Should carriage fees in television be legitimised? This, it seems, is the main irritation that most broadcasters have with a new tariff order from the Telecom Regulatory Authority of India, or Trai. The News Broadcasters Association (NBA) has raised its voice against it, and the Indian Broadcasting Foundation (IBF) too mentions it in an otherwise approving press release.
But, in fact, the legitimising of carriage fees is a masterstroke.
Think about it. Carriage fees are charged because India’s creaking cable system doesn’t have enough bandwidth. Once digitisation – which this tariff order is supposed to enable – is complete, there will be no bandwidth constraints. If there are no bandwidth constraints, why would multi-system operators (MSOs) or distributors charge carriage fees and why would anyone pay them? But till that happens, it is not a bad idea to allow MSOs, who bear the cost of digitisation, to continue charging carriage fees — albeit with caveats. It is a fair cost to pay for getting 100 per cent transparency, no revenue leakages, better pay revenues and more taxes in the future.
Therefore, the ruckus over the new order, which follows a law passed on mandatory digitisation last year, is unnecessary. This is the industry’s third attempt at digitisation in 12 years. If cable doesn’t go digital now, it will get marginalised — since this time it has competition in the form of direct-to-home (DTH). And if six DTH operators control a market that reaches 146 million homes and generates Rs 33,000 crore in revenues, it is not a healthy sign. This market needs competition between digital cable and DTH if consumers are to get a choice of TV distributors and better prices.
That is why it is imperative that the industry should keep aside its natural instinct to squabble about everything and get on with digitisation. The new tariff order simply does what the industry should have done by itself long ago — it forces transparency across the value chain from broadcasters to MSOs and cable operators.
It states, among other things, that cable operators have to sell a basic free-to-air bouquet of 100 channels at Rs 100. MSOs have to show how much carriage fees they are charging. The carriage fee has to be charged in a uniform, non-discriminatory manner and it cannot be raised for two years. And, in case it is “unreasonable”, broadcasters can turn to Trai. Broadcasters have to share revenues with MSOs in a predetermined ratio and MSOs have to share them with cable operators, also in a proportion decided by Trai.
These, among several other recommendations, make any special deals, undeclared cash and arm-twisting almost impossible. “The detailing of the reporting mechanism [in the order] ensures that the slush nature of the business gets addressed,” says Uday Shankar, CEO of Star India. He is also the president of the IBF.
For those who came in late, here’s a quick recap. Haphazard hyper-growth, poor regulation and short-sighted broadcasters have made the world’s second-largest TV market a structural nightmare. Of the Rs 15,000 crore collected on the ground by cable operators, 80 per cent leaks away as undeclared cash. This leaves the broadcasters gasping for pay revenues, especially at a time when advertising is slowing down.
Meanwhile, over the last 10 years, bandwidth constraints have given rise to carriage fees — a charge by MSOs and operators for carrying a channel. It also explains how MSOs have survived with so little cash coming back to them.
The only way out of the mess is digitisation. A digital set-top box increases capacity 10 times. That means instead of 100 channels, a cable operator can now offer 1,000 channels. So, late last year, the government amended the Cable Television Act. It is now mandatory to sell TV signals through an addressable digital set-top box. By June 30 this year all the four metros should be digital, and by December 2014, all of India.
By legitimising carriage fee, yet making it uniform and non-discriminatory, the regulator has in one stroke cut both broadcasters and MSOs down to size. It tells broadcasters that MSOs, who will foot the bill till consumers start paying for their set-top boxes, need financial legroom.
On the other hand, it also caps carriage fees. MSOs cannot charge crazy amounts from new or niche channels. It also states that MSOs cannot insist on getting a popular channel if they don’t have bandwidth. Trai has directed MSOs to build bandwidth for at least 500 channels till April 2013. Once it is there, the need for carriage fees goes away.
What the order does is take away any excuse a stakeholder might have for not digitising. Can we get on with it now?
Business Standard
But, in fact, the legitimising of carriage fees is a masterstroke.
Think about it. Carriage fees are charged because India’s creaking cable system doesn’t have enough bandwidth. Once digitisation – which this tariff order is supposed to enable – is complete, there will be no bandwidth constraints. If there are no bandwidth constraints, why would multi-system operators (MSOs) or distributors charge carriage fees and why would anyone pay them? But till that happens, it is not a bad idea to allow MSOs, who bear the cost of digitisation, to continue charging carriage fees — albeit with caveats. It is a fair cost to pay for getting 100 per cent transparency, no revenue leakages, better pay revenues and more taxes in the future.
Therefore, the ruckus over the new order, which follows a law passed on mandatory digitisation last year, is unnecessary. This is the industry’s third attempt at digitisation in 12 years. If cable doesn’t go digital now, it will get marginalised — since this time it has competition in the form of direct-to-home (DTH). And if six DTH operators control a market that reaches 146 million homes and generates Rs 33,000 crore in revenues, it is not a healthy sign. This market needs competition between digital cable and DTH if consumers are to get a choice of TV distributors and better prices.
That is why it is imperative that the industry should keep aside its natural instinct to squabble about everything and get on with digitisation. The new tariff order simply does what the industry should have done by itself long ago — it forces transparency across the value chain from broadcasters to MSOs and cable operators.
It states, among other things, that cable operators have to sell a basic free-to-air bouquet of 100 channels at Rs 100. MSOs have to show how much carriage fees they are charging. The carriage fee has to be charged in a uniform, non-discriminatory manner and it cannot be raised for two years. And, in case it is “unreasonable”, broadcasters can turn to Trai. Broadcasters have to share revenues with MSOs in a predetermined ratio and MSOs have to share them with cable operators, also in a proportion decided by Trai.
These, among several other recommendations, make any special deals, undeclared cash and arm-twisting almost impossible. “The detailing of the reporting mechanism [in the order] ensures that the slush nature of the business gets addressed,” says Uday Shankar, CEO of Star India. He is also the president of the IBF.
For those who came in late, here’s a quick recap. Haphazard hyper-growth, poor regulation and short-sighted broadcasters have made the world’s second-largest TV market a structural nightmare. Of the Rs 15,000 crore collected on the ground by cable operators, 80 per cent leaks away as undeclared cash. This leaves the broadcasters gasping for pay revenues, especially at a time when advertising is slowing down.
Meanwhile, over the last 10 years, bandwidth constraints have given rise to carriage fees — a charge by MSOs and operators for carrying a channel. It also explains how MSOs have survived with so little cash coming back to them.
The only way out of the mess is digitisation. A digital set-top box increases capacity 10 times. That means instead of 100 channels, a cable operator can now offer 1,000 channels. So, late last year, the government amended the Cable Television Act. It is now mandatory to sell TV signals through an addressable digital set-top box. By June 30 this year all the four metros should be digital, and by December 2014, all of India.
By legitimising carriage fee, yet making it uniform and non-discriminatory, the regulator has in one stroke cut both broadcasters and MSOs down to size. It tells broadcasters that MSOs, who will foot the bill till consumers start paying for their set-top boxes, need financial legroom.
On the other hand, it also caps carriage fees. MSOs cannot charge crazy amounts from new or niche channels. It also states that MSOs cannot insist on getting a popular channel if they don’t have bandwidth. Trai has directed MSOs to build bandwidth for at least 500 channels till April 2013. Once it is there, the need for carriage fees goes away.
What the order does is take away any excuse a stakeholder might have for not digitising. Can we get on with it now?
Business Standard
