The regulatory regime governing the distribution and broadcasting services of television channels in India has evolved significantly since 2017 and has been the subject matter of various proceedings, most notably the proceedings initiated by various broadcasters challenging the validity of the regulatory amendments.

The first significant development in the regulatory regime came through the introduction of a new regulatory framework by the Telecom Regulatory Authority of India (“TRAI”) on March 3, 2017, consisting of: (i) The Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 (“Interconnection Regulations”); (ii) the Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017 (“Tariff Order”); and (iii) the Telecommunication (Broadcasting and Cable) Services Standards of Quality of Service and Consumer Protection (Addressable Systems) Regulations, 2017 (“QOS Regulations”) (collectively “2017 Regulations”).

A. Battle with the Madras High Court and the Supreme Court: The 2017 Regulations, inter-alia, provided that the price of a bouquet of television channels offered by broadcasters or distributors should not be less than 85% of the sum of a-la-carte prices of television channels comprised in such bouquet. This effectively introduced a cap of 15% on the maximum discount that may be offered on a bouquet of channels as compared to the sum of the a la carte rates of all of the channels comprised in such bouquet.

The Interconnection Regulations and the Tariff Order were challenged by Star India Private Limited  (“Star”) before the Madras High Court. The Madras High Court, on May 23, 2018, generally upheld the validity of the Interconnection Regulations and the Tariff Order, other than with respect to the provisions imposing a cap on the maximum discount. A subsequent appeal filed by Star before the Supreme Court was dismissed on October 30, 2018, pursuant to which the Supreme Court also upheld the validity of the Interconnection Regulations and the Tariff Order. While the initiation of such proceedings did delay the initial implementation and effectiveness of these regulations, following the decision of the Supreme Court, the 2017 Regulations were re-notified in December 2018 and eventually implemented and operationalized in February 2019, albeit without the 15% maximum discount cap.

B. The 2020 Amendments: Despite the implementation and operationalization of the 2017 Regulations in February 2019, TRAI believed that certain issues were still not addressed by the revised framework of the 2017 Regulations.

TRAI therefore, on January 1, 2020, issued the following amendments to the 2017 Regulations: (i) Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff (Second Amendment) Order, 2020; (ii) Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) (Second Amendment) Regulations, 2020; and (iii) Telecommunication (Broadcasting and Cable) Services Standards of Quality of Service and Consumer Protection (Addressable Systems) (Third Amendment) Regulations, 2020 (“2020 Regulations”).

The key changes brought out by the 2020 Regulations are as follows:

1. Maximum Discounts: The 2020 Regulations have, inter-alia, re-introduced a cap on the maximum discounts on formation of bouquets in the form of the following twin conditions: (a) the sum of the a-la-carte rates of the pay channels forming part of a bouquet can not exceed one and half times of the rate of the bouquet; and (b) the a-la-carte rates of each pay channel, forming part of such a bouquet, cannot exceed 3 times the average rate of a pay channel of the bouquet.

2. Price Ceiling: The ceiling on the MRP that can be charged by a broadcaster for a pay channel forming part of a bouquet has been reduced from INR 19 to INR 12. Further, the MRP of a channel should not be more than the MRP of any bouquet containing that channel.

3. Bouquet Formation: The number of bouquets of pay channels offered by a broadcaster should not be more than the number of a-la-carte pay channels. Also, the earlier requirement on the Distribution Platform Operators (“DPOs”) of providing at least a bouquet of free-to-air channels has been done away with.

4. Network Capacity Fee: DPOs have been permitted to declare different NCF for different regions within their service area. Further, DPOs are permitted to offer up to 200 Standard Definition television channels in the NCF of INR 130 per month, with a cap of a maximum of INR 160 per month for higher number of channels. Moreover, channels declared mandatory by the government will not be counted in number of channels in the NCF.

5. Multi-TV Households: DPOs are permitted to offer discounts on the NCF charged for multiple TV connections in a household, provided that the NCF, per month, for each additional TV connection, beyond the first TV connection in a multi TV home should not exceed 40% of the declared NCF.

6. Discounts on NCF: DPOs are now permitted to: (a) offer discounts on long term subscriptions (i.e. subscriptions having a duration of 6 months or more for which an advance payment has been made by the consumer); and (b) offer promotional schemes to subscribers on distributor retail price per month of a-la-carte pay channels available on the DPOs platform.

7. Reporting Requirements: Any change in name, nature, language, MRP of channels and/or bouquets per month, or composition of bouquets must be reported to TRAI by broadcasters at least 45 days before such change and must be published on the broadcaster’s website.

C. Impact on Stakeholders

1. Broadcasters: Broadcasters are required to bear significant revenue risk, while faced with stringent and onerous conditions such as maximum pricing, restrictions on bundling, minimum distribution fees, promotional offers etc. The 2020 Regulation will impact the broadcasters’ ability to maximum value for the channels, and provide distributors with a lop-sided advantage as compared to broadcasters. Due to the restrictions imposed on the MRP chargeable and the discounts which may be offered, there is essentially a reduction in the possibility of cross subsidization, which are the key elements relating to the utility of offering bouquets. The ability of a broadcaster to push for a higher reach for niche channels significantly decreases as a result of the pricing restrictions.

The visibility of small or relatively young channels which had previously been augmenting their reach as part of discounted channel bouquets may be negatively impacted due to re-evaluation of business models in the field of broadcasting and distribution of visual media.  This is likely to also have a knock on effect on the broadcasters ability to pay for and source quality content, and therefore on the potential revenue streams for content producers.

2. Distributors: The 2020 Regulations do not seem to have had as severe an impact on distributors as compared to the broadcasters. TRAI, via the amendment, has now mandated the maximum NCF to be INR 130 for 200 channels (100 channels in the 2017 Regulations). However, the explanatory memorandum to the 2020 Regulations indicates that distributors had a practice of providing more than 100 channels for NCF of INR 130 prior to the 2020 Regulations. The TRAI has thus, amended the 2017 Regulations keeping in mind the market practices of the distributors. Moreover, distributors are now permitted to offer discounts and promotional schemes, which is also a favourable change as for as distributors are concerned.

The validity of the 2020 Regulations have been challenged before various high courts by way of several writ petitions filed by a number of stakeholders, including broadcasters, distributors and content producers. The grounds for such challenge include restrictions on freedom of speech and expression and manifest arbitrariness. A number of these writ petitions have been filed before the Bombay High Court.  While the 2020 Regulations were to come into effect on and from March 1, 2020 (barring a few provisions that came into effect earlier), as in the case of the 2017 Regulations, the outcome of the various proceedings that are pending before the courts may have an impact on the timing for implementation of such proceedings, as well as the form and manner in which the 2020 Regulations are eventually operationalized.

Authors:

Roxanne Anderson, Partner 
Saloni Bhandari, Associate
Aditi Shukla, Associate
Priyanka Bhandari, Associate