Thursday, 10 October 2013

DAS Regulations need a Relook

TRAI issued a path-breaking consultation recently to regulate the channel aggregators and distribution agents. A mere perusal of comments given by the Pay Channel Broadcaster / Aggregators  tells us that to continue misusing their dominant position in the market they continue to harp on the problems of analogue cable era. They have made frivolous accusations to a point where they are themselves making contradictory comments, accusing their own people. Definitely this speaks of the topsy turvy regulations that have brought the industry to a stand still. Result is that more and more cases are being filed in the courts and everything is being stayed. Cable TV is a service that depends solely on content that the distribution networks transmit, irrespective of the technology used. There are analogue cable, digital QAM cable, IP, HITS, DTH, mobile TV and streaming video to deliver TV channels. No operator wants to invest unless he is assured of content that would give him revenue and make his business model viable.
Hits Operators and independent MSOs have lost crores of investments in the business trying to get content from these aggregators. Many have lost their business to these large players due to the discriminatory tactics of the aggregators owned by the ‘Pay’ Broadcasters. Result is that there is hardly any benefit of the massive exercise of digitisation undertaken by the government. This requires a relook at the current DAS regulations.
Government’s License Policy to sign ‘Pay’ content first makes Aggregators Dominant : Government’s license policy requires MSOs to sign the content agreements first and then get the license. Content agreements are not signed because aggregators first ask operators to invest crores in the infrastructure and then ask for the content. Thus everything from license to providing a Cable TV/DTH/HITS service depends on aggregators who control the price and method of distribution of all popular channels.
Not only the above, after the service starts all LCOs become dependent on the MSO partners of these aggregator companies for their monthly revenue and even future existence.
Differentiate ‘PAY’ Channels from FTA channels : It is the ‘PAY’ Channel Broadcasters who have created the unbalance in the industry through various means including Bouquets, Aggregators, High cost of a-la-carte etc. It is very important for the Regulator to differentiate the ‘PAY’ channels from FTA channels. It is the first time that people will experience addressability and they must be given ample time to adjust with the new system. This also requires to change the definition of a ‘Pay’ Channel that for some reasons has been adopted in the DAS law, probably on the instance of the ‘Pay’ Broadcaster Lobby. In stead of-
“Pay channel means a channel for which subscription fee is to be paid to the broadcaster by the MSO operator and due authorization needs to be taken from the broadcaster for its re-transmission on cable.”
It should be-
“Pay channel means a channel for which a pre-declared subscription fee is to be paid to the broadcaster by the Subscriber and due authorization needs to be taken from the MSO for its reception on cable signing a consumer authorisation form (CAF).”
Broadcasters’ definition also to be changed : TRAI must change the definition of a ‘Broadcaster’ to exclude any ‘Authorised Agent’ as there is no scope for an Agent in the DAS scheme. Inclusion of agents reeks of corruption like in many other industries where ‘Agents’ have resulted into big scams involving crores of rupees like in Defence procurements, Heavy equipment procurements etc.
Monopolies Causing Heavy Damage to the Structure of the Industry : In such an unstable and monopolistic environment how can any government policy succeed? The disturbance caused in the industry by the aggregators will lead to mass unrest and disruption of services, not only amongst the small MSOs, LCOs and broadcasters but also the consumers who are yet to face the hazards of the monopolistic regime for times to come without anyone gaining anything from government policies.
Damage done to the industry by the aggregators sabotaging the government’s ambitious scheme of digitising the Cable TV industry can be best judged from the very recent order of Honourable TDSAT in the case of NSTPL (JAIN HITS) Vs Union of India and others in which the company in line with Mrs Ambika Soni’s dream of HITS technology helping thousands of small, self employed Cable Operators to adopt digital technology and continue to earn their livelihood, decided to provide HITS service having received their license in 2003. Company applied for content with Media Pro in March 2012 but could not get the content till date. It is only now that TDSAT has ordered MediaPro to provide its content and also pay a penalty of Rs 50000/-. Media Pro used all delay tactics legal and otherwise to deprive Jain HITS of the content in Phase I and Phase II of digitisation so that this company was unable to get any business and as known to all, the market has been captured by the National MSOs owned by the companies who also own Media Pro.
This also proves the point made by TRAI Chairman during the open house discussion on 12 Sep 2013 that as long as these agents/ aggregators are owned by large pay TV broadcasters themselves, cable TV market will remain disturbed and no progress will be made except the industry moving into the hands of their supported MSOs and DTH companies.
Pay Channel Bundling should not be allowed : This has been amply clarified by Honourable TDSAT in the case of ASC Enterprise Vs MTV ( TDSAT Judgement dt 10 Feb 2006 in Case No MA 225 of 2005).

The Court noted in Para 22 that :
“22. We have gone through the pleadings and carefully considered the arguments.   While it  may be true that the bundling of channels has not been addressed in the Regulations,  if we read the language of Clause 3.2 a duty has been cast on every broadcaster to provide signals on request, on non-discriminatory basis to all distributors of TV channels and clearly Petitioner No.1 as Direct to Home Operator comes in the category of distributor.  Under Clause 3.3 a broadcaster like Respondent No.1 can provide the signals through a particular designated agent or intermediary. However a responsibility is cast on the broadcaster that when signals are provided through a agent or intermediary, the broadcaster is to ensure that the agent/intermediary acts in a manner consistent with the obligations placed under the regulations and it should not be prejudicial to competition and a time limit has been provided for the agent to respond to the request of the distributor.”

Further the Court noted that :
“For the reasons stated above we are of the opinion that an agent or a distributor of multi-broadcasters cannot compel the receiver of signals to compulsorily receive a multi-broadcaster bouquet.  If a receiver of signals demands a bouquet of any single broadcaster of which the supplier of bouquet is an agent or distributor, he shall give such bouquet of a single broadcaster, if so desired by the receiver of the signals.”
Many such judgements are already existing that restrict the role of the aggregator as an agent. In fact TRAI is revisiting its own regulation again through the present proposed regulation. 
New Regulations must be adopted within three months- No Extensions : Not more than three months (90 days) time should be given to the aggregators as proposed by TRAI to adopt the new regulations of ‘bouquet making’ because already they have enjoyed a free hand for more than one and a half year of digitisation and many years in analogue regime.
No Exclusive Distribution Agents :  Regulations should also ban employment of exclusive distributor /agent of a broadcaster for the whole country.
This has also been laid down by the TRAI in its Interconnect Regulations of 2004 as noted by TDSAT in the judgement dated 10 Feb 2006 in the case of ASC Enterprise Vs MTV referring to the Supreme Court ruling in the case of Sea TV Vs Star India as given below :
“…………………..Clause 3.1 of the Regulation reads thus:-
 No broadcaster of TV channels shall engage in any practice or activity or enter into any understanding or arrangement, including exclusive contracts with any distributor of TV channels that prevents any other distributor of TV channels from obtaining such TV channels for distribution (emphasis supplied”.
This clause makes it mandatory for the broadcaster not to engage in any practice or activity of entering into any understanding or arrangement including exclusive contract with any distributor of the channels.  This clause also prevents the broadcaster from engaging in any manner that prevents any other distributor of the TV channels from obtaining such TV channels for distribution.  The language of this clause is quite clear and mandatory.  Keeping in mind the fact that the definition of distributor includes an MSO it is not open to a Broadcaster to appoint any distributor or MSO, an  exclusive agent and if done it would run counter to the prohibition of exclusivity contemplated in clause 3.1 of the Regulation…………………”
If an agent is exclusive then there is no difference between the distribution department of a broadcaster that used to distribute content exclusively before aggregators were formed. The only difference is that this aggregator/ agent is also the exclusive agent of many such broadcasters and makes his own bouquets mixing all channels in order  to exercise  more control and bargaining power on the Service providers, raise the prices to earn its own revenue using discriminatory practices. This has been emphasised by TDSAT in the NSTPL case as follows :
“The respondent is in arrangement with primary broadcasters of around 70 TV programmes to represent them collectively (and/or separately) and to enter into agreements on their behalf with other “Service providers”, broadcasters, MSOs, LCOs. Mr. Srinivasan, learned counsel for the petitioner aptly described the respondent as “the commercial limb” of the broadcasters.” 
“It is easy to imagine that being represented in a collective, the broadcasters get bargaining power far greater than they would have otherwise wielded on their own.” 
TDSAT has even referred to the TRAI’s explanatory memorandum to the draft of the Register of Interconnect Agreements( Broadcast and Cable Services) (Fifth Amendment) Regulations, 2013 as a good description of the ‘Content Aggregator’ which is as under :
“11. As on date there are around 233 pay channels (including HD and advertisement-free channels) offered by 59 pay broadcasters. These channels are distributed by 30 broadcasters/aggregators/agents of broadcasters. Of these, the four main aggregators and the number of TV channels they distribute are: Media Pro Enterprise India Private Limited – around 75 channels, IndiaCast UTV Media Distribution Pvt. Limited – around 35 channels, M/s Sun Distribution Services Private Limited – around 30 channels and MSM Discovery Private Limited – around 30 channels. 
12. One of the prime drivers for the emergence of authorized distribution agencies of broadcasters could be the fact that the analog Cable TV distribution market is too fragmented with the presence of a very large number of MSOs and LCOs thereby, posing practical difficulties for the broadcasters to deal with them individually. However, the trend observed in this market is the entry of big broadcasting houses into the business of aggregation by forming joint venture companies………. 
13. ………….. This together with the misuse of market dominance by the aggregators has led to aberrations in the market. With time, consolidation has taken place in the aggregators’ business and now the top four aggregators control around 73% of the total pay TV channel market and wield substantial negotiating power which can be, and is often misused.”
No Mutual Aggrements- TRAI should make a Standard Agreement : This industry has no standard practices in its functioning and there is no trust between the stakeholders. Thus to start with, regulations should be such that they do not leave anything to speculation and imagination leading to unnecessary litigations that prolong the process of growth rather than benefit the nation and the consumers apart from the litigants paying through their nose. For a small business owner getting into a tedious litigation becomes a question of survivability whereas large companies prefer to go to courts to delay the matters with the help of very senior lawyers who charge a ton. These large companies use litigations to gain more time and to exploit, harass and weaken the small player.
No Law Regulating the existing Registered Channels : At present, there are no laws for TV channels. Only policy guidelines exist for downlinking and uplinking of satellite channels with effect from 2006. These guidelines, although provide the basic policy, do not stand the test of the law in the courts. Even TRAI the regulator cannot take any action on them as happened in the case of implementing 10+2 Ad cap. They simply go to the courts and get a relief on any policy that is not in their favour.
a) Broadcast Bill that was to regulate the broadcasters needs to be passed as soon as possible. It is pending since 1997.
b) Registration of Pay Channels. There should be separate registration procedure for pay channels. They should pay more to the government for registration than the FTA channels as they are earning both from subscriptions and advertisements. Channels may be divided in FTA Channels, PAY Channels and Premium Channels and they may be charged differently for registration.
c) There should be a limit laid down to own TV channels by any one company. Not more than 10 channels may be owned by a group and not more than two channels in each genre or language may be the limit.
d) Presently restriction of 12 minutes per clock hour on advertisements is same for FTA and pay channels. This is unjustified. This restriction is right for FTA channels but for pay channels it should be none or not be more than 6 minutes of ads as TRAI has left them free to charge whatever they wish and they get a huge subscription from consumers. Apart from making a difference in the two types of channels, conversion from one to the other will also benefit the subscribers. If subscriber opts for FTA channel he pays less and if he subscribes a pay channel, he can freely watch the channel with less of advertisements.
e) They must declare whether they are ordinary pay channel (allowed with 6 minutes of ads but an MRP fixed by the regulator like in CAS, Rs 5/-) or ads free channel or a premium channel with no restriction on pricing.
f) Registration of Foreign Channels – These channels come to India to exploit our vast population. They sell to our people, the same content that they make and broadcast in their country, thus making double profits. Government must make these channels pay more for registration.
g) Indian Content on Foreign Channels should be mandatory – Like it is done in many European and other countries, there are restrictions on foreign channels that they must generate a percentage of their content (50% is typical) locally, it does not happen in India. We should also give downlinking permission to foreign channels, only after they agree to create 50% of their content within India.
h) Foreign Pay Channel Registration as Free to Air -   Most of the revenue generated by these foreign channels is sent out of India to their country of origin. Where as they benefit tremendously from our large population, Country does not benefit from them. In view of this, they should be registered only as free-to-air channels, at least for the first five years or till they generate 50% content in India. This will make our own content production industry also flourish.
i) Foreign Pay Channel Pricing – Foreign based pay channels should be permitted to become ‘Pay’ channels only after they have generated 50% content within India, at half the rate what is fixed for our Indian channels that generate 100% content in India.
j) Registration of HD/ 3D Pay Channels  Registration of Pay/ Premium channels/ HD Channels/ 3D TV etc should be done at a much higher registration fee than ordinary channels. Registration charges may be linked with the cost of the pay channels per subscriber or as per different subscription slabs eg. Free to Air, Rs 1-5, Rs 6-10, Rs 11 upwards etc.


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