Seminar on Dispute Resolution in Telecom and Broadcasting Sectors TDSAT 20 th November 2010, Bangalore

India C&S Market 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  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 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 Number of Judgments 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 Revenue Revenue (INR Crs) (as on Dec) Pay Broadcaster MSO `s/ ICO`s 700 LCO`s Revenue Source: FICCI report 2010 &2008 & Industry Estimates Consumer LCO`s MSO`s Broadcasters

Distribution of Analog Subscription Revenue (%) Share of Stakeholders Pay Broadcasters MSO`s/ ICO`s LCO`s Households Distribution chain % 9% 71% % 5% 80% % Share has reduced from 2004 to 2009

Distribution of Subscription Revenue (%) Share of Stakeholders 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 Cable ARPUs - India vs Other Nations (US$) Note: ARPU – Average Revenue Per User per Month Source: 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

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 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; 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 Encourage forbearance and allow market forces to determine prices and distribution of subscription revenue Recommendations for Elimination of Disputes 6

Thank You