Scatmag.com

July 2014

TRAI CONSULTATION ON HOTEL TARIFFS



According to the TRAI, subscribers of broadcasting and cable TV services are basically of 2 types:

a. Ordinary subscribers who consume TV services domestically and for their own pleasure.

b. Commercial subscribers who obtain TV services for the benefit of their clients, customers etc., at their commercial establishment i.e. for the furtherance of their business interests. This category directly or indirectly, builds in a cost which is finally recovered from their clients who actually consume the TV services.

The 2 categories therefore need to be charged differently, for TV consumption.


PAST REGULATION

The TRAI in its amendment to the principal Tariff Order on 21.11.2006, categorised commercial subscribers into the following 2 groups:

(a) A specified category of commercial subscribers comprising---

(i) Hotels with rating of 3 stars and above;

(ii) Heritage hotels (as defined by the Department of Tourism, Government of India);

(iii) Any hotel, motel, inn or commercial establishment providing board & lodging and having 50 or more rooms; and

(b) All other commercial subscribers (not falling under the specified category of commercial subscribers).



CHALLENGED IN COURT

The TRAI's categorisation has been challenged in the TDSAT. The TDSAT's judgement against the TRAI and even the contention that the TRAI was not authorised to regulate commercial subscribers, has been challenged in the Supreme Court. The Apex court has ruled the following 2 important points in its judgements:

1. "…..We, therefore, are of the opinion that it would not be correct to contend that the commercial cable subscribers would be outside the purview of regulatory jurisdiction of TRAI. If such a contention is accepted, the purport and object for which the TRAI Act was enacted would be defeated.

2. On 16th April 2014 the Supreme court directed the TRAI "…However, we direct that for a period of 3 months, the impugned tariff, which is in force as on today, shall continue. Within the said period, TRAI shall look into the matter de novo, as directed in the impugned judgment, and shall re-determine the tariff after hearing the contentions of all the stake holders…."


Supreme Court: A New Commercial tariff Must Be Declared By The TRAI By 16 July 2014

16 JULY 2014 DEADLINE

Clearly, the TRAI is now required to reconsider its earlier tariff order for commercial establishments, and after consulting all stake holders, must declare the new commercial Tariff Order by 16th July 2014.


"COMMERCIAL SUBSCRIBER"

First and foremost, the TRAI needs to define the terms "Commercial Subscriber" & "Commercial Establishment."

A Commercial establishment has been defined in various Shops and Establishments Acts, enacted in different states.

Based on these, the TRAI has suggested:

"Commercial Subscriber" means any person, other than a MSO or cable operator, who receives broadcasting service at a place indicated by him to a broadcaster or a cable operator or DTH or MSO or HITS operator or a service provider offering IPTV service, as the case may be, and uses such signals for the benefit of his clients, customers, members or any other class or group of persons having access to its commercial establishment;"

"Commercial Establishment" means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto is carried on and includes a society, charitable or other trust, whether registered or not, which carries on any business, trade or profession or work in connection with, or incidental or ancillary thereto, journalistic and printing establishments, educational, healthcare or other institutions run for private gain, theatres, cinemas, restaurants, eating houses, pubs, bars, residential hotels, malls, airport lounges, clubs or other places of public amusements or entertainment but does not include a shop or a factory registered under the Factories Act, 1948

"Shop" means any premises where goods are sold, either by retail or wholesale or where services are rendered to customers, and includes an office, a store room, godown, warehouse or work place, whether in the same premises or otherwise, mainly used in connection with such trade or business but does not include a factory, a commercial establishment, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment.


Focus To Shift To Establishment Not End User

ESTABLISHMENT FOCUS

In the above definitions, the underlying idea is to shift the focus from the "end use" concept and instead, define a commercial subscriber as a commercial establishment which avails the broadcasting service or cable service from broadcaster or a Distribution Platform Operator (DPOs), as the case may be.

In order to ensure that only such commercial establishments which are engaged in commercial activities for private gain are covered by the definition, the term "commercial establishment" has also been defined.


SUB CATEGORIES?

In the past, sub-categorisation of commercial subscribers has been a contentious issue, challenged in courts.

The TRAI is therefore considering the elimination of sub-categories of commercial subscribers. View have been invited.


DAS COMPULSORY FOR COMMERCIAL

In the past, readers have enquired with the magazine whether compulsory digitisation and switch off of analog signals was also applicable to commercial establishments and hotels. This has clearly been clarified by the TRAI in its consultation paper:

"With implementation of DAS, it is natural that the TV signals will have to be distributed in the digital and encrypted form till the end viewer. While the signals obtained by the commercial subscriber from DPOs in DAS will, in any case, be digital and encrypted, it would be the responsibility of the commercial subscriber to ensure distribution of TV signals in digital and encrypted form within its commercial establishment, in case it obtains signals directly from the broadcaster. However, the commercial subscriber, unlike DPOs, cannot re-transmit the TV signals to any other subscriber."


DAS Also Applicable To Commercial Establishments

3 OPTIONS FOR DISTRIBUTION

The TRAI has suggested that TV signals can be made available by the broadcasters directly or through any of the distribution platforms. The regulator has suggested 3 models whereby channels can be offered to commercial establishments.

1. The broadcaster publishes the rates for commercial tariff in the form of a Reference Interconnect Offer (RIO), which will be the basis for finalising the agreements with commercial subscribers. The commercial subscribers will have to negotiate with the broadcasters and once the negotiations are settled and agreements are in place, the broadcaster shall identify the distribution platform which will supply the signals to the commercial subscriber. The broadcasters shall have their own agreement with the distribution platform, based on mutual negotiations. In case the commercial subscribers have their own digital Headend and would like to take signals directly from the broadcaster, the RIO of the broadcasters should also have distinct provisions for such commercial subscribers.

2. The distribution platform publishes the rates for commercial tariff in the form of a RIO, which will be the basis for finalising the agreements with commercial subscribers. The commercial subscribers shall have to negotiate with the distribution platforms and once the negotiations are settled and the agreements are in place, the distribution platforms shall supply the signals to the commercial subscribers. The distribution platforms shall have their own agreements with the broadcasters based on mutual negotiations.

3. The third model could be a combination of the above 2 models. In this model, both the options mentioned above are available to the commercial subscribers. Both the distribution platforms and the broadcasters publish the RIOs, and there will be competition among the distribution platforms as well as between distribution platforms and broadcasters. The commercial subscribers will have more flexibility and options for negotiations to get competitive rates.


CHALLENGED IN COURT

In its 11th June 2014 consultation paper, the TRAI has raised broadly the following issues for consultation:

1. What should be used as the definitions for "Commercial Establishment; Shop & Commercial Subscriber? Alternate definitions, with their justifications, are invited by the TRAI.

2. How should Commercial Subscribers be further sub-categorised?

3. How should the signal be distributed to commercial subscribers?

4. Should the Tariff for Commercial Subscribers be the same or different to that applicable to ordinary subscribers? Should the commercial tariff be independent or linked to the tariff applicable to ordinary subscribers?


DEADLINE

Written view/comments on this paper were invited from the stakeholders by 27th June 2014.

The comments received will be posted on the TRAI's website www.trai.gov.in.

As instructed by the Supreme Court, the TRAI will have to declare its regulation on commercial TV tariffs, by 16th July 2014. n