The broadcast regulator Telecom Regulatory Authority of India has begun studying the feasibility of putting a ceiling on carriage and placement fees (charges that broadcasters pay to distributors so that their channels are carried on the limited bandwidth in preference to others? channels) after receiving a corrected order of the Supreme Court dated May 13, 2009, that directs the regulator to do so.
?The Trai shall also consider the feasibility of putting a cap on carriage and placement charges,? the latest SC order says. This is the fourth time in last five years that Trai is considering capping carriage fee. As late as in March 2009, the regulator had decided against any ceiling on carriage fee.
While the broadcasters have been pressing for a cap on regulation fee, the distributors have been opposing it. Since an analogue operator, due to technological restrictions can carry only 80 channels on an average and the number of channel licences granted have touched 370, there is bound to be competition among the channels to reach maximum number of eyeballs, as that is what determines ad revenue. Trai officials, while ruling out the possibility of putting a cap on carriage fee, had forwarded the following argument, ?The number of channels that can be carried at any given time is limited. Even if any kind of ceiling is laid down for carriage fee, the competition among channels would ensure that many broadcasters would still be willing to pay over and above the maximum permissible limit of carriage fee so that their channels are carried in the available slots in preference to their rivals?. Selection of which channels to carry in such a situation would again result in covert deals, which would compromise the transparency of the sector further?.
The multi-system operators (MSO) point out that once ceiling on carriage fee is imposed, they wouldn?t be left with a choice but to pass on the cost burden to the consumer, resulting in increased cable rates. A MSO said, ?Around 50% to 70% of our revenue is dependent on carriage and placement fee while the rest comes from subscription. Currently we are able to subsidise the services to the consumer only because we have that alternate source of revenue?.
Another MSO advances the argument further, ?At a time when we are paying the broadcaster an average of Rs 10 per channel (a la carte basis) and carrying 80 channels on our platform and we have to shell out over Rs 800 for the service if we don?t choose to buy bouquets, how can we be expected to offer the same service for Rs 200-250 to consumer if we are not allowed to charge carriage fee. At the end of the day, the carriage fee is mutually decided upon by the broadcaster and us. Carriage fee to us is what ad revenue to them.?
The link between carriage fee and ad revenue is also established by Trai, which notes that in cities where TAM devices (determining viewership data) are installed, higher carriage fee is being charged.
Broadcasters argue that the regulator isn?t being fair by putting a ceiling on the amount that the cable operators can charge from the subscriber, while not putting any cap on what the MSOs can charge from channels. Also in forcing the broadcaster to offer channels on an a la carte basis, the regulator was not being fair. ?As the number of channels is multiplying, the demand supply mismatch is getting further skewed and distributors are demanding arbitrary amount for carriage fee,? said a broadcaster. They also confess that the carriage fees issue gets more complex in regional markets where politics and muscle power also play a role.
This January, Telecom Disputes Settlement and Appellate Tribunal (TDSAT ) had set aside the Telecommunication (Broadcasting & Cable) Services (Second) Tariff (Eighth Amendment) Order 2007 dated 4.10.2007 of the Trai that had mandated broadcasters to offer all channels to the distributors on an a la carte basis and determined the chargeable rates for the individual pay channels. Trai had challenged the TDSAT judgement in SC, which is currently hearing the case while ordering a status quo in the interim period. Interestingly, the newly appointed Trai chairman, JS Sarma, was part of the adjudicating body in TDSAT when the tribunal passed the above judgement in January.
