Over the last three weeks, India’s TV news channels have obsessed over actor Sushant Singh Rajput’s death and the subsequent investigations into it. Each night on prime time, anchor after anchor dissects every small detail of Rajput’s life and his partner Rhea Chakraborty. It is no secret that news channels are fixated on this because it fetches them high TRPs, a tool that judges which programmes are watched the most. TRPs also determine the fate of a channel’s advertising revenues. Sensationalist news leads to high TRPs which, in turn, results in more advertising revenues.
According to a recent report by Koan Advisory, nearly 70 per cent of broadcasters’ revenues accrue from advertising. This dependence precipitates a vicious cycle of content creation that aims to maximise eyeballs rather than optimise quality. The lack of balance between subscription and advertising revenues stems from the manner in which the Telecom Regulatory Authority of India (TRAI) has governed TV broadcasting since 2004. The report added that TRAI’s regulation is characterised by a lack of expertise, which manifests in an inexplicable urge to micromanage the competitive content market of over 900 TV channels.
New Regulatory Framework: Bone of contention
In March 2017, TRAI notified three rules – interconnection regulations, quality-of-services regulations and a tariff order. Together, they are commonly known as the New Regulatory Framework (NRF). After a public consultation that lasted five months, TRAI finalised the NRF with three primary objectives — diverse and quality content on TV, transparency in the business practices of content providers and distributors, and an equitable tariff for consumers to pay. Soon after, direct-to-home (DTH) operators Tata Sky and Bharti Telemedia Ltd (Airtel), filed petitions in the Delhi High Court, challenging the validity of the NRF. Tata Sky argued that TRAI’s actions were “excessive and without jurisdiction”. TRAI went ahead and implemented the NRF in March 2019. In January 2020, TRAI made further changes to the regulatory framework, which were again challenged by broadcasters in the Bombay High Court.
Channel pricing is the key issue that the Bombay High Court verdict will hope to resolve, and affects broadcasters and viewers alike. The NRF initially prescribed that broadcasters/distributors may only include channels priced below Rs 19 in channel bouquets. In the January 2020 amendment to the NRF, TRAI reduced this cap to Rs 12 per channel per month. For broadcasters, this restricts the revenues they can earn from consumers and makes them more dependent on advertising. Without price restrictions, broadcasters would have the commercial freedom to produce differentiated content for diverse consumers.
Another contentious issue is the limit set by TRAI on discounting channel bouquets. Under the NRF, TRAI had prescribed that the discount on these cannot exceed 15 per cent of the sum total cost of channels in the bouquet — a rule the Madras High Court struck down. TRAI reintroduced it in 2020 and revised the limit to 33.3 per cent. The regulator further prescribed that the price of an individual channel in a bouquet, shall not exceed three times the average price of all the constituent channels. This would concentrate advertisement revenues in a few channels. Consequently, broadcasters would have to champion one channel and seek to maximize advertising revenue from it.
TRAI’s micromanagement prevents broadcasters from passing on the benefits of selling bouquets to consumers. According to Dr. Jeffrey Eisenach, an expert who has worked with regulatory bodies in the US, UK, Canada and the Caribbean, market-based bundling of channels facilitates efficient pricing. It subsumes transactions and information costs of multiple channels and exposes consumers to new and niche ones, by including them in a bouquet that has popular channels.
A penchant for overregulation
In 2004, a government notification expanded the scope of ‘telecommunication service’ in the TRAI Act, to include broadcasting. Ever since, the TRAI has regulated the TV market and governed business modalities like channel pricing. A study of 10 countries conducted by Indian Council for Research on International Economic Relations (ICRIER) found that only China and India regulate channel prices. The Organisation for Economic Cooperation and Development (OECD)’s Services Trade Restrictiveness Index says that one of the most prescriptive legal frameworks govern India’s TV market.
Content creation and distribution are the twin pillars on which broadcasting stands. It is impossible to adopt a one-size-fits-all approach to pricing content because production costs are not uniform. They vary depending on the type of content being created, unlike relatively static costs of distribution. In a tariff order issued in October 2004, TRAI acknowledged that channel pricing is a specialised issue that cannot easily be solved through regulation. TRAI cited large variations in content production costs, and the difficulty in linking channels to prices, as the reason behind not fixing a ceiling limit for new channels. Yet it insists on applying a uniform tariff ceiling on broadcast content today.
In countries like the US and the UK, regulators distance themselves from economic rulemaking and prescribing price ceilings for TV content. This is because such content qualifies as copyrighted work. Amongst the signatories of the Berne Convention, the earliest international treaty on copyright, India is the only country, where one regulator administers the communication and the content aspects of the broadcasting sector.
The proliferation of disputes and of sensationalist content on TV should prompt India to modernise its regulatory framework in step with global best-practices. Previous governments and Parliamentary bodies have highlighted the need to stop India’s communications regulator from overstepping into content-related matters. The 12th, 13th and 14th Lok Sabhas considered a sector-specific legislation that would segregate the carriage aspects of broadcasting from its creative counterpart, but these were never finalised. This latest NRF saga highlights the need to free content from economic regulation, especially as the government has identified media and entertainment as a “champion sector”.
The authors work at Koan Advisory Group, a technology policy consulting firm. Views are personal.
This article is part of ThePrint-Koan Advisory series that analyses emerging policies, laws and regulations in India’s technology sector. Read all the articles here.