Scatmag.com

February 2017

SC OK FOR TRAI TARIFF ORDER


The Supreme Court Has Allowed The TRAI To Declare Its Tariff Order, After Consultation With The Apex Court.

SC OK

In its much-awaited order, the Supreme Court bench of Justices Rohinton Fali Nariman & Pinaki Chandra Ghose have ruled in favour of the TRAI releasing its new Tariff order & Interconnection Regulations for Pay TV channels, and DPOs (Digital Distribution Platforms, viz: DTH, Cable TV & HITS). However, the TRAI has been asked to check with the Supreme Court on the aspect of jurisdiction, before releasing the new tariff order.



TRAI Can Release Its Tariff Order After Checking With The Apex Court


MADRAS HC STAY REJECTED

The Supreme Court reversed the Madras HC's status quo order of December 23 that essentially froze the TRAI's powers to fix pay channel prices.

The TRAI is now free to continue with its consultations on tariffs and interconnect regulations.

However, the case filed by Star India and Vijay TV in the Madras High Court would continue to be heard on its merit. When the case came up for hearing on 19 January, Star TV's counsel P Chidambaram was not available, and the court adjourned the matter, without hearing, till 17 February.

Since the Madras High Court case also questions the jurisdiction of the TRAI, in effect, the TRAI will probably not be able to declare its new tariff and interconnection regulations, until this case is fully heard. The matter could drag on, effectively stalling the TRAI's new order. An option for the TRAI could be to go ahead with its order, after deleting the clause that caps prices of Pay channels, genre wise.




APEX COURT DISCUSSIONS

Arguing that the impugned order is "clearly erroneous, contrary to law and not in the public interest," Attorney General Mukul Rohtagi said the mere continuation of a consultation process, which only indicates the adherence to the principles of transparency and openness and enables stakeholders to express their views, does not entitle any person to stall TRAI from undertaking a process of consultation.

Senior counsel P Chidambaram, appearing for Star India contended that TRAI had overstretched its jurisdiction by fixing content prices under the TRAI Act 1997 and the regulator was being too harsh against content creators in the name of creating a level-playing field. Star India further argued that the tariff fixing exercise was a violation of the Copyright Act, which deals with all aspects of exploitation and monetisation of content.


TRAI's New Tariffs Are Because SC & TDSAT Have Asked It For A Fresh Tariff Order



BACKGROUND

For more than 2 decades, pay channel broadcasters and distribution platforms have had their own complaints.

Broadcasters have bitterly complained about the high carriage fees levied by DTH platforms and cable TV networks. They have also opposed the TRAI's efforts to reign in pay channel prices. Pay channel broadcasters perpetually complain that they were not receiving their projected dues on subscriptions, because of under declaration and malpractices by distribution platforms.

The sum of all pay channel prices today exceeds Rs. 1500 per month while the average pay out by subscribers of Pay channels were less than Rs. 250 per month. Distribution platforms reiterated that they were entitled to a carriage fee since they had invested substantial money in setting up their distribution infrastructure.

MSOs also pointed out that their balance sheets were in the red for the past several years and that there was no economically feasible business model.


COURTS INSTRUCT TRAI

On hearing several industry petitions, The TDSAT and the Supreme Court instructed the TRAI to completely rethink its tariff regulations and make them equitable to all.


TRAI'S RESPONSE

The TRAI noted the difficulties of each sector within the industry and drafted its new tariff regulations to alleviate each of these separately. In its draft tariff order issued in October 2016, (see SCaT November 2016) the TRAI proposed a completely new tariff framework for pricing and packaging of TV channels.

The major reforms it proposed were:

1. Broadcasters will declare the consumer prices for their pay channel bouquets. They must also offer each channel on a stand-alone basis. (In the past, broadcasters only priced their channels to the Distribution platforms, who then bundled channels to consumers, and worked out a consumer price.)

The distribution platforms were to now simply act as collection agents for the broadcasters and receive a 20% collection fee. Hence if the broadcasters pegged unrealistically high prices, subscribers may not opt for them. This model avoids any possibility of under invoicing or other alleged malpractices by distribution platforms.

2. The TRAI proposed genre wise price ceiling for pay channels viz:

Sports : Rs. 19

GEC : Rs. 12

Movies : Rs. 10

Kids : Rs. 7

Infotainment : Rs. 9

News : Rs. 5

Devotional : Rs. 3

HD : Not More than 3x SD

3. The TRAI proposed a maximum carriage fee of Rs. 0.20 / subscriber / month, progressively reducing as the percentage of subscribers increased.

4. Free-to-air channels do not pay any carriage fee.

5. Distribution platforms like Cable TV also receive a monthly fee from each subscriber, for their service. They can charge up to Rs. 130 for 100 SD channels + Rs. 20 for each block of 25 additional channels.


TRAI Could Release The Order Without The Price Cap Clause



THE CONFLICT

Broadcasters- particularly Star India and its subsidiary Vijay TV- have made an all-out effort to stall the new tariff proposals.

The broadcasters have alleged that the TRAIs orders violate the copyright act and the specific setting of genre wise pay channel charges is too restricted.

"Under the Copyright Act, 1957, a content owner has the freedom to monetize copyright works and enter into contracts to monetize content in a manner he deems fit. However, the price restrictions imposed by TRAI interferes with this basic freedom. It risks stifling creativity and may force smaller companies out of the market - resulting in less choice for consumers," opined Uday Singh, Managing Director, Motion Picture Dist. Association India.

The broadcasters have given their views widespread publicity in the Press and obtained a stay order from the Madras High Court. The TRAI contested the stay in the Supreme Court. The Supreme Court has rejected the Madras High Court stay. It has however told the TRAI to approach it with the new proposed tariff order before declaring it as law.

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