Mumbai: 2022 was the year that saw a volatile relationship between the Telecom Regulatory Authority of India (Trai) and broadcasters that lasted for two years improved immensely. That is because, towards the end of the year, the regulatory body issued amendments to the new tariff order (NTO) and interconnection regulations. It decided not to prescribe a ceiling on the maximum retail price (MRP) of pay channels.
Trai is maintaining the maximum price of Rs 19 on a channel's MRP that is part of a bouquet. Earlier, the proposed price was Rs 12. Channel bundle discounts cannot be more than 45 per cent. The discount offered as an incentive by a broadcaster on the MRP of a pay channel shall be based on the combined subscription to that channel, both a la carte and in bouquets. Having done all of this, Trai then asked broadcasters to put sports and popular entertainment channels back into bouquets. Last year, the broadcasters pulled these channels. NTO 2.0 will now be implemented in February 2023.
Broadcasters were also told to inform the regulatory body of any change in the name, nature, language, per-month MRP, composition, or MRP of channels by 16 December. This information was published on their websites as well. DPOs were instructed to contact their respective RIOs by 16 December.
Distributors have to report the discounted retail price of à la carte channels and their bouquets and the composition of bouquets for paid and free-to-air channels by 1 January 2023. They must publish this information on their websites as well.
It should be noted that the groundwork for this reconciliation began in February, when the Indian Broadcasting and Digital Foundation (IBDF), which represents TV channels, withdrew petitions filed in the Supreme Court challenging the NTO 2.0 introduced by the Telecom Regulatory Authority of India in January 2020. As a result, NTO 2.0 2020 and 2021 have been mired in litigation. However, Trai reportedly indicated at the start of the year that it would initiate consultation if the petitions in the Supreme Court were withdrawn. The broadcasters felt strongly enough that Trai would introduce a consultation process before proceeding further. That is what Trai did. In May, it floated a consultation paper called "issues related to the new regulatory framework for broadcasting and cable services." It asked a few questions, including whether it should continue to prescribe a ceiling price for a channel's inclusion in a bouquet. It also asked about the steps that should be taken to ensure that popular television channels remain accessible to a large segment of viewers. It asked whether there should be a ceiling on the MRP of pay channels.
In response, the IBDF requested a few things, including the removal of bundling restrictions. It had pointed out the struggle that the pay TV industry is facing due to the loss of subscribers. It also argued that pricing should be left to market forces, which would ensure high-quality content.
Trai chairman P.D. Vaghela spoke at CII's Big Picture Summit about the need to move towards forbearance, which is what the IBDF had earlier called for. But for this, all the service providers have to work in a cohesive manner. He had said that Trai's recent consultation on tariff-related issues for television channels and bouquets was the result of multiple discussions with each group of stakeholders --- broadcasters, multi-system operators, DTH players, and local cable operators. "I can assure you that if all service providers work in a cohesive manner, Trai may take further steps to move towards forbearance," he said.
Elara Capital's Karan Taurani gave Trai 8/10 for the amendments that will allow the industry to move forward. He also noted that this is, for the most part, a return to NTO 1.0. "Broadcasters were not in favour of many of the proposals in NTO 2.0. One of the proposals was in the form of discounting. 94 per cent of TV consumption happens through bouquets. A la carte is not more than seven per cent. A la carte has a significant impact on ancillary channels. The discount cap was settled at 45 per cent instead of 30 per cent which broadcasters were against. This overhang is out of the way. Also, Trai had reduced the price of an a la carte channel to Rs 12. This has been done away with, as a la carte revenues would eventually have seen a huge crash. A la carte's share would have risen to 14–15 per cent from seven per cent. Overall, if the a la carte price of Rs 12 had been maintained, broadcasters' subscription revenue would have been negative.
He added that, over time, things have been resolved and we are moving towards a more certain scenario. "With the removal of uncertainty, broadcasters' revenues will grow as they can go for price hikes, which I expect to be in the range of six to seven per cent. I would give Trai an 8/10. What Trai did was implement this after getting suggestions from broadcasters. Earlier, they did things out of their own will. Now they sat back and had multiple discussions. Then they reached a consensus. This is very beneficial to the entire industry as a whole. It will have a big benefit for the distributors, broadcasters, and the TV industry. This industry is already seeing a lot of pressure from OTT in terms of eyeballs moving away. Incremental growth in terms of the number of households has not been much (5–6 per cent). The industry came together from all ends and found a solution. 2022 has ended on a positive note compared to the start of the year."
He said that it has gone back to NTO 1.0. The only change is that the discount is capped at 45 per cent which is a non-event as broadcasters' discounts range from 35 to 50 per cent. "45 per cent is a fair number." He went on to say that previously popular sports and entertainment channels had gone a la carte due to high content costs. Now they will return to the bouquet. "The cap being revised to Rs 19 will have a positive impact. Arpus will move back to where they were a year ago. A lot of channels will get bundled back into the bouquet."
He believes, however, that this move will have no effect on the drop in the pay TV universe. This drop is not due to channel pricing. It is coming from other factors like OTT penetration, smartphone viewership, etc. Broadcasters, however, gain an additional revenue driver as a result of the amendments. "Uncertainties will not hinder revenue growth," he added. To get viewers back, he said broadcasters have to innovate in content creation and marketing. "These things need to be changed from their end. Pricing is not an issue. It is about the quality of the content and the fact that audience preferences are changing over time."
For this very reason, he does not see niche genres like English entertainment benefiting. That is because most of those viewers have migrated to OTT. These genres on television will always see consumption pressure. These channels are already provided for free as part of a bundle.
A DPO executive agrees that the amendments are just a modified version of NTO 1.0. "This will have a positive impact for the broadcasters. 80-85 per cent of consumers choose from the suggested pack of the DPOs which is bouquets."
Trai is now expected to come out with another consultation paper for DPOs that will address issues like NCF, multi-TV connections, and revenue sharing among various players. "We are bringing out another consultation paper to take up these issues soon. I am sure that through constant dialogue with all the industry stakeholders, we will find solutions that will stimulate growth in the television broadcasting sector," said Vaghela.
Meanwhile, the DPO executive said that there should not be a cap on the NCF. The NCF he noted is quite marginal, and the NCF has to be shared between LCOs and MSOs. For DPOs to manage this is difficult. He also wants more transparency in the deals that are happening. The discount structure given by every DPO is very different. "How the incentive is being passed by a broadcaster to each and every DPO is not transparent. Some of it is obscure. Marketing and promotions are part of it. Incentives are a part of it. There should be a little bit of transparency in that."
He added, however, that the pay TV universe being affected is more on account of Freedish, which he insists is causing havoc. Sports content is also available on it, and it is free for rural and urban viewers. Urban viewers in low-Arpu (average revenue per user) areas consume it. "DD Freedish is eating into pay TV like anything." That, he noted, is more of a challenge than OTT. "Actually, pay TV is getting sandwiched between DD Freedish and OTT. Neither DD Freedish nor OTT are regulated."
Trai's amendment was welcomed by IBDF president K Madhavan, who said it was the result of constructive dialogue between the industry and the regulator.
"NTO 2.0 is the outcome of the strong collaboration between industry and Trai. Rather than pursue a litigative approach to address pending demands, our approach of engaging in constructive dialogue has allowed us to make strong progress in creating a more conducive environment for the industry on the pricing front," he said.
Looking ahead, Trai is said to be preparing to start a consultation process in January to frame a regulatory mechanism for OTT. It will also look at the convergence of content.
Trai is considering whether communication and broadcasting apps should come under the purview of the same regulatory framework.
The two kinds of OTTs fall under the ambit of the IT Act. For the record, communication OTTs are regulated by the department of telecommunications, while broadcasting OTTs are handled by the ministry of information and broadcasting (MIB).
It is about striking a balance. "Our objective will be to introduce a light-touch framework that irons out the inconsistencies created by technological disruptions. We cannot have a regulatory imbalance between conventional technologies of yesteryear and new technologies. Yet, at the same time, we should not stifle innovation and competition," Vaghela said at CII's Big Picture Summit.
He had added that the primary area that requires the attention of the regulatory regime is the convergence of content. The same content is available in several places, including television, smart connected screens, and smartphones. Since there is a difference in the distribution mechanism on these platforms, they pose a regulatory challenge. "Therefore, in the new technological world of convergence, we need to deliberate on the possible alignment of a regulatory regime, keeping in mind the scenario of multiple screens with the same content," he had said.
The Delhi High Court has now asked Trai to expedite the consultation process with all the stakeholders for regulating OTT communication services such as Facebook Messenger and WhatsApp.
"Considering the extensive prevalence and use of internet telephony, Trai would expeditiously conduct this stakeholders' consultation and give its recommendations accordingly," said the order.
Meanwhile, Wing Communications CEO and founder Shiva Bhavani stated that light touch regulation is critical for the OTT industry to grow and survive without losing its creative spark. He further said that whether the OTT industry needs separate policies is a matter for debate. Since there is an IT Act, of 2000 that manages issues related to the internet, anyone aggrieved by any OTT content can use the provisions of this Act to seek redress of grievances. Self-regulation, he noted, should ensure that responsible content is displayed that does not violate general laws or upset the peace of the land. If too much control is applied, it will suffocate creativity, and people will walk on eggshells at all times.
"What is needed is a broad framework within which OTT platforms can function normally while adhering to laws and not promoting content that shows divisiveness and discrimination or extreme graphic details that can impact minds."
He added that, while too much regulation is not desirable in a free world, it is necessary to have some basic rules in place to ensure that the platforms remain responsible for the content they release. "It is imperative that platforms adhere to the general law of the land and do not release any divisive content that can impact the minds of viewers. Since it is on-demand content that is available on a subscription model, OTT platforms offer content that would not pass the censorship test. While freedom of expression is good, some form of overarching rule is needed to make sure that things don’t spiral out of control. When over 40 per cent of the population is active on the internet, there is a risk of impacting a large number of people through misrepresentation of facts or the promotion of hateful content. So, in order to keep the playing field level, a line must be drawn somewhere."
Streaming, he said, is a rapidly growing segment that is buoyed by deeper penetration of the internet and the rise in the sale of smartphones. This sector is poised to see growth in excess of 10 per cent, and the rollout of 5G is expected to stimulate further acceleration. "A light touch in regulation is critical for the sustained growth of this sector. The industry needs stricter IP protection and anti-piracy measures."
He added that there are areas where some regulation could come in handy as far as OTT platforms are concerned. It is essential that the content abide by Indian law and not violate the nation’s integrity. Content that incites violence and disrupts public order should be considered illegal and prohibited. The view is similar in the case of content that spreads hate and dissent or depicts criminal acts in graphic detail. "Considering the growing size of the impressionable young viewers, it would help to bring in some kind of responsible behaviour. Nobody desires an executive order that will police the sector, but the need for some form of accountability remains. It remains to be seen how this will be accomplished through light touch regulations."
Also worth noting is the fact that in April 2022, Trai floated a consultation paper on the need for monitoring cross-media ownership and control, mechanisms, and related issues in the wake of drastic changes in the sector with the advent of digital technology.