Published: Business Line, 6 November, 2004
By Pradeep S. Mehta and Manish Agarwal
Transmission of TV signals has come a long way with the advancement in information and communication technology.
CABLE television was developed in the late 1940s in the US for communities unable to receive TV signals because of terrain or distance from TV stations. Cable TV operators located antennas in areas with good reception, picked up broadcast station signals and then distributed them by coaxial cable to subscribers.
Since then, transmission of TV signals has come a long way with the advancement in information and communication technology (ICT). Now several alternative delivery platforms for transmitting TV signals have emerged such as Direct-to-Home Services (DTH) and Internet protocol-based TV (IPTV). These distribution technologies are competing with cable TV operators to provide audio-visual services. In several countries the penetration rate of DTH is much higher than cable services and consumers have a fair choice between competing technologies.
Carriage of popular channels by competing distribution networks is essential for competing in the market. As such, the success of competition in the distribution chain largely depends on the non-discriminatory treatment of carriage of TV channels. Broadcasters may also face similar problems when distribution network operators refuse to carry their TV channels/programmes to subscribers’ premises.
Sometimes broadcasters and distribution network operators vertically integrate to discriminate against competitors in the carriage or provision of signals. Vertical integration may improve efficiency as it reduces the transaction between upstream and downstream operations. But, at the same time, in certain circumstances it may be used to limit competition, which could take any of following forms:
Vertical price squeeze, which happens when a vertically integrated broadcaster increases the price of a TV channel for competing operators but maintains the same price for operator affiliates;
Exclusivity of content, whereby popular TV channels are denied to a competitor so as to promote broadcaster’s own distribution network; and
Denial of carriage by a vertically integrated cable system of TV channel of the rival company.
To what extent can regulation help ensure fair competition and to what extent can the market be expected to ensure that competition is not thwarted?
The concern is that broadcasters may not provide content to rival platforms and this could affect competition in terms of price and quality of service.
Moreover, the issue has to be seen primarily from a consumer’s perspective. If all channels are not available on one platform then a consumer may have to acquire more than one platform to view his/her favourite channels. If content, especially popular content, is exclusively available on one platform then there may not be effective competition.
In the US there is a 40 per cent limit on the number of channels that can be occupied by video programmers affiliated with a particular cable system. Moreover, vertically integrated cable companies are prohibited from discriminating against competitors in the distribution of satellite delivered programming. In Canada, a 2001 ruling by the Canadian Radio-Television and Telecommunications Commission (CRTC) reversed a long-standing policy that prevented cable companies from owning pay and specialty TV channels. At the same time, the CRTC laid down certain principles for the cable TV industry, such as:
All specialty and pay services should be supplied and distributed on fair and equitable terms.
Unaffiliated companies should get terms and conditions that are no less favourable than those with affiliates.
In India, the Telecom Regulatory Authority of India (TRAI) recently submitted its recommendations to the Government of India on broadcasting and distribution of TV channels. TRAI has recommended that every broadcaster shall provide signals of its TV channels on a non-discriminatory basis to all distributors of TV channels and no exclusivity would be permitted between broadcasters and distributors of TV channels.
Generally, TV channels are provided to all carriers and platforms to increase viewership for the purpose of earning maximum subscription fee as well as advertisement revenue. However, according to some, if all platforms carry the same content it will reduce competition and there will be no incentive to improve the content. The experience in the US suggests that regulation relating to non-discriminatory access can provide an effective stimulus to competition and improve the content. The FCC, after reviewing the impact of its programme access rules over 10 years, found that exclusivity prohibition has not reduced the incentives to create new or diverse programming. In view of all these, it is necessary that there are regulations in place to check if content is denied in a manner that stifles competition among competing distribution networks.
It is important that all distribution platforms are promoted so that they provide consumers with choice.