TV outlets and distributors face new regulatory regime

By Jaya Singhania, Cyril Amarchand Mangaldas
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A 3 July press release from the Telecom Regulatory Authority of India (TRAI) has brought into effect the Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017, and the Telecommunication (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017, and requires service providers to comply with the provisions of the regulations and tariff order, which were notified on 3 March 2017. The press release follows a judgment delivered in favour of TRAI by Madras High Court (in Star India Private Limited and Anr v Department of Industrial Policy and Promotion and Ors), which upheld TRAI’s right to implement the regulations and tariff order.

Jaya SinghaniaPartnerCyril Amarchand Mangaldas
Jaya Singhania
Partner
Cyril Amarchand Mangaldas

The revised regulatory framework, which purports to curb discriminatory practices followed by broadcasters and distributors by setting out strict servicing and offering conditions, has been perceived as unreasonable and onerous by the service providers, who have opposed it from the time TRAI published a discussion paper seeking stakeholder comments, prior to notifying the regulations and tariff order. Writ petitions challenging them were filed before Madras High Court and Delhi High Court after the notification. Enforcement of the regulations and tariff order was stayed by an order from the Supreme Court, requiring that the status quo be maintained until Madras High Court delivered its final judgment.

The judgment confirms the dissenting opinion of the chief justice of Madras High Court in a split order of the same court and rules on the principal issues of: “(1) whether the impugned Regulations and the Tariff Order can exist and operate through the powers conferred to and under the TRAI Act, 1997; [and] (2) whether the impugned Regulations and the Tariff Order would impinge upon the provisions of the Copyright Act, 1957”, while dealing with contentions that the regulations and tariff order deal with “content” instead of “carriage”, thus impinging on the provisions of the Copyright Act.

The judgment, while upholding TRAI’s rights to regulate the service providers, holds that the Copyright Act and the TRAI Act stand apart in their respective arenas and their fields are distinct and separate. The Copyright Act primarily deals with the rights and duties of individuals (such as a copyright holder and the licensee), with a limited right to a third party and does not deal with the larger public interest. On the other hand, the TRAI Act regulates broadcasters (which may also be copyright holders) and other service providers that are permitted to use the airwaves and frequencies owned by the government, which is duty bound to protect the overall public interest of subscribers and other service providers. The judgment rejects almost all the objections raised against the regulations and order. It, however, declares as arbitrary, and hence liable to be struck down, the discount cap prescribed under the tariff order for bundling pay channels in an attempt to dissuade “perverse” pricing strategies for the bundling of channels.

In the explanatory statement accompanying the tariff order, TRAI observes that “while subscribers want freedom to choose affordable a-la-carte channels and bundled TV broadcast services as per their preferences and paying capacity, broadcasters generally want to ensure maximum eyeballs to ensure higher advertisement revenues.” The regulatory framework sought to be enforced prescribes detailed conditions and pricing norms to be followed by broadcasters and distributors, particularly with respect to bundling of channels. Also, distributors are required to ensure maximum offerings, given their capacity, and to offer all pay channels available on their network on an a-la-carte basis, based on subscribers’ choice. The maximum network capacity fee chargeable by the distributors, regardless of the means of carriage, is also prescribed.

The petitions filed by distributors before Delhi High Court are yet to be discharged and the Madras High Court judgment may be appealed before the Supreme Court. However, the reasoned judgment delivered by Madras High Court will make it challenging for the petitioners to contest the regulations and tariff order for any substantive relief.

Service providers, who may have to brace up and comply, are concerned that implementation of the regulations may, besides altering deal dynamics among distributors and broadcasters, pose significant practical challenges and lead to an increase in operational costs, which may adversely affect the industry.

Cyril Amarchand Mangaldas is India’s largest full-service law firm. Jaya Singhania, a partner at the firm, was assisted by Tarumoy Chaudhuri, a senior associate.

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