TDSAT SEMINAR TDSAT SEMINAR DISPUTE RESOLUTION AND REDRESSAL

OF CONSUMER GRIEVANCES IN BROADCASTING SECTOR

(March 13, 2010)

Presented by:A. MohanExecutive Vice PresidentZee Network, Indiaamohan@siti.esselgroup.com

This presentation depicts the personal views of the speaker and should not be treated as the views of the

Company.

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INDIA – one of the largest media market

500+ television channels; 600m viewers : 2x the

population of United States

100m+ newspaper circulation across 50,000+ editions

: Next only to China

3.5bn movie tickets sold annually for 1000+ movies :

2.5x the size of the second largest market

87m Cable and Satellite homes :Next only to USA

and China

3Sources : IDFC/SSKI - India Entertainment & Media - February 2010 - Nikhil Vora / Bhushan Gajaria / Swati Nangalia

• Three fastest means of communications:

– Tele-communication

– Tele-vision

– ?????

BROADCASTING VS TELECOMMUNICATION

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WHAT WE PROVIDE We, provide you content on 365 days a year on 24X7 basis.

Broadcasters are required to invest heavily in acquisition / procurement of content which inter-alia include: News & Current Affairs content disseminating news, views & infotainment, business affairs.

Entertainment programmes such as serials, quiz shows, celebrity shows, talent hunts.

Movies rights.

Religious content.

Events Rights & Sports Broadcasting rights.

Huge expenditure on setting-up broadcast facilities, uplinking teleports & leasing transponder space on satellites to effect delivery of channels to distributors of channels.

Rate regulation and price controls distort the market and lead to a misallocation of resources.

Artificially low prices deter any further investment in new Channels and programming, affecting consumer choice and creating a shortage of quality channels and variety in programming.

A Myth - Channel prices are quite high and need regulation.- Newspaper example

ARPU in India – $3.5 - $ 4 - lowest in the world (Vs $ 65 in US)*

Regulator needs to balance “equity” and “consumer interest”.

*WIPO Report dt.30/11/2009 5

In Millions 2008 2009f 2010f 2011f 2012f 2013f CAGR 2009-13

TV Households % Change

118.02.6%

120.01.7%

125.04.2%

130.04.0%

132.01.5%

135.02.3%

2.7%

Pay TV Households% Change

80.08.8%

87.58.7%

94.08.0%

100.06.4%

107.07.0%

115.07.5%

7.5%

Cable TV households% Changes

71.01.4%

72.01.4%

74.02.8%

75.01.4%

77.02.7%

80.03.9%

2.4%

DTH Households% Changes

9.0*157.1%

15.066.7%

20.033.3%

25.025.0%

30.020.0%

35.016.7%

31.2.0%

Projected growth of Indian Television Industry 2009-2013

Sources : Industry estimates and PWC analysis; PWC – Indian Entertainment and Media Outlook 2009

In Millions 2008 2009f 2010f 2011f 2012f 2013f CAGR 2009-13

Television Distribution% Change

150.09.9%

165.010.0%

185.021.1%

205.010.8%

225.09.8%

250.011.1%

10.8%

Television Advertising% Change

84.27.9%

91.08.1%

100.09.9%

112.012.0%

130.016.1%

150.015.4%

12.2%

Television Content% Changes

10.511.7%

11.59.5%

13.013.0%

15.015.4%

17.013.3%

20.017.6%

13.8%

Total% Changes

244.79.3%

267.59.3%

298.011.4%

332.011.4%

372.012.0%

420.012.9%

11.4%

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Subscriber Break-Up FY09 Subscriber Break-Up FY15E

Source : Industry, Elara Securities Research Elara Capital – Cable & Satellite Industries – Future is digital – Media & Entertainment 19 November, 2009

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Sources: Group M, KPMG Interviews, KPMG Analysis

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9Sources: Group M, KPMG Interviews, KPMG Analysis

Due to lack of addressability, forced to sell negotiated lump sum rather than at a fair rate per end subscriber. However, advertisement revenue has been their relief.

Clutter of MSOsToo many

suppliers of the same content targeting max 1-2 LCOs per area.

Forced to resort to undercutting in order to widen subscriber base.

Monopoly in their areas of operation.

Easy substitution of content from one MSO with content from another.

Hence high bargaining power with MSOs

Have to bear monopoly at the last mile leading to inferior quality services and monopolistic LCOs.

Dissatisfaction with Analogue cable. Eager for an alternative.

Broadcasters Multiple

Multi-System Operators

6,000

Local Cable Operators

60,000

Households 90 Million

ANALOGUE VALUE CHAIN FAVOURS LCO

Source : Elara Securities Research Elara Capital – Cable & Satellite Industries – Future is digital – Media & Entertainment 19 November, 2009

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C&S homes

Average ARPU

Annual cable collection

Broadcaster’s share

MSOs and DTH operator’s shares

LEAKAGE

REVENUE LEAKAGES

80m

USD4/ Month

X

USD 3.8 bn (Rs.17,100 Cr.)

=

USD 500M (Rs.2,250 Cr.)

_

USD 500M(Rs.2,250 Cr.)

USD 2.8 bn(Rs.12,600 Cr.)

• Unorganised nature of cable distribution; 7,000 MSOs and 40,000 LCOs

• Cash transaction

• Lack of addressability – analogue

distribution

Sources : IDFC/SSKI - India Entertainment & Media - February 2010 - Nikhil Vora / Bhushan Gajaria / Swati Nangalia

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Distribution of Revenues

USA 60% 40%UK 63% 37%Australia 65% 35%Japan 65% 35%India 90% 10%

Cost of Piracy in 2009 – US$ 1280 million(Rs. 5,760 Cr.)

Continued rapid growth in market size – US$5.3 billion (Rs.23,850 Cr.) – 20% up in 2008

Piracy levels up 7% although actual piracy cost up 12% due to increased ARPU and currency movements

Grey market for cable operators is the biggest factor

With nearly $1.3 billion (Rs.5,850

Cr.) of revenue leakage in India continues to be the largest monetary contributor in Asia

Individual illegal connections US$ 22 million (Rs. 99 Cr.)

Indian grey marketUS$ 1258 million (Rs. 5,661 Cr.)

12Digital Deployment, Asia-Pacific, Pay-TV, Industry Study, November 2009

2006-09 – digitization remained a ‘concept’

What has gone wrong for the cable industry?

Mandated CAS innotified areas

Voluntary digitization

• MSOs not funded for seeding STB• Execution a failure - high resistance from

LCOs• Lack of political will• Consumer Psyche – If digital is mandated,

why not switch to DTH, a professionally managed service

• Lack of funds to subsidize customer acquisition

• DTH industry funded to the tune of USD4bn-5bn

• Subsidies on DTH as high as Rs2500-3000 per connection

• Absence of clear cut road map and lack of regulations

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FUTURE - MULTIPLE LAYERS OF CONVERGENCE

YESTERDAY

(Silos into the home)

TODAY

(Convergence of services, networks & devices)

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Broadcaster

MSO

LCO

Subscriber

Dispute

Dispute

Dispute

Most affected

Most affecte

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Channel(s) Switch

off

DISPUTES

LCO

Subscriber

Service Quality

Price discrimination

Limited choice of channels

Interruption in cable services

Change in channel placements

No effective consumer redressal system

No value for money

Non availability of channel guides

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DISPUTESMSO

LCO

Non disclosure of complete subscriber base by LCO.

Piracy of signals/Inserting advertisements.

Non payment of subscription fees.

Non renewal of service agreements.

Frequent change in loyalty of the LCOs i.e. migration from one MSO to another leaving subscription dues/arrears.

Resistance to adapt themselves to changing technology.

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DISPUTESBroadcaster

MSO

Subscriber base. Territory issue – transmission in unauthorised

areas. Digital Transmission without paying any additional

subscription. Non payment of subscription fees. Non renewal of service agreements. Alleged unreasonable clauses in service agreements. Piracy of signals/violation of copyrights. Resistance to adapt to changing technology. Limited bandwidth capacity. Change in channel placements. Interruption of cable services at their own. Undue advantage of regulations. Compliance cost.

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SOLUTIONS OF

DISPUTES

DIGITALISATION

WITH

ADDRESSABILITY 19

SOLUTIONSLCO

Subscriber

Written agreement in place between the LCO & consumer. (QSR for CAS and Non-CAS areas)

Subscription fee receipts to be issued by the LCO. (Tariff Order dt.4/10/07 – Cl.4B & Cl.9 of QSR)

LCO providing technical support at the time of any cable breakdown (QSR dt.24/2/09).

21 days notice for discontinuation of channel(s).

LCO providing complete channel guides.

LCO upgrading their network & improving the quality of services (Cl.18 of QSR).

Local body to be authorized for settlement of disputes. (TRAI recommendations)

Discourage monopoly and encourage healthy competition.

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SOLUTIONSMSO

LCO

Maintaining contractual agreement with LCOs. (Interconnection Regulations/Agreements)

MSO maintaining detailed records of subscriber base served by the LCO. (Interconnection Regulations – SLR)

Appointing independent piracy check agencies.

MSOs facilitating LCOs to help them in investing in better infrastructure.

MSO coordinating with local bodies to shoulder the accountability of consumer complaints (QSR).

Digitalisation.

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SOLUTIONSBroadcaster

MSO

MSO maintaining a record of number of franchisees served & their individual HH connections through a transparent system. (Interconnection Regulations – SLR)

Timely payment & renewal of agreement. (Interconnection Regulations – SLR)

Appointing independent piracy check agencies.

Broadcaster providing relevant information.

Joint public awareness campaigns on the channel list, new programmes etc.

Both should encourage healthy competition.

Digitalisation

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Section 14A of TRAI Act provides as under:

1) The Central Government or a State Government or a local authority or any person may make an application to the Appellate Tribunal for adjudication of any dispute referred to in clause (a) of Section 14.

2) The Central Government or a State Government or a local authority or any person aggrieved by any direction, decision or order made by the Authority may prefer an appeal to the Appellate Tribunal.

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Broadcasting Services – categorized as Essential Services

“Cable broadcasting may not be an essential commodity in the sense that it is not an item of food without which one cannot survive, yet looking to the figures of TV viewership in this country its importance cannot be underestimated. Available figures suggest a TV viewership of 68 million for the whole country. This shows that television viewing has almost attained the status of an essential service in this country.”

Hon’ble TDSAT in its judgment dt.27/02/2007 in Case of Set DiscoveryVs. TRAI & others has observed asunder:

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• Three fastest means of communications:

– Tele-communication

– Tele-vision

– ?????

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