Why deny broadcasting telecom-like success? Trai must shed intensive regulation

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Published: January 16, 2020 5:15:21 AM

Trai must shed intensive regulation of the broadcasting market. distribution technology doesn’t allow for innumerable channel combinations at consumer-end

broadcasting telecom, Trai, Cybermedia Research, TV channel pricing, OTT streaming services, DPO, CAGRTRAI can repeat its past success and cement its legacy as a critical factor in India’s economic growth by taking a break from intensive regulations and permitting the markets to breathe.

Can you imagine living without your smartphone? From waking up to that of falling asleep, many of us are glued to our mobile devices. Indeed, a recent study by Cybermedia Research shows that Indians spend one-third of their waking hours on their smartphone, and a majority of study participants reported feeling sad and bored without their phones!

In its heyday, Indian telecom became one of the fastest-growing markets in the world, and a source of great pride for the nation, with over half a billion people owning smartphones. The broadcasting industry, however, has not been privy to such growth-fuelling policies. There has been a spate of heavy regulations that include stringent pricing caps on TV channel pricing. Where is this headed? Will it spill over to the over-the-top (OTT) streaming services?

The telecom boom of the 1990s was only possible due to a powerful partnership between the telecom regulator TRAI, operators, and associated industry stakeholders. TRAI’s astute, market-friendly, and liberalised policies resulted in a win-win. Telecom players operated freely, and consumers enjoyed greater affordability due to policies that not just supported, but also boosted the economy. In fact, the telecom industry grew at the same high rate as the Indian economy for many years.

Unfortunately, TRAI has come down with a heavy hand on Indian broadcasting. As the Indian Broadcasting Federation (IBF) noted, TRAI has issued more than 36 notifications in just 15 years! This includes the unexpected amendment to the New Tariff Order (NTO), which has been in play for less than a year, on January 1, 2020. It mandates that all operators offer 200 channels for a base price of Rs 130.
On the surface, the goal seems to be to allow consumers to cherry-pick their choice of channels at a low, fixed price. However, broadcasters create content and deliver it to televisions across the country by partnering with Distribution Platform Operators (DPOs). The distribution technology simply does not allow for innumerable channel combinations at the consumer end. So, although freedom of choice is a noble cause, users will still have to select between groups of channels determined by the DPOs, while broadcasters have their hands tied.

There is also a new ceiling price of Rs 160 for all channels offered, and a la carte pricing of each pay channel is lowered to Rs 12. The walls seem to be closing in on broadcasting companies. TRAI’s restrictive moves are quite perplexing—particularly at a time when the Indian consumer is spoilt for choice between cable broadcasting and internet-based OTT streaming services.

Again, while TRAI’s intent is positive, a lot is lost in translation when it comes to the ground realities of implementation. Organic market competition will result in more attractive price offerings and keep prices low for consumers—as evidenced by Indian telecom. In fact, since cell phone data package rates are at an all-time low, TRAI is now considering floor pricing!

Pricing caps, at a time when the government is focused on growing the economy, are counter-productive and, as with all regulation-heavy markets, eventually, consumers suffer. Broadcasters invest crores of rupees into content, much to the Indian consumers’ delight. Price caps and intense regulations will result in a decline of quality programming—driving consumers away.

The act of breaking down bouquets and extrapolating individual channel prices is also puzzling. Even a small shopkeeper packages like goods together and offers attractive discounts to customers. This is the fundamental principle of discounts! Those who eat at a buffet do so knowing fully well that if they ordered the papad, butter chicken, naan, gulab jamun, and more individually, they would need to pay much more than the packaged buffet price. This is exactly what broadcasters have done with bouquet prices.

Breaking down bouquets to lower individual channel pricing is similar to unfairly demanding the same price for a papad and a more expensive sabzi, both ordered a la carte, based on their combined buffet offering. It is not economically viable, and will hurt consumers as broadcasters will have no choice but to begin severe cost-cutting measures. Global content providers might just end up taking their business elsewhere rather than dealing with a volatile regulatory environment.

Stringent pricing regulations are needed when a few players dominate the market and may collude to maintain higher prices. Pricing mandates are also beneficial in capital-intensive industries where resource limitations can potentially stifle new entrants and healthy competition. This is not the case for the broadcasting and content provider industry! This market is ripe with growth and competition. Why introduce regulations that curtail this growth?

The Indian media and entertainment (M&E) sector is expected to grow at CAGR 13% within the next three years to Rs 2.66 lakh crore. India’s media consumption is nine times greater than that of the US and twice that of China! Over four million people are employed by this industry. Over 30 OTT players are competing to win Indian consumer eyeballs. What problem are we trying to solve here? This is a vibrant market opportunity for OTT platforms to compete both in terms of pricing and content, and, as time goes by, consolidate.

With the digitisation of TV and the internet as a great equaliser, there is no scarcity of resources for new or existing players. This scenario is not similar to spectrum or broadband allocations applicable to telcos. Article 14 of the constitution requires equal treatment for entities only under similar circumstances. Why are the two very different industries being painted with the same brush? The saying, “different strokes for different folks”, is more applicable in this instance.

All is not lost. TRAI can repeat its past success and cement its legacy as a critical factor in India’s economic growth by taking a break from intensive regulations and permitting the markets to breathe. If content providers are busy jumping through hoops to satisfy a slew of regulations and their amendments, unhappy consumers will turn their eyes elsewhere, taking precious advertisers with them.
This proved true last year, when broadcasters were first hit with NTO regulations requiring them to break down bouquet offerings and offer a la carte options within a short period of time. Certain favourite channels experienced a blackout since the technology did not allow individuals to create their custom channel bouquets, resulting in customer dissatisfaction.

The vibrant and economically attractive telecom policies of the 1990s continued to reverberate until very recently. TRAI’s greatest successes were achieved when they actively heeded consumers’ demands, market requirements, industry player challenges, and resources and investments prior to delivering a liberalised regulatory framework. TRAI recognised that the needs of the mobile and internet industry were very different from those of the traditional landline industry—this was very forward-thinking at the time, and allowed for tremendous growth.

The TRAI approaches to WiFi, WANI (the UPI of telecom), tariff forbearance, and facilitation of healthy competition have been brilliant. Once again, it is time for TRAI to ‘stop, collaborate, and listen’ to the needs of an evolving market. Regulations must bolster support for disruptive innovations in broadcasting and OTT services.

The author is President, Broadband India Forum and Founder
Views are personal

Research inputs by Chandana Bala

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