Tariff hike a distinct positive for broadcaste​rs

In a major boost to broadcasters, the Telecom Regulatory Authority of India (TRAI) has announced a 27.5% inflation-linked tariff hike for analog cable areas. The hike, which comes after a gap of almost five years, will be implemented in two installments—while first installment of 15% will be effective from April 1, 2014 (today), the second installment of 12.5% will be effective from January 1, 2015. With this hike, consumer ARPU should increase and accordingly contracts signed on Reference Interconnect Offer (RIO) basis should see a surge. It will also lend higher bargaining power to broadcasters when fixed fee deals come up for negotiations. Though this order is only for analog areas, we expect DTH as well as DAS area deals to be revised upwards.

Ideally, this tariff hike should benefit LCOs, MSOs and broadcasters in terms of higher subscription revenue. However, recovery of proportional incremental share from LCOs will not be easy for MSOs. Also, broadcasters will put pressure on MSOs for higher content fees payout. This ruling can more than mitigate any negative impact on broadcasters due to TRAI’s action on content aggregators.