Seminar on Dispute Resolution in Telecom and Broadcasting SectorsTDSAT

20th November 2010, Bangalore

India C&S Market

2004 2004 Total TV Household:102 mn Total C&S Cable Household:50 mn Total Subscription Revenue: INR 75 billion Number of channels :213 Pay channels – 70 FTA channels- 143

20092009 Total TV Households: 129 mn Total C&S Cable Households: 73 mn Total DTH Cable Households: 16 mn Total Subscription Revenue : INR 169 billion (Cable & DTH) Number of channel :550 Pay channels – 129 FTA channels - 421

Source:TRAI`s report on Tariff issues related to Cable Tv services in Non-CAS area, FICCI 2010 As on December 2009

Overview Judgments TDSAT

Judgements /TDSAT orders

129

301

224

132

0

200

400

600

800

2004 2005 2006 2007 2008

• Number of Judgments - 786

• Several precedents have been set

• Disputes are skewed towards analog cable

Manufacturer

Distributor

Wholesaler

Retailer

Broadcaster

Distributor

MSO

LCO`s

Similar

•Several layers needed to reach end consumer

•Highest investment by manufacturer• The middle layers aggregate various

products from different manufacturers

Dissimilar

•Value chain from distributor to LCO`s in TV industry does not carry risk of buying the service upfront

• The economic risk lowers with each layer down from broadcaster to LCO`s.

• The return is highest for the LCO`s, leading to an inequitable distribution of wealth in the value chain.

• Last mile monopoly in cable industry

Distribution Chain -Comparison

Distribution of Analog Subscription RevenueDistribution of Analog Subscription Revenue

 Revenue

(INR Crs)

 2004 2009

(as on Dec)

Pay Broadcaster 1500 2100

MSO `s/ ICO`s 700 700

LCO`s 5300 11212

Revenue 7500 14016

Source: FICCI report 2010 &2008 & Industry Estimates

Consumer

LCO`s

MSO`s

Broadcasters

Distribution of Analog Subscription Revenue (%) Share of Stakeholders Distribution of Analog Subscription Revenue (%) Share of Stakeholders

Pay Broadcasters

MSO`s/ ICO`s

LCO`s

Households

Distribution chain 2004

20%

9%

71%

2009

15%

5%

80%

% Share has reduced % Share has reduced from 2004 to 2009 from 2004 to 2009

% Share has reduced % Share has reduced from 2004 to 2009 from 2004 to 2009

Distribution of Subscription Revenue (%) Share of Stakeholders Distribution of Subscription Revenue (%) Share of Stakeholders

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2004 2009

Years

Su

sc

rip

tio

n r

ev

en

ue

in (

%)

Sh

are

o

f S

tak

eh

old

ers

Pay Broadcaster MSO/Head End Operator LCOs

• Broadcasters share has fallen to a mere 15% of subscription pie as against 50% globally

•Leakage of revenue leading to tax evasion and revenue loss Rs.1425 Crs

• Lack of transparency in subscriber base

• The “Fight” is for the fair share of total revenue collected from the cable households

Low ARPU

• India’s monthly ARPU is far below the ARPU of international nations. • This highlights the vast difference in India’s current retail pricing to

international benchmarks. • If India was to increase its retail price to the average of developing

countries, then it would come to about INR 325.

8

42

38

31

26 25

4

UK Japan Hong Kong Singapore Thailand India

Cable ARPUs - India vs Other Nations (US$)

Note: ARPU – Average Revenue Per User per MonthSource: World Screen

Areas of Dispute

Frequent Migration of LCO’s: LCO’s leave huge defaults with MSO`s which has a cascading impact on Broadcasters collections

Must Provide: Gross misuse of the Regulations; Operator moves TDSAT/Courts without providing necessary details to commence meaningful negotiations

Lack of Transparency in declared Subscriber Base : Monthly Subscriber Statement a “myth”

Piracy – Area Transgression : Operator shifts area without any agreement/license from broadcasters/aggregators

1

2

3

4

Cause and Effect of Disputes

Root Cause of all Dispute : Lack of transparency and clarity on Subscriber Base

Subscription Revenue is a factor of Rate/Charges and the Subscriber Base

Subscriber Base is the currency for negotiations

No data on the spread of Rs 14,016 crores collected from 73 mn homes by 60,000 LCO’s

Imbalance in the existing Regulatory Framework – Does not impose responsibility of reporting and disclosures to MSO’s and LCO’s

1

2

3

4

Environment incentivizes under reporting of Subscriber Numbers and discourages implementation Digitization and Addressability

TRAI’s Recommendation/Roadmap on Licensing, Digitization and Addressability put forward to MIB yet to be notified

5

6

7

Recommendations for Elimination of Disputes

“Must Provide” • Requests should be subject to provision of complete information proposed area of operation & subscriber base.• Meaningless unless monopolies at the LCO level is eliminated• Entry to existing MSO`s into new markets should be only on digital mode

Reporting and publishing of Tariff/Cable Charges must also apply to MSO’s/LCO’s;

1

2

3

4

Interconnect Agreement Filings must also be extended to MSO’s/LCO’s;

Effective Compliance and Enforcement of the Standards of Quality of Service Regulations for Non CAS Areas;

Mandate Audit of MSO/LCO Subscriber Records by TRAI and Broadcasters;

Shift consumer billing from LCO to MSO

Fast Track Implementation of Licensing Regime, Digitization and addressability

5

7

8Encourage forbearance and allow market forces to determine prices and distribution of subscription revenue

Recommendations for Elimination of Disputes

6

Thank You