Pricing power
After doing course correction, Trai needs to free tariffs
The move by the telecom and broadcasting sector regulator, the Telecom Regulatory Authority of India (Trai), to amend the new tariff order (NTO) 2.0 earlier in the week to restore the price cap for a television channel, which is part of a bouquet, to ~19 from ~12 earlier is a step in the right direction. In future, Trai must stay away from regulating channel prices or broadcasting platform tariffs in keeping with competitive market dynamics. In telecom, tariffs are under forbearance. Even when telcos have been bleeding in an ultra-low-tariff scenario following Reliance Jio’s entry disrupting the market, Trai rightly didn’t intervene.
In 2020, when the regulator had set a price cap of ~12 per channel in a bouquet under NTO 2.0, broadcasters and direct-to-home (DTH) broadcasters were up in arms against the decision, terming it prohibitive, resulting in the regime being put on hold several times. Such a structure was supposed to enhance affordability for consumers, but at the risk of restricting pricing flexibility for broadcasters. Typically, broadcasters get more than 90 per cent of their subscription revenues from bouquets. In fact, bouquets are a business model for broadcasters to package some less popular channels with TRP (television rating point) churners. That should not be meddled with.
At a time when traditional TV broadcasters are facing stiff competition from over-the-top (OTT) platforms such as Netflix and Amazon Prime, the Trai decision to loosen its grip on tariffs is expected to help keep a balance between advertising and subscription revenue. Over-regulation in tariffs could have thrown the already distressed broadcasting sector in further disarray, forcing firms to disproportionately depend on advertising revenues.
It’s hard to understand why the regulator must get into finer commercial details such as what and how a-la-carte or standalone channels and bouquets must be designed and priced even if the objective is to be consumer-friendly. Three years ago, Trai had explained that the order was being imposed “to promote orderly growth of the sector and to balance the interests of service providers and to safeguard the interest of consumers’’. And after the latest order, Trai again said the amendments were being notified to protect consumer interests. While it’s Trai’s responsibility to protect those, it must not lose sight of its stated policy of light-touch regulation.
The regulator has now announced that channel bundle discounts would be capped at 45 per cent and that forbearance on the maximum retail price of TV channels in the a-la-carte format will continue when NTO 2.0 becomes effective in February 2023. Broadcasters had earlier argued that limiting the discounts on bundles would force them to hike prices of smaller channels. In effect, that would have meant consumers’ TV bill going up anyway. Since the cap on discount remains, Trai has not achieved the task of making the new tariff structure truly consumer-friendly.
It’s true that broadcasting platforms and TV channels have often hoodwinked customers with an eye on their own revenues. To check any unfair practice, the regulator must act and also direct broadcasters to be transparent about their offers and tariffs. But it’s not for the regulator to thwart industry dynamics. Like other businesses, platform owners and broadcasters have the right to do mutually negotiated agreements. The room for negotiations must not shrink.