NTO 2.0 amendment: Beginning of a new friendship between TRAI & broadcasters?

The two sides have been at loggerheads ever since the regulator came out with the first amendments to the NTO in January 2020

by Javed Farooqui
Published - November 23, 2022
5 minutes To Read
NTO 2.0 amendment: Beginning of a new friendship between TRAI & broadcasters?

The amended new tariff order (NTO) issued by the Telecom Regulatory Authority of India (TRAI) on Tuesday will, it seems, finally put an end to the acrimonious relations between the sector regulator and the pay broadcasters. The broadcast sector is yet to fully recover from the after-effects of the pandemic with subscription and advertising revenues remaining under pressure due to a variety of factors.

In the amended tariff order and regulation, TRAI has gone back to the maximum retail price (MRP) cap of Rs 19 for a channel to become a part of the bouquet while replacing the twin conditions with a new clause that caps bouquet pricing at 45% of the sum of a la carte rates of all the channels in a bouquet. A source in the broadcasting sector said that TRAI has gone back to the NTO 1.0 when the price cap was Rs 19 and the linkage between a la carte and bouquet was not prescribed since the 15% discount cap on bouquet was set aside by the Madras High Court.

Indian Broadcasting and Digital Foundation (IBDF) President and Disney Star Country Manager & President K Madhavan praised TRAI Chairman PD Vaghela for taking the collaborative route to deal with the NTO 2.0-related issues.

“NTO 2.0 is the outcome of the strong collaboration between industry and TRAI under the leadership of Dr. Vaghela. Rather than pursue a litigative approach to address pending demands, our approach of engaging in constructive dialogue has allowed us to make strong progress in creating a more conducive environment for the industry on the pricing front. We remain confident of moving to an environment of regulatory forbearance," he stated.

Speaking at the CII Big Picture Summit recently, TRAI chairman stated that the regulator is open to tariff forbearance provided the stakeholders in the broadcasting value chain work in a cohesive manner. TRAI has not fixed any price caps for channels that are offered on a standalone basis or outside the bouquet.

In its amended policy, TRAI has stated that the discount offered as an incentive by a broadcaster on the MRP of a pay channel shall be based on the combined subscription of that channel both in a-la-carte as well as in bouquets. The distribution fee and discounts offered by a broadcaster to the DPO remain capped at 35% of the MRP of an a la carte channel or a bouquet.

While welcoming the changes brought about by TRAI, TMT Law Practice Managing Partner Abhishek Malhotra said that the clause about the discount offered as an incentive to the distribution platform operator (DPO) is tricky.  "I would say that most of the demands of the broadcasters seem to have been met. However, a discount offered as an incentive by a broadcaster on the MRP of a pay channel shall be based on the combined subscription of that channel both in a-la-carte as well as in bouquets. This part is a little tricky since it is unclear how this will play out," he noted.

Concurring with this view, a senior official with a leading cable TV company noted that this clause will increase the regulatory burden for the DPOs. He added that TRAI should now look into the demands of the DPOs like removing the cap on network capacity fee (NCF), parity in offering discounts to customers at the retail level, and applying the 60% discount on NCF to broadcasters for pay channel prices for Multi TV connections among others.

The TRAI is expected to come out with another consultation paper to look into the issues faced by the DPOs and local cable operators (LCOs).

According to a TV distribution executive with a leading media network, the amendments will end the uncertainty that persisted for the last three years and will help broadcasters grow their subscription revenue. He also stated that TRAI has tried to balance the interests of all the stakeholders by extending distribution fees and discounts to bouquets.

"TRAI has done the right thing by removing restrictions on bouquets as 80-90% of consumers subscribe to bouquets. It's in the interest of DPOs to sell bouquets. After all, content bundling is happening in the OTT space also. As broadcasters, we have not been able to increase prices for the last three years. Consumers have been getting content at the same price while the inflation-linked price of all the commodities has gone up. It's time for the industry to work together and increase the ARPU (average revenue per user). It will help DPOs also," he averred.

The High Court had upheld TRAI's NTO 2.0 barring the second twin condition. The regulator had brought twin conditions to bring linkage between a la carte pricing of a channel and bouquet pricing. The then dispensation at TRAI had accused the broadcasters of limiting consumer choice by pushing bouquets through huge discounts. The idea behind the Rs 12 MRP cap was to make a la carte offering affordable.

The amended NTO was notified on Tuesday after a long-drawn consultation process that lasted over six months. TRAI has been holding a series of meeting with stakeholders to get the NTO 2.0 rolling. After multiple postponements, the NTO 2.0 will finally roll out on 1st February 2023.