A botched rollout of TRAI tariffs could hurt NDA in elections

The curious case of TRAI’s implementation of the its 2017 Tariff Order, which threatens to add yet another negative factor for NDA in upcoming polls, can be an excellent case study of what ails India’s legal and regulatory system.

The saga started almost two years ago with four companies — Star India, Discovery Communications, Tata Sky and Airtel Digital — legally challenging a move by India’s broadcast regulator to make TV channel pricing more transparent.

While Star India filed its challenge in the Madras High Court, the others chose the Delhi High Court.

Shortly after, in May of 2017, the Supreme Court directed the Madras High Court to hear Star’s matter and resolve the case within four weeks.

However, instead of four weeks, the Madras High Court took nearly 10 months, and still delivered an inconclusive 1:1 verdict.

The matter was therefore referred to a third judge to break the logjam. The third judge, after two more months, held that the TRAI order was valid and dismissed Star’s petition.

This was again challenged by Star India in the Supreme Court in mid 2018.

The Supreme Court dismissed Star’s appeal in October 2018, and said that Star’s original petition in front of the Madras High Court was not maintainable, and is dismissed as well.

While doing so, the Supreme Court also upheld TRAI’s arguments that pricing individual channels high, while making channel packs cheap, resulted in “perverse pricing of bouquets vis-à-vis individual pay channels.”

“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.

At a glance, it was a clear victory for TRAI as the Supreme Court had clearly sided with it and upheld its powers to stipulate that channels could not be priced substantially higher when sold individually. In other words, channel prices had to remain largely the same, whether sold individually or in a pack.

As expected, TRAI announced that its 2017 rules would come into effect from Dec 29, 2018.

At this time, some broadcasters took the stand that the Supreme Court judgement had not upheld all of TRAI’s rules, especially its power to impose price parity.

In what was to prove to be a major misstep, the TRAI responded by filing a clarification petition in the Supreme Court asking it again if it had indeed upheld the regulator’s right to impose pricing parity between channels and packages.

Even as this clarification petition was pending, all broadcasters announced channel and pack prices that were clearly in violation of the original 2017 rules.

TRAI’s 2017 rules had said that channels should be priced at largely similar levels, whether they are sold individually or in a pack. According them, the individual price of a channel cannot be higher by more than 18% compared to its price in a pack.

However, broadcasters unveiled channel prices that were 100%-200% higher than pack prices. In other words, if they were selling a channel at an effective price of Rs 7 or 8 in a pack, there charging Rs 22.41 when it was being sold individually.

STICKER SHOCK

The prices of channels announced by the broadcasters came as a shock to many customers. Most of the popular channels were priced at Rs 22.42 per month, including taxes.

So, a customer who wanted to watch 50 popular pay channels would have to shell out Rs 1,121 per month just by way of pay channel costs.

Instead of taking action against the broadcasters, TRAI waited for the Supreme Court to respond to its request for clarification.

However, last week, the Supreme Court expressed its displeasure at TRAI again coming to it for clarification. The judges pointed out that the judgement was very clear, and that they had upheld TRAI’s 2017 regulations in its entirety.

Moreover, they pointed out, TRAI should have sought for clarification immediately if at all there were any doubts.

In other words, there was no doubt now that TRAI had the full right to impose pricing parity between channel prices and pack prices. Following this, TRAI withdrew its petition.

TOO LATE TO CHANGE?

So, for the second time, TRAI was proven right, and was again assured that its 2017 regulations putting limits on individual channel prices were the right way to go.

But now the TRAI faced a different problem.

While it was waiting for the court to take up the clarification petition, most of the broadcasters announced their channel prices, and that too, without taking into account the restrictions imposed in the 2017 order.

According to industry and legal experts, TRAI can still salvage the situation by now sending all broadcasters a notice that they must bring down their channel prices in line with the pack prices, or raise pack prices if they so wish. Either way, such a divergence was against the 2017 regulation.

Such a move would immediately reduce the prices of popular channels from around Rs 22.41 per month to about Rs 7 or 8 per month.

Hence, a person buying 50 popular channels under the new tariff scheme will have to shell out only Rs 350-400 per month in the form of pay channel prices, instead of Rs 1,121 per month.

Yet, for almost a week, the regulator has kept mum.

This has, not surprisingly, led to much anger and agony among ordinary consumers of cable and DTH services, as well as the lakhs of people employed in the cable and DTH industry.

If channels continue to priced at Rs 22.41 per month, the cable and DTH operations will face a crisis as consumers will not be able to afford such rates.

Even if consumers go for packs, low-end subscribers would still end up shelling out more than Rs 500 per month to watch the channels they are getting at Rs 200 per month now.

In addition, the high rates demanded for individual channels have made life difficult for the cable and DTH industry.

They can no longer offer topic-based packs — such as movie packs, sports packs and music packs, and have been reduced to simply reselling broadcasters’ packs.

This has angered cable operators and DTH companies.

The issue has now taken a political turn, with the popular anger being at least partially channeled against the ruling party. Many angry citizens, particularly those that depend on the cable and DTH industry, have started calling this a ‘scam’ by the ruling government to benefit ‘big businesses’ at the expense of ordinary citizens.

Hence the question that the industry and consumers are facing now is — will the TRAI act before it’s too late? Or will it wait for the cable and DTH industry to go into a shock on February 1?

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