This is the second attempt by TRAI to cut channel prices

Discovery Communications, India’s biggest provider of infotainment content, has taken broadcasting regulator TRAI to the Delhi High Court for the second time in three years for trying to bring down prices of individual TV channels.

TRAI had earlier this month announced a move to force channel owners to bring the prices of their individual channels in line with the prices of their channel packs.

At present, consumers who try to buy individual TV channels have to pay two to three times more compared to buying entire bouquets or packs.

TRAI, in its consultation paper, pointed out that because of the policy of broadcasters to make individual channels very costly, TRAI’s earlier move to bring choice to consumers and declutter cable and DTH networks had failed.

TRAI said because of the high prices charged for individual channels compared to packs, consumers do not have any real option even now, and choice of activating individual channels was “illusory”.

Discovery Communications has taken issue with the above stand, and has dragged the regulator to court, saying the move to slash channel prices “clearly lacks objectivity, transparency and fairness of approach”.

Discovery Communications accused TRAI of making the latest move “with a pre-meditated approach” that seeks to blame channel owners for the alleged lack of choice faced by consumers.

Discovery Communications also said that TRAI seemed to be under the impression that its job was to reduce the price of TV channels. But, pointed out the company, its job was to work for the betterment of the industry as well.

It also alleged that the consultation was just a ceremony, and TRAI has already made up its mind to bring down individual channel prices in line with pack prices.

“..the impugned consultation paper issued by the respondent [TRAI] evinces a pre-determined mind / pre-meditated approach of the respondent with respect to the broadcasters, which defeats the very purpose of such consultation exercise, thereby rendering the entire process an idle ceremony.”

Discovery Communications also called TRAI’s new consultation paper on the subject “non-transparent, unfair, motivated and marred by arbitrariness, in as much as the bias of the respondent [TRAI] towards the broadcasters is patent on a bare perusal.. the respondent [TRAI] has approached with a closed-mind at the state of consultation itself.”

LEGAL TANGLE

Discovery Communications also made repeated references to a judgement by the Madras High Court that favored the current stand taken by the company.

The judgement by one of the judges in the Madras High Court last year had echoed the arguments of Discovery Communications. In a related case, and somewhat surprisingly, one of the judges of the Madras High Court had struck down a TRAI rule that prohibited broadcasters from making individual channels very expensive in comparison to their pack-prices.

The observation of the Madras High Court came in a case in which Star India had challenged TRAI’s authority to make rules and regulations on the pricing of TV channels.

Star India lost that case, as the Madras High Court upheld TRAI’s authority to make laws on TV channels and their pricing, but it nevertheless had far-reaching impact on the sector.

Star India, in its Madras High Court petition, had not challenged the merits of the rules formed by TRAI, but had challenged TRAI’s right to make such rules.

In the words of a judge, Star’s “challenge [in the Madras High Court] to the jurisdiction of TRAI is predicated on one core issue and that one core issue is that the jurisdiction of TRAI to regulate and fix tariff is limited to carriage or ‘means of transmission’ and therefore it cannot be extended to ‘content’ which according to the writ petitioners is completely and comprehensively governed by the Copyright Act, 1957.. To further simplify, it is the case of the writ petitioners that TRAI can regulate ‘carriage’, but not ‘content’.”

On the above question, the Madras High Court sided with the TRAI, and said TRAI has the power to regulate the prices of channels and so on.

Unfortunately for TRAI, one of the judges went beyond the question of TRAI’s jurisdiction as raised by Star in its petition, and said that a key number contained in the new regulation — which would have prevented broadcasters from making individual channels expensive — was ‘arbitrary’. This was done even though Star had not challenged the merits of the rules per se, but was challenging TRAI’s authority to make such rules in the first place.

Unhappy that the Madras High Court had turned down its core argument, Star appealed in the Supreme Court.

Under normal circumstances, TRAI too should have appealed in the Supreme Court, given that one of the judges of the Madras High Court had held one of the key rules ‘arbitrary’ in spite of the fact that no such plea or request was made by Star.

However, instead of filing an appeal against the above observation, TRAI was content to respond to the appeal filed by Star India, which turned out to be a mistake.

The Supreme Court, in late 2018, dismissed Star India’s appeal and upheld TRAI’s right to form rules and regulations in this matter.

Giving relief to TRAI, the Supreme Court also made observations in its judgement that high cost of individual channels in relations to bouquets had led to ‘perverse pricing’ in the market and affected consumer choice.

“In the process, the public ends up paying for unwanted channels, thereby blocking newer and better TV channels and restricting subscribers’ choice. It is for this reason that discounts are capped,” the Supreme Court noted in its judgement.

However, for TRAI, that was hardly the end of its troubles, as it was still not clear whether the Supreme Court had also quashed the Madras High Court judge’s observation against the rule on individual channel pricing.

To get clarity, TRAI filed yet another clarification request in the Supreme Court, but the court dismissed the request, pointing out that neither TRAI nor Star had challenged the observation of the judge, and therefore there was no need to rule upon that subject.

This forced TRAI to implement the New Tariff Order without the key provision.

In the absence of the key provision, broadcasters such as Star and Discovery made individual channels costly when purchased singly, compared to when they are purchased in packs.

This is a tactic used by broadcasters across the world to ensure that consumers, cable networks and DTH operators find it uneconomical to buy one or two channels, and will instead be forced to buy all of their channels in the form of packs. These packs usually come with so-called ‘laggard channels’ or ‘junk channels’ which few people would buy otherwise. The strategy prevents the emergence of new competitors as these junk channels eat up all the capacity of cable and DTH platforms. With limited space, new channels cannot be launched easily, thus preventing competition.

Such an implementation led to complaints from consumers as well as cable and DTH operators.

In response, TRAI has now come up with a second consultation paper aimed at reintroducing the rule struck down by the Madras High Court judge, and facilitating true choice.

In the latest consultation paper, TRAI has repeated its original arguments — upheld by the Supreme Court, but rejected by the Madras High Court judge — to justify its move to reintroduce the rule.

However, Discovery Communications, in its petition, argued that because the rule was struck down by the Madras High Court judge, it cannot be casually reintroduced.

“The impugned consultation paper has set out the same arguments that had been placed before the Hon’ble Madras High Court by the TRAI and rejected. Therefore, the effort on the part of the respondent [TRAI] to re-introduce the same issue is clearly an effort to override and disregard the findings of the Hon’ble High Court of Madras..” Discovery Communications noted in its latest petition.

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