After shelling out more for everyday necessities such as food items and fuel due to soaring inflation, consumers will now have to pay more for their daily dose of entertainment on television. The Telecom Regulatory Authority of India (Trai) has allowed cable operators to hike rates of cable TV by 27.5%. The only saving grace is that the hike will be imposed in two phases. While in the first phase beginning this month, the cable subscription tariff has been increased by 15%, in the second phase, starting January 1, 2015, it will be further increased by 12.5%.
?Based on the rise in the wholesale price index (WPI) over the last five years and considering other relevant factors, the authority has come to a conclusion that overall 27.5% inflation hike is to be allowed. Such revision could not be undertaken for the last five years because the matter was pending in the Supreme Court,” said Trai in a statement.
Early this year, the regulator had sought the Supreme Court?s permission to review rates by making adjustments for inflation. In February, the court allowed Trai to review the rate ceiling for cable television subscribers. After the inflation-triggered rises of 7% in 2005, 4% in 2006 and 7% in 2009, this is the fourth hike by Trai.
?Unlike the West, in India pricing of cable television is regulated and controlled by the Trai. So in such a scenario any move to increase the price of cable television is welcome by broadcasters. However, the price rise will bring little respite to the problems being faced by broadcasters,? said MK Anand, managing director and CEO, Times Television Network. While broadcasters are happy about the tariff hike, concerns have been raised about the impact the move will have on the subscriber base. There is apprehension that viewers may opt for free-to-air channels or base packs in digital addressable system (DAS) areas. ?The main issue that continues to persist is that the the regulator has treated all the channels as one uniform product. There is no segregation of channels on the basis of content, genre or quality of transmission. One cannot generalise television channels as the consumer base all channels are varied. As a result, there will always be a set of consumers who will not be able to afford certain channels,? said Smita Jha, leader, entertainment and media practice India, PricewaterhouseCoopers (PwC).
Jha says that instead of simply increasing the price by itself, the regulator could have worked out a framework by which the ?price control? could be left to the discretion of the channel owners themselves. ?The channel owners are best placed to determine the content needs of their viewers and thus best placed to design their pricing accordingly,? said Jha.
While the immediate impact of the hike will not be felt by direct-to-home (DTH) consumers, analog consumers in non-metros and small towns as well as existing customer in digitised territories are definitely expected to feel the pinch. ?DTH players usually ink fixed fee deals, so there will be no immediate impact of the rise. Also, DTH has to contend with intense competition from MSOs and hence will not be able to significantly pass on the price rise. As for the analog sector, the hike in tariffs will come as a shock to viewers and is a concern for MSOs as this may lead to decrease in subscriber base yet Trai has
justified it by stating it has increased the price after five years of freeze and has divided it into two instalments,? said Ashok Mansukhani, whole time director, Hinduja Ventures, the
parent company of IndusInd Media Communications Ltd, a multi-system operator. Mansukhani says the impact of the hike can already be seen in DAS territories as many consumers are resorting to smaller packages and a-la-carte options. ?In short, fewer channels for more prices,? he said.
However observers feel that despite Trai increasing the price of cable TV, there will be limited impact on subscriber base as viewers would still want to watch their favourite daily soaps and reality shows. ?The increase in price will not have a huge impact on consumers? purse. In analog markets, if earlier the consumer was paying R150, she will now have to pay R175. The price rise will actually help in increasing the average revenue per user. Currently the ARPU in main markets such as Delhi and Mumbai is R300, while in smaller towns and cities it is about R100-150,? said Gurjeev Singh, COO, Media Pro Enterprise, the 50-50 joint venture media distribution company of Star India and Zee Entertainment Enterprises Ltd (ZEEL).
