The battle to price TV content

The case between Trai and Star India is about a firm's freedom to price its own product

Do companies have the freedom to price their product? That, shorn, of all legalese, is the question that the ongoing court case between Telecom Regulatory Authority of India (Trai) and Star India is all about. Its result could determine whether or not India’s Rs 58,800-crore TV industry reaching 180 million homes becomes a world-class industry.

Here is the flashback.

In October 2016, Trai issued a consultation paper on a draft tariff order. The order divides broadcast content into devotional, general entertainment, kids et al. It also prescribes a maximum price for each genre — Rs 12 for a general entertainment channel, Rs 7 for a kids’ channel and Rs 5 for a news channel and so on.

In December 2016, the estimated Rs 11,000-crore Star India and its Vijay TV filed a petition against the Department of Industrial Policy and Promotion, Department of Telecommunications, Ministry of Information and Broadcasting and Trai. It questioned Trai’s authority to do this since it was anointed broadcast regulator to regulate “carriage” in 2004. Content is beyond its remit. Star’s petition states Trai’s tariff orders and regulations for “broadcasting services” encroaches on the statutory rights that broadcasters enjoy under the Copyright Act of 1957. These laws are based on international treaties to which India is a signatory. Implementing the order would have the effect of regulating content creation, generation, exploitation, licensing et al which fall under the Copyright Act.

Late in December 2016, the Madras High Court froze Trai’s powers to fix television prices. In March 2017 the Supreme Court allowed it to notify its tariff order and asked the Madras High Court to wrap up the case in two months. A two-judge bench had finished listening to the arguments from Star India and the central government. Trai’s arguments were pending. An anonymous petition last week forced the recusal of Justice S Nagamuthu and Justice Anita Sumanth from the case. It alleges that Justice Nagamuthu was appointed at the time of the United Progressive Alliance government and that former finance minister P Chidambaram, Star India’s counsel, had a hand in it. This week, two new judges will be appointed to hear the case all over again. Meanwhile, the Trai order could get implemented by May 2 since it has been notified.

There are three mysteries here.

One, why the anonymous petition came towards the end of the arguments and not at the beginning.

Two, why the broadcasting industry, which will be a huge beneficiary if Star wins this case, is silent. Earlier this year when I asked the CEOs of the top five broadcasting firms for their reaction to the case most refused to comment.

Three, why Trai, which has done a wonderful job on several fronts, is insistent on what looks like a regressive order. When it began in 2004 there were several arguments for price regulation. The biggest was the mess in cable, practically the only technology offering TV signals then. Today, Indian television is competitive across the value chain — in content production (thousands of production houses), distribution (DTH, cable, IPTV, internet, mobile) and in broadcasting (more than 800 channels). Where then is the need for price regulation?

Instead, Trai should calculate the cost that price regulation has imposed on television in India. It has stifled programming innovation, stalled digitisation and put the brakes on potentially millions of dollars of investment into distribution. Note that the world’s largest cable and DTH firms do not want to come to India despite 100 per cent foreign direct investment being allowed. Incidentally, working out the cost of regulating versus that of not regulating is an exercise that most global communications regulators routinely conduct before deciding on policy.

Lack of pay revenues — only 20 per cent or so of the money cable operators collect on the ground goes to broadcasters — has meant little choice besides ad-stuffed, lowest common denominator programming. Not having price regulation will free the market to innovate on programming quality and variety, and segment it better.  For all you know, prices may fall further at the lower end. By restoring the freedom to price back to firms, Trai could become both a facilitator for growth and a protector of consumer interests.
Twitter: @vanitakohlik