May 2013

TRAI PLANS COMPULSORY STB PRICE

As part of compulsory digitisation under DAS, the TRAI has laid out compulsory pricing and service norms for practically every aspect of DAS, associated with consumer. Minimum pay channel price tiers and basic service tier price have been mandated along with quality of service levels that each consumer must be delivered.

However an obvious lacunae/ oversight by the TRAI has been the pricing of digital Set-Top-Boxes to consumers.

Generally the TRAI has maintained approximate parity between DTH and Cable TV norms. For almost a decade since DTH first commenced in India, the TRAI has not regulated prices of DTH STBs. Prices for outright purchase as well as hire purchase schemes were mandated under CAS approx 5 years ago. However these were not extended for CATV DAS.

STB INTEROPERABILITY

All DTH licenses mandate that all consumer's DTH STBs must be inter-operable. This implies that a consumer should be able to shift from one DTH operator to any other DTH operator, using his existing DTH STB. This implies that DTH STBs must all be provided with a CAM (Conditional Access Module) slot. This did not find favour with DTH operators who obviously wanted to lock in consumers to their service. Hence besides an initial consignment of DishTV STBs, no other DTH operator provided inter-operable STBs. The situation was compounded when MPEG-4 was deployed by new DTH operators.

The government decided to turn a blind eye to this mandatory clause in the DTH licence, despite consumer protest and even a court case.

COMMERCIAL INTER-OPERABILITY

The TRAI and government then promoted the idea of commercial inter-operability. This advocated a mechanism where a consumer could commercially return an unused STB and claim a partial refund (based on age of the STB). He could then obtain a new STB from any other service provider.

However DTH operators were in no mood to allow customers to shift to competing platforms. Even today not a single DTH platform provides refund for their STBs. Instead they collect the entire STB + LNB + dish + wiring cost as an 'Activation Fee' specifying that the Consumer Premise Equipment (CPE) remains the property of the DTH platform! DTH subscribers are often not aware of this.

Given the fact that there are more than 15 million deactivated DTH STBs that consumers do not want to use, it points to more than Rs. 2,500 Crores of consumer funds locked up for de-activated STBs.

With mandated DAS, consumers in Phase 2 cities have loudly protested against variation of rates of digital STBs from not only different MSOs in the city but also through DTH platforms. Interestingly, practically no MSO has charged more than Rs. 1,000 for a Cable TV STB compared to Rs. 1,750 to Rs. 2,000 charged by DTH platforms for their Consumer Premise Equipment (CPE) that consists of the DTH STB + LNB + dish + wiring. As a result, DTH platforms recovered their entire CPE cost as an 'Activation Fee' without paying VAT and provided the consumer no option for a refund and even retained full ownership of the CPE!

The TRAI has finally decided to step in and provide compulsory options that DTH platforms and MSOs must provide for their consumers. Separate options have been detailed by the TRAI for outright purchase, hire-purchase and rentals. The service providers (DTH & MSOs) are free to provide any other schemes or payment plans in addition to the mandatory plans outlined by the TRAI.

On 11th April 2013 the TRAI issued its draft tariff orders prescribing Standard Tariff Package (STP) for Set Top Boxes (STBs) for Digital Addressable Cable TV Systems (DAS) and Consumer Premise Equipment (CPE) for Direct to Home (DTH) services.

THE TARIFF PLANS

The TRAI has proposed compulsory tariff plans that all Cable networks and DTH operators must offer their consumers. A total of 4 tariff plans have been offered with the option of either a fully refundable security deposit or a security deposit refund which diminishes with age of the STB.

The TRAI has also taken the precaution to end the commonly prevailing practice of charging additional amounts to consumers under various pretexes such as installation or activation fee and maintenance charges.

The proposed tariff plans and compulsory terms and conditions are summarised in Table 1.

ASSUMED COSTS

The Standard Tariff Packages proposed by the TRAI have been computed based on a STB lifespan of 5 years, with zero residual value and Equated Monthly Installment (EMI) interest @15% per annum (@1.25% per month) for a period of 60 months.

The cost of a basic CATV STB has been assumed at Rs. 1,750.

The cost of a basic DTH STB with CPE (STB + Dish + LNB + Cabling) has been assumed to be Rs. 2,250.

ONLY FOR BASIC STBS

Various types of STBs having different features/ capabilities such as "recording facility", "Internet / broadband compatibility", " High definition/ 3D reception capability" etc., are sometimes offered to consumers. Given the wide variations of features and cost of these products, the proposed Standard Tariff Package is applicable only for the basic STBs meant for reception of Standard Definition TV signals (SDTV).

DEADLINE

The TRAI has invited suggestions from the industry and consumers by 26th April, to its proposed tariff plans for CATV and DTH STBs.

After reviewing all feedback received, the TRAI will declare its final tariff order for STB tariff packages. n