Opinion

DTH sector tangled in regulatory web

Harit Nagpal | Updated on November 15, 2021

From licence fee and New Tariff Order to GST rate and pricing, the rules don’t favour DTH operators

The knots that have tied up the media industry over the years need to be untangled.

According to the quarterly Pay TV subscriber numbers published by TRAI, the industry that was growing fast, has started to stagnate.

Pay TV in India started over two decades ago via cable, that was analog and unlicensed. Then came DTH, which was digital, licensed by the government with a licence fee of 10 per cent. Subsequently cable, too, was digitised and required a licence, however without any licensc fee, for reasons no one has been able to explain coherently.

While every feature film has to obtain a censor certificate, TV content, because of its volume, is sensibly subjected to self-regulation, basis a code created between the licensor and the broadcasters. Violators are penalised and the engine works well.

As mobile broadband speeds improved, content also became available on-demand. Most content creators and all audiences remained same, yet the same self-regulation rules for content were not extended to OTT. As a result, homes with kids, watch OTT after children are asleep.

While you can watch the same content over DTH, cable or OTT, DTH is licensed, regulated, self-censored and pays licence fee, all rules apply to cable but it doesn’t pay license fee and none of these rules apply to OTT. This is Knot No. 1.

A couple of years ago, the New Tariff Order (NTO) was released, aimed at allowing customers to choose individual channels and bring down their bill, already the lowest in the world.

Prior to this, distribution platforms like cable operators and DTH negotiated fixed payouts with broadcasters, created bundles of content by genre, at prices their customers could afford and served them. Healthy competition ensured fair prices and customers were not inconvenienced.

Under NTO, every channel has a fixed price, decided by the broadcaster, applicable across platforms. Broadcasters provide bundles of channels, comprising many genres, which the distributors further re-bundle. The plan does not recognise the fact that customers watch genres, and not broadcasters. This makes creation of a sensible pack difficult for customers who wish to subscribe to a genre. This is Knot No. 2. Every distribution platform is entitled to the same margin and incentive. Every broadcaster’s incentive plan rewards distribution platforms for reach of their channels, which the broadcasters price, customers choose and the distributors only host and facilitate. This is nothing short of preposterous. This is Knot No. 3.

However, these measures are only applicable to pay TV channels on cable and DTH platforms. Customers can watch some of these channels for free on DD Free Dish, and almost all channels at much lower prices on broadcaster apps via OTT, often before TV. This is Knot No. 4.

The government runs DD Free Dish, a service that carries 20-plus pay TV channels, that subscribers pay for on cable and DTH, in addition to DD, all for free. If entertainment of the masses is that important an objective, wonder why the pay TV category is placed in the high 18 per cent GST bracket. In addition, DTH, which serves the remotest village, where cable can’t reach, is levied a 8 per cent licence fee. This is Knot No. 5.

Differential pricing

Content watching is different from buying a soap or a toothpaste, where manufacturers decide the price. Movie theatres have historically been allowed to price their seats differently for the same movie, depending on the paying capacity of the neighbourhood, quality of the hall or seats, distance from the screen and the time of day. From vegetable vendors to airlines, everyone reprices their offerings in response to demand and competition. This does not apply to TV content. This is Knot No. 6.

The second order of NTO, released a year later, directed the distribution platforms to discount the second and third connections by 60 per cent. This dented DTH margins even further and was akin to directing that a second seat on an airplane or the second child in a school would pay half. This is Knot No. 7.

Distribution platforms are entitled to a network carriage fee (NCF) for the infrastructure they create and the bandwidth they provide. However, no provision for an increment, to account for inflation, has been created for NCF. This is Knot No. 8.

Manufacturers with exclusive content, instead of hypercompetitive distributors, deciding consumer prices would not force the passing of benefits of scale to the customer. Stringent and complex NTO provisions do not incentivise distributors to improve their service standards.

Net-net, customers complain that they are paying much more than they were, broadcasters have been in court against the regulator for over two years, the industry is attempting it’s first price hike after three years, and distribution platforms are stagnating.

Efforts need to be made to untangle these knots, one at a time, gently. If we don’t, every stakeholder, including the government, stands to lose.

The writer is MD and CEO, Tata Sky

Published on November 14, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like