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TRAI HIKES ANALOG TARIFF
On October 1, 2004 the TRAI issued its Telecommunication (Broadcasting and Cable) Services (Second) Tariff Order 2004 (6 of 2004) which imposed a maximum limit of the cable charges excluding taxes, payable by Cable Subscribers to Cable Operators, Cable Operators to MSOs / Broadcasters & MSOs to Broadcasters, for both - Free To Air (FTA) and pay TV channels. This ceiling was to be revised periodically, based on the Wholesale Price Index (WPI) declared by the government.
Accordingly, inflation linked increases of 7% and 4% in the cable charges were permitted through the Second Tariff Amendment Order of 1st December 2004 and the Third Tariff Amendment Order of 29th November 2005 respectively, based on the movement of the wholesale price index (WPI). These inflation linked increases in the cable charges were effective from 1st January 2005 and 1st January 2006, respectively.
However, the Third Tariff Amendment Order relating to the 4% increase could not be brought into operation as the TDSAT stayed it on 20th December 2005 on an appeal filed by a consumer organisation.
On 4th October 2007, the TRAI, while continuing the ceiling on the cable charges, permitted a 4% increase in the cable charges in those cases in which service providers had not increased the charges.
Subsequently, vide Ninth Amendment dated 26th December 2008 to the Tariff Order, another inflationary hike by 7% was allowed, effective from 1st January 2009.
To summarise, since 1st October 2004, 3 inflationary hikes viz:
(i) 7% w.e.f. 1st January 2005,
(ii) 4% w.e.f. 1st January 2006, and
(iii) 7% w.e.f. 1st January 2009
have so far been allowed. This is summarised in Table A.
NO INCREASE PAST 5 YEARS
No increase (on grounds of inflation) has been allowed for the past 5 years, for the reasons discussed below.
a. The Eighth Amendment to the Tariff Order was challenged in the TDSAT by several service providers.
The TRAI appealed the TDSAT's stay in the Supreme Court, who struck down the TDSAT's stay. The Supreme Court, in its interim order dated 13th May 2009, directed the TRAI to carry out a new tariff determination exercise. The TRAI submitted a draft tariff order suggesting a 9% inflation linked hike.
The matter has been pending in the Supreme Court since 2009.
In effect this means that there has been no inflation linked adjustments in the Tariff Order during the past 5 years.
Based on this, the TRAI approached the Supreme Court and sought permission to review the Tariff Order. This was allowed on 28th February 2014.
Accordingly, the TRAI has now worked out the change in the WPI from December 2008 to February 2014, based on the monthly Wholesale price Index (WPI) issued by the Ministry of Commerce and Industry.
Analysed in Table A above, the WPI indicates a total inflation of 43.69% for December 2008 to February 2014.
Further, while the WPI moved up by 30% from December 2003 till December 2008, the TRAI had permitted only 19% during that period.
Thus, a 63% price hike is now overdue for the period December 2008 to March 2014, as shown in Table B below.
The TRAI believes that a 27.5% tariff hike in a single go would not be appropriate for the market; consumers need some time to adjust.
Therefore, the TRAI has decided on a 2 stage price hike.
15% IMMEDIATE HIKE
The first installment of 15% will be effective from 1st April 2014 which has been incorporated in this Tariff Order. (See Table B).
The second installment for the remaining inflation linked increase, for the period from December 2008 to March 2014, will be applicable from 1st January 2015 thorough a separate tariff order to be issued subsequently. (However, since all analog Cable TV networks must compulsorily migrate to digital by end December 2014, the second price hike may be irrelevant unless DAS Phases 3 & 4 are not successful - Ed.)
In its 2007 tariff order, the TRAI had prescribed specific tariff ceilings for consumers on the number of pay channels and classification of cities/towns. Accordingly, to account for the 15% inflation linked hike, similar tariff ceilings for consumers have been declared in this tariff order, summarised in Table B. The tariff ceilings have been rounded-off to the nearest rupee from the point of view of convenience of the consumers and service providers.
As a result of the new tariff order, cable TV networks charge their consumers more. However, consumers are also certain to resist.
On the other hand, pay channel broadcasters will almost certainly hike their rates to analog cable TV Headends, almost immediately, making business increasingly difficult for the cable network.