There has been rising scepticism and doubt among the smaller cable operators about falling profitability after the introduction of the new Trai pricing regime. However, brushings off these doubts of the smaller cable operators, Telecom Regulatory Authority of India (Trai) has said that this won’t be the case. Instead, the new pricing regime will enhance flexibility and standing for the operators. The doubts arose when some sections of the cable industry were worried about the new system which dictates that 80% of all channel dues have to be passed on to channel companies. Whereas, right now, cable operators keep about half of the total revenue.
The new rules put into place by the regulator outline that the monthly subscriber charge is split into two — content charges and network charges. Ultra News highlighted that out of these two parts, the cable operator will only take a share of the network charges, along with a chunk of the 20% ‘distribution commission’ on pay channel charges. As for high-end packs, the 65% of the total amount paid by a subscriber can be summed up under content charges, which might deny the cable operators of 55% of the monthly fees of high-end customers. However, Trai has remarked that such worries are misplaced.
The regulator said, “If a comparison is made between the two regimes, the new regime provides equitable revenue share.” Providing clarification about its new pricing policy, Trai further added, “It is pertinent to note that the network capacity fee apply to a total number of channels subscribed by the subscriber, therefore as the subscriber selects more number of channels over and above the 100 channels, the network capacity fee increases. In addition, the LCO gets its share in the pay channel rates in the form of distribution fee which is 20% of the MRP to be shared with MSO [feed provider].”
The regulator also dismissed concerns which claimed that the new pricing scheme is a plan to make the last mile connectivity providers and local cable operators irrelevant and redundant. These sceptics were also voicing their concerns when Trai had rolled out its digitisation guidelines where LCOs were reduced to linemen, whose job was to collect rentals and provide last mile connectivity.
LCOs Will Now Be Able to Setup Channel Distribution of Their Own
Before the digitisation guidelines were put into place, the cable feed providers used to serve at the pleasure of the local cable operators, however, the digitisation scheme ensured that the LCOs become a mere agent of the feed provider. This new setup angered a lot of operators.
However, to dismiss these doubts, Trai said, “LCOs can choose to generate a bill, can do marketing and can help MSOs in forming the bouquet of both Pay and FTA channels.” The regulator also added that the new pricing scheme will now allow the cable operators to set up their own channel distribution from head to the end and become a fully independent operator. The reason why the smaller operators could not do so earlier was the need to negotiate the pricing with the channel owners.
Earlier, a cable provider with 10,000 subscribers would struggle to get a viable cost for the channels, whereas big feed providers supplying feed to 500 operators would be able to get a much better cost for the channels. The new regulation puts a total end to this difference, now the price per connection offered by the channel owner has to be the same as that being provided to a cable operator and a prominent feed provider.
In its clarification of the new policy today, the industry regulator said, “The flexibility of LCOs in the new framework has been increased.”
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