaining television service from broadcasters directly. The authority said that the commercial establishments will only have to provide television service from a distribution platform like cable TV, DTH, headend-in-the sky (HITS), or internet protocol television (IPTV).
As per the amended tariff order, commercial establishments that do not charge its customers for providing television programmes are to be treated like ordinary subscribers and should be charged on per-television basis.
Irked by the amended tariff order, the broadcasters challenged the tariff order in the Delhi High Court and TDSAT. While Star India challenged the order in Delhi High Court, the Indian Broadcasting Foundation (IBF) did so in TDSAT.
The broadcasters, however, failed to get any reprieve as both Delhi HC and TDSAT refused to stay the amended tariff order.
The tribunal had kept it open for commercial establishments that were not protected by the 2006 TRAI Regulations, to take the supply of TV channels under the statutory scheme framed by TRAI.
The tribunal had also stated that contracts that were signed before the coming into force of the impugned order shall not be terminated or annulled, but its terms and conditions will remain dormant and ineffective until the disposal of the present petition.
In case the IBF appeal succeeds and the impugned tariff order is set aside and in case there is no consequential direction in the final judgment, the earlier agreements between the subscribers and their respective suppliers of TV channels will be revived, regardless of any other arrangement made by the subscribers during the pendency of this petition, the tribunal had said in its interim order.
For the radio medium, TRAI took the long-pending process of the FM radio Phase III expansion ahead and released a set of recommendations to set the ball rolling for the next stage of the sector’s growth, opening up space for more channel launches, extending the period of permission and fixing a cut-off date.
According to the regulator, the FM channels operating with channel spacing of 400 KHz should be radiated from effectively co-located sites and transmitted with equal power. It also recommended a relook into the issue of high reserve prices.
TRAI worked out a migration fee formula to solve the raising concerns of the radio broadcasters. The migration fee formula worked out by TRAI ensured that auctions should not be held under scarcity, thus determining a fair fee for the FM radio broadcasters.
Key pointers
TRAI brings content aggregators under regulatory framework, clips the wings of aggregators by disallowing bundling of channels from more than one broadcaster.
TRAI’s regulation on content aggregators’ sets off a chain reaction with all four aggregators – MediaPro, Zee-Turner, MSM Discovery and IndiaCast UTV – splitting their joint ventures. ZEEL-owned Taj Television distributes Zee and Turner channels while IndiaCast continues to distribute Disney UTV channels as an agent.
TRAI allows vertical integration between a DTH and a broadcaster. It recommends removal of the broadcast sector cap of 20 per cent equity in a DTH company.
In its new ‘DTH Licensing Regime’, TRAI recommends that the broadcaster can control only one DPO. An entity that controls a vertically integrated DPO or the vertically integrated DPO itself shall not be allowed to ‘control’ any other DPO of other category.
TRAI proposes DTH licence fee at 8 per cent AGR; moots 20-year licence period.
TRAI issues recommendations on cross-media ownership, seeks ownership restrictions on corporates entering media, bats for media regulator for TV and print
TRAI bats for no entry for political parties, government-owned entities and religious bodies into TV broadcasting and distribution businesses
Media companies with 32 per cent market share in print and TV will have to trim their size to fall in line with the regulation, recommends TRAI
TRAI calls for ban on private treaties, says disclaimer should be issued for paid content.
DPOs can run a maximum of 15 PS channels in DAS and a maximum number of five PS channels in non-DAS areas
DPOs need to register their PS channels with the MIB
TRAI issues amended tariff order for commercial subscribers, disallows commercial establishments from taking signals directly from broadcasters
TRAI issues consultation paper on QoS regulations, mulls imposing penalty on erring MSOs and LCOs for non-implementation of consumer billing
TRAI releases recommendations for FM Phase III, reiterates the minimum channel spacing of 400 Khz. It relooks into the issue of high reserve prices
Also read:
Bollywood personalities on TV in 2014
The highs and lows of DTH in 2014
2014: Top 6 Hindi GECs launch 31 new fiction shows
Programming trends that ruled TV in 2014
2014: The year of the mobile
2014: TV saw tremendous growth in rural markets
2014: MSM bets on stronger content deals for Pix and AXN
Discovery’s focus on creating new growth engines in 2014
How NGC India played its cards in 2014