New Delhi: A major tariff war is about to break out between cable operators and the direct-to-home (DTH) operators with the Telecom Regulatory Authority of India (Trai) considering a reduction of the existing pricing formula for broadcasters on DTH, which is likely to bring down DTH bills by half.

Trai met broadcasters, cable operators and DTH companies on Tuesday to discuss the new formula. The regulator is involved in the tariff revision as directed by the Supreme Court over a legal battle between cable operators, broadcasters and DTH firms. Trai has to recommend the revised tariffs to the court before June 30. Sources said that Trai is set to meet again on Wednesday to chalk out the revised tariffs.

According to experts, the new formula means cheaper content on DTH platforms compared to cable services, triggering a price war between cable and DTH operators. As per the current formula, DTH operators have to pay broadcasters at the rate of 50% of the tariff fixed for cable homes by Trai. Sources told FE that Trai is now looking at a revised formula, to be fixed at 30% of cable tariffs.

Therefore, the six DTH operators will have to pay broadcasters at 30% of cable tariffs fixed for non-CAS homes instead of the current 50%. Simply put, this means if a consumer today pays his cable operator Rs 50 for a cable channel, the same is available for Rs 25 per month on the DTH platform (half of Rs 50 as per the DTH tariff formula). Under the proposed Trai formula, this channel may only cost Rs 15 on DTH (30% of Rs 50).

This means monthly bills for 25 million DTH consumers may come down by at least half and may spur faster DTH rollout. According to sources, DTH operators including Reliance Big TV, Airtel Digital TV and Tata Sky are in favour of lower tariffs. Experts say that such a move will trigger a price war as cable operators will be forced to reduce charges to compete with DTH.

The Indian cable market is estimated to have 90 million subscribers generating around Rs 19,000 crore in annual revenue. However, only around Rs 3,500 crore reaches broadcasters due to under-declarations. In comparison, the 25 million-plus DTH market is pegged at over Rs 5,000 crore with 100% revenue reaching broadcasters.

“Be it 20% or 30% of cable tariff for DTH platforms, we would demand the same for the cable sector; else consumers will shift to DTH,” said a leading cable operator from East Delhi.

However, not every one is in favour of a reduction. “Reducing DTH tariffs will mean loss of revenues due to declining average revenue per user. Trai should look at de-linking DTH content pricing from cable tariffs,” a senior executive of a leading DTH company told FE. Some sports and niche broadcasters too have pitched for removing tariff barriers.

Source: The Financial Express