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MSOs welcome freedom to fix rate

Sharmistha Mukherjee  |  New Delhi 

Broadcasters and multi-system operators have largely welcomed the Telecom Regulatory Authority of India (Trai)’s move to allow multi-system operators to determine fees for carriage of channels on their network.

The regulatory body had in its tariff order issued yesterday permitted multi-system operators (MSOs) to fix carriage fee, keeping in view that they are making substantial investments for implementation of digital addressable cable TV Systems. Trai has, however, said the fees determined have to be notified in the reference interconnect offer and cannot be increased for at least two years. It has held the authority would intervene if it is felt that the fee fixed is unreasonable.

MSOs are major cable operators who give feed to local cable operators.

M G Azhar, president (strategy & business development) of multi-system operator Den Networks, said, “It is a welcome move. It will help all in the value chain: Consumers will have more choice in terms of content, broadcasters will benefit from the reduction in carriage fees and MSOs will gain from the increased volume of business they get, both in terms of carriage of channels and the enhanced addressable subscriber base.”

At present, cable operators carry 70-80 channels in the analogue mode. TRAI has directed MSOs to carry 500 channels from January 1, 2013. While carriage fee per channel will reduce with the “must carry” provision specified by the regulatory body yesterday, revenues from carriage of channels will go up due to the increased business, said multi-system operators.

Deepak Jacob, general counsel and head of regulatory affairs, Star India, said, “Carriage fees came into being because of artificial constraints in bandwidth. With TRAI mandating MSOs to carry 500 channels from January, market forces will come into play and carriage fees will come down. Cable operators will not be able to deny access to broadcasters. Additionally, the regulatory body has noted that carriage fees should be determined and charged by MSOs in a uniform, non-discriminatory and transparent manner, which will particularly benefit smaller broadcasters who till now did not have much bargaining power.”

About 50 per cent of the revenues made by a multi-system operator come from carriage and placement fees. The carriage fee market grew by 25 per cent to Rs 1,600 crore in the last financial year. Industry observers have said with digital addressable systems being put in place from July this year, subscription revenues would increase to three-quarters of the consolidated revenues of MSOs by December 2014.

The Broadcasters Association (NBA), however, criticised the TRAI order, saying the notification has legitimised the very practice they had hoped would be stopped. “TRAI's new notification has actually legalised the practice of carriage fees and given distributors the freedom to unilaterally set the amount of carriage fees broadcasters must pay. This unfairly penalises broadcasters and threatens the very survival of the broadcasting industry,” said Annie Joseph, secretary general, NBA.

The Cable & Satellite Broadcasting Association of Asia (Casbaa) presented a contrarian view. “Though there may be criticisms, TRAI has attempted to ensure fair play for all stakeholders, including consumers and the government. The fine prints are still being studied, but TRAI has tried to set boundaries within which business can be transacted in a transparent way. In the long run, tariffs should be left to market forces,” said Anjan Mitra, executive director, Casbaa.

Devendra Parulekar, partner, Ernst & Young, said, “If broadcasters and cable sit down and negotiate appropriate revenue share arrangements, the need for carriage fees may not exist. A regulator should ideally lay down the ground rules of a sector; and so long as any stakeholder’s interests are not being adversely impacted, not intervene or determine prices or control carriage costs and fees.”

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First Published: Wed, May 02 2012. 00:18 IST
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