Broadcasting sector: Regulation needed, not management
October 1, 2020 6:30 AM
Trai’s New Tariff Order can have unpredictable and disruptive consequences
The NTO cannot take into account all dimensions of these complex interconnections and commercial deals between broadcasters and DPOs.
By Uday Kumar Varma
In January 2020, broadcasters approached the Bombay High Court after the Telecommunications Regulatory Authority of India (Trai) notified an amended New Regulatory Framework which includes a New Tariff Order (NTO) for the sector. The broadcasters contend, inter alia, that because of TRAI’s prescriptive channel pricing rules outlined in the NTO, they are unable to earn revenues from consumers and have to rely on advertising revenue, affecting the quality of TV content they produce.
In the next few weeks, the court is expected to deliver a judgment which will hopefully put an end to this issue of channel pricing. However, this case is only one of many legal webs that tie up India’s broadcasting sector. A case filed against Trai’s cap on duration of advertisements is pending before the Delhi High Court since March 2013. Between 2005 and 2019, broadcasting-related cases in India’s superior courts have tripled. According to a report by the Koan Advisory Group , there were four cases 15 years ago—now, there are twelve. Tellingly, almost 70% of the 70 regulations issued by Trai have been challenged before a judicial body.
Entertainment is not a public good. Information is like clean water, pure air or education. There is justification for the state to regulate sectors dealing with public goods. But entertainment, such as the price of a cinema ticket, music performance or an award ceremony cannot be regulated the way one regulates a public good. While regulating the price of news channels is perhaps justified as falling under “information” (most of them are free anyway), prescribing channel pricing for all genres is problematic, and only merits interference when the market-determined pricing is so arbitrary and excessive as to deprive the common man of the basic need of information and entertainment at a reasonable cost.
The issue before us is not to comment on the efficacy of Trai or its regulations. It is to understand the expected role of a regulator in a sector as complex and dynamic as broadcasting. The broadcasting sector in India, in terms of its composition and structure, is complex by any definition. The interdependence of its constituents is deep, pervasive and, to a large extent, symbiotic. There are four ways to view a program on TV—cable, DTH, HITS and IPTV. There are at least three major actors in the supply chain—content creators, broadcasters and distribution platform owners (DPOs) which include cable operators. The interrelationship among the constituents, whether commercial or strategic, is both dynamic and complicated. There are over 900 channels, 1,600 DPOs, 4 DTH operators, 1 HITS operator and thousands of last-mile cable operators representing a large, extensive and intricate web.
The legal challenges to this NTO, as well as previous challenges to regulations, demonstrate that if the regulator chooses to “manage” every aspect of the sector, then the consequences will be unpredictable and disruptive. The current state of the regulations, an attempt to “manage” it for the public good, has left broadcasters unable to increase revenues from consumers. Tariff caps have led to excessive dependence on advertising revenue, which is already the source of nearly 70% of broadcaster earnings. This has been institutionalised by the NTO. Broadcasters have, therefore, started creating content to maximise TRPs, which, in turn, attract advertising revenues. This has resulted in a race to the bottom among channels because baser and cruder content grabs more eyeballs and thus higher advertising revenue.
The latest NTO is well-intentioned as it seeks to place an “affordable” tariff regime. However, the practical difficulties in its implementation and a disregard for the crucial interplays within the broadcasting ecosystem nullifies this objective.
The question remains why Trai is not considering approaches apart from issuing tariff orders, such as giving freedom to the industry to price their channels as per market forces. We need to remember that between 2004 and 2018 (when the new tariff order was brought into effect) there was no evidence that consumers were exploited as far as pricing was concerned. India has always had one of the cheapest channel pricing across the world. The fierce and intense competition in the sector explains this stability of channel pricing and these waters needn’t have been muddied by a tariff order. Likewise, terms of the agreement among various stakeholders should be left to them to be determined mutually. The NTO cannot take into account all dimensions of these complex interconnections and commercial deals between broadcasters and DPOs.
Regulations and policies are never static and must respond to ever-changing objectives and compulsions. At the turn of the century, policies favouring rapid expansion were required. This resulted in a fast expansion of TV channels and the introduction of new platforms like DTH and HITS. Digitisation in 2011 transformed the broadcasting sector like never before. Then technology became king, and the supply of entertainment and news was abundant. This abundancy no longer is a surprise; rather, it is the norm. Therefore, a serious look is needed to ensure just “regulation” to facilitate orderly growth of this sector, not “management” of all complex relationships of the sector among market participants. Without this, any proposed remedy will be worse than the malady.
The author is Former secretary I&B, and former secretary, MSME