New Delhi:
Telecom Regulatory Authority of India (TRAI) Chairman JS Sarma explains the digitization of cable. He said that carriage fees should be moderate, between 50 paise to Re. 1 per subscriber per year. "Anything beyond that level would be unreasonable," he said, adding that there can be no placement fee in post digitization world. Here is the full transcript of the interview.
Vikram Chandra: Hello and welcome, we have with us the person who has been the man of the moment of recent days, Mr JS Sarma, head of the Telecom Regulatory Authority of India. So you have been in the news for telecom but I will discuss television with you because you have just come out with the tariff order, the inter connect order which promises to change the entire landscape of television. What is the main thing you have been aiming for with these?
JS Sarma: Vikram, you see we are in the path of digitization which is going to bring several benefits to consumers, most important, and various stakeholders. It will bring transparency in the system, it ultimately improves the quality of the channel itself and then it brings additional revenue to the government, because it brings transparency to the government, so the entire amount that is collected is accounted for. Now it also, incidentally, vastly reduces the dispute in the entire system; otherwise if the system isn't transparent obviously there is scope for plenty of disputes. It is to this context that we have recommended and the Ministry of I&B has taken up the task of digitization in the entire country in over three years. Now the two important things are tariff and the interconnection, it is this tariff order and the interconnection that we have issued few days back and that is what is currently under discussion.
Vikram Chandra: Okay, the entire process of digitization is still on track. We have been told that it is good for broadcasters, it is good for the industry, it is good for distributors, good for the consumer. Is that process still on track and will that happen on the 1st of July as stated?
JS Sarma: There is no reason to doubt that. Firstly, happily every stake holder is committed to digitization. There is nobody who says I don't want to do digitization. I think, as I see and the news I get, I don't see why there should be any delay in the implementation of this programme. I think, and I am quite confident, that by 1st July you will have complete digitization in the four metropolitan cities.
Vikram Chandra: The orders that you have mentioned have by and large been welcomed, including by the broadcasters and by others. But there have been some aspects that have raised a certain amount of consternation. So one of the things that we are here to do is to try and understand what really lies behind the order, particularly I have to say, the issue of carriage fees. From the government in Parliament to what has been stated to all stakeholders, one of the major aims and ambitions of digitization was to change the business model so that carriage fees go down, subscriptions are better reported and a new business model emerges. People are somewhat concerned as to the carriage fees that have been legitimised in this context.
JS Sarma: No I would not use the word legitimise. It's being regulated. Carriage fee is something that has been going on for some time. Who started it and why he started it is immaterial. The fact is that the carriage fees are actually big now and it is estimated to be in the order of 1600-2000 crores.
Vikram Chandra: If not more...
JS Sarma: Since it is totally underground, no one knows about it. What we have done is brought it on to the surface and regulated it, now it's a regulated entity. We said that 500 channels must be provided by every MSO, now this is significant. Currently some people have 175, some have 200, some people have 300 and perhaps only 1 or 2 persons have more than 300. This means that even today, though there are about 500 channels, if a broadcaster wants a channel to be carried, there is always a scope for carriage fee. What we mandated is that from 1st January 2013, and for smaller people from 1st April 2013, the number of channels provided must be 500. There are about 800 odd channels in this country, out of them about 600 odd channels are active. Out of these all the English, all the Hindi, plus any one regional language will not exceed 470. That is why we mandated 500. If the number of channels goes up, it becomes 800 active channels, then we could actually increase this number.
Vikram Chandra: 500 is not frozen you are saying, it can move?
JS Sarma: 500 is not frozen. You need to give MSOs some time to obtain those channels. In fact the rule under the Act also says that the number of channels 'as prescribed from time to time'.
Vikram Chandra: You said Sir that it's being regulated. What I think is causing the greatest amount of concern is that you, in a sense, brought it above ground perhaps, but you have said that it is entirely the discretion of the MSO to decide what the quantum of the carriage fee is going to be, and if you consider it unreasonable, you will step in. Now that automatically calls for a lot of concern for broadcasters, because you don't know what level you might consider something to be reasonable or unreasonable...
JS Sarma: It is true that we have not specifically quantified any amount, because at this particular stage we felt that it is better to let the MSOs and the broadcasters settle it among themselves and let this market settle. You must understand that MSOs also can't run riot because there is always the threat of DTH. So the cable industry is competing with the DTH industry. Secondly we recognize that the carriage element is basically for the network transportation cost. We have figures with us, it is not that we don't have figures. We know that the per channel per subscriber cost is not very high. So any MSO who actually wants to charge more, first of all he has to publish it, we have stated that he should publish his charge. He should apply across all the channels, not any particular genre, but across all the channels in a uniform, transparent and non discriminatory basis. Thirdly he can't change it for two years. And then most importantly, he should report the matter to us and we reserve the right to intervene, in the event we feel it is unreasonable.
Vikram Chandra: I understand you did not want to state a figure in the order itself, but you are right that there is a certain figure which is the actual cost for carrying a channel, and it is not a very high figure. So I guess the big debate becomes what level of carriage is considered unreasonable? That's the basis on which one makes a plan. You have to understand that many broadcasters are not in a very good financial position either. What are the levels of carriage that you would consider unreasonable?
JS Sarma: At this stage it is very difficult to put it down, but typically, generally anything above 50 paise, per channel per subscriber per month per year.
Vikram Chandra: Per month or per year?
JS Sarma: Sorry per year, you're right, per year, would be actually be something that needs to be noticed. And anything above a Rupee would then definitely need attention. In other words we would actually watch, is it going beyond a particular range, I think.
Vikram Chandra: If I can just make sure that I am not misunderstanding the range that you have indicated, you are saying that anything above 50 paise per subscriber a year is something that you would notice, and above 1 Rupee, per subscriber a year, would be a level of carriage fee that you think would perhaps be unreasonable?
JS Sarma: No, I think you asked me to put a figure.
Vikram Chandra: Trying to get a benchmark...
JS Sarma: No I think since you asked me to put a figure, I just want to mention that it is currently not in the regulation, but obviously we don't want astronomical figures. As is said, this is meant for the carriage of the channel. It is not any other money, because we are saying no to placement fees, because there is no need for placement fees in this particular scheme of things.
Vikram Chandra: Is that also clear cut? Because I know you have defined placement fees, but you haven't said that there has to be EPG by listing, you haven't said specifically that there shouldn't be a placement fee. So are you saying that that there will be no placement fee?
JS Sarma: That's right. You see unlike in the case of analog where you can place the channel at a particular place, the quality differs from channel to channel and brand to brand. Now here, that particular problem is not there, since everything is of uniform quality. So the question of placement, what is placement? It is the advantage that you get. You need to place it in the concerned genre. Now whether this one genre is before the other genre, this is immaterial. So in other words, while each of the MSOs can design their own EPGs, but the channel should be in the particular genre.
Vikram Chandra: And no placement fees will be charged. Is this something that you can make explicit?
JS Sarma: We are saying no to placement fees. Again we don't want another problem to come up. Getting back to carriage fees, we are not indicating any figure at this stage; this is what we have in mind.
Vikram Chandra: When you are saying that what you have in mind, something like 50 paise per subscriber for a year.
JS Sarma: Yes 50 paise to 1 Rupee.
Vikram Chandra: Which is the benchmark that the MSO should keep in mind?
JS Sarma:We don't want to get into a very rigid figure at this stage. We will watch. We will see how it is going. In the event if we feel anybody is unreasonable, we will definitely intervene.
Vikram Chandra: I think one of the things, just to look at the way that would work; a channel trying to reach at the 1 Rupee level or a channel to reach 90 million subscribers, pays around 9 crores sort of a thing. So I guess for MSOs also, they would be able to reach a larger number of channels.
JS Sarma: That's right.
Vikram Chandra: Because earlier they could only charge carriage fees from 50 and now they might be charging for 300 or 400 channels.
JS Sarma: It depends on how one wants to pay. You see we have said that there will be no carriage fee in respect of a channel that the MSO himself seeks. So it is only in respect of the channels that ask to be carried, that the carriage fees can be charged. So these are the kind of things that are there. So I don't know whether it would be 100 or 200 or 300 etc. You can say that in about a 500 channels capacity, a fair number would be seeking that 'must carry provision', which is available only when it reaches 500, because then, incidentally, the much provided clause kicks in alongside. Both right and duty go together.
Vikram Chandra: So your position would be, if I understand it correctly, in this entire issue of carriage fees, is at those sort of levels, at 50 paisa per subscriber a year. If that is to work for both broadcasters and MSOs, then everyone should be happy. If the rates are moderate then both sides should agree.
JS Sarma: If an MSO has 1 lakh subscribers, let's say in smaller areas, then to that extent that amount that is available is substantial. In any case it is not as if part of the carriage cost, that is the transportation cost, is also not being taken from the subscribers. The reason why I have said a range is, it is very difficult to get into one range in this large country. So you have to see how it is. First of all I am quite confident that the industry with digitization will be a much more organised industry than what it has been so far. I am also sure that the relationships are much more streamlined and therefore I guess, as somebody was telling me this morning, they expect the carriage fee itself come down to one fifth, or so, by 20 percent in about 2 or 3 years. I don't know whether that will take place or not, but let us watch. The whole idea is that the digitization process should actually tend to professionalise the entire industry. It includes the broadcasting industry as much as the carriage industry.
Vikram Chandra: Of course one of the reasons that you have stated as to why this should be done, is for the cost of digitization from the point of view of the MSOs. Broadcasters are upset about that. They are saying why should they pay the cost for somebody else's business, especially when they get the benefit of broadband and things like that.
JS Sarma: Then the MSO would say why would I invest? After all I am the person who is investing and they must pay me some amount of money to carry. I think both sides are reasonable cases.
Vikram Chandra: But at some time do you see there being a sunset, once the investments have been made, it's a better robust economic system?
JS Sarma: I think so. Though this is purely in the realm of the future, but I think in the course of the not too distant a future I admit that MSOs also are able to develop a lot more things. For instance, in the telecommunication itself, we have decided that there will be unified licences. In the state level we are also suggesting that for TRAI there will also be a district level licence. Whatever happens, but in the state level surely and hopefully at the district level too, there would be a telecommunication licence which means a lot more things will be possible. I have been repeatedly saying that cable, as in other countries, should become the deliverer of plenty of services and broadband is a major major thing, it is not channels alone, In fact channels will be one of the services that the MSO will be delivering, in my opinion, in the future. It would be delivering in telecom, delivering broadband, in fact it would be delivering access to educational services, access to health services etc. So with all this I think the relationship between the broadcaster and the MSO will be far more smooth than what it is now.
Vikram Chandra: Thank you so much for joining us.