On 10th October 2016, the Telecom Regulatory Authority of India (TRAI) released a draft broadcasting tariff order (the Order) which is sought to be brought into effect by 1st April 2017. The Order Inter alia seeks to fix a ceiling on the maximum retail price (MRP) on TV channels.
Star India Pvt. Ltd. (Star India) challenged the Order before the Madras High Court on grounds that it stands in conflict with the Copyright Act, 1957. On 23rd December, the Court stayed the operation of the Order until a complete determination of this question was concluded. Livemint reported that the Supreme Court passed an order allowing TRAI to proceed with the consultation process.
In the present post, I will be dealing with the possible conflict between TRAI’s authority to regulate broadcasting services on the one hand and broadcasters’ monopoly in their content on the other.
The Tariff Order
The Order requires broadcasters to declare the MRP for each channel on an a-la-carte basis. TRAI believes that this will offer better and wider choice to subscribers who, at present, are required to purchase bouquets with unpopular channels only because they are tagged with a few popular ones.
That said, the Order does allow broadcasters to offer bouquet; provided that the MRP of these bouquets is at least 85% of the MRP of the sum of the a-la-carte pay channels forming such a bouquet. Additionally, the Order also mandates that the MRP for both bouquets and a-la-carte pay channels have a uniform MRP for all distribution areas in the relevant geographical area.
Lastly – and here lies the bone of contention – Section 5 of the Order provides for a genre-based cap on the MRP (per month) for pay channels. For instance, devotional channels are capped at Rs. 3.0 while sports channels are capped at Rs. 19. This ceiling on the MRP is applicable to existing pay channels and to new channels that are launched or converted from free channels to pay channels after this Order comes into force. It’s very important to note that this provision does not apply to channels which broadcasters classify as ‘premium’.
Broadcasters have objected to the Order on grounds that it is ultra vires the Copyright Act, 1957. In particular, Zee Entertainment Enterprises Ltd. (Zee) argues that the Order seeks to impose restrictions in the form of “ceiling on tariff, manner of offering, discounting etc.”, thereby violating broadcasters’ “freedom to commercially exploit their intellectual property”. Furthermore, Zee argues that the Order takes away its freedom of contract and negotiation under Section 19(3) of the Act to enter into mutually acceptable terms.
Two important questions emerge from this conflict: (1) Does TRAI have the power to regulate the prices of TV channels? and (2) If yes, does the Order derogate broadcasters rights under Section 37 of the Act?
TRAI’s Authority to Regulate Broadcasting Services
The Order derives authority from: Section 2(k), Section 11(1)(b)(iv), Section 11(1)(d) and Section 11(2). The relevant provisions of the TRAI Act are reproduced below:
|Section 2(1)(k)||(k) “telecommunication service” means service of any description (including electronic mail, voice mail, data services, audio tex services, video tex services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnetic means but shall not include broadcasting services:
[PROVIDED that the Central Government may notify other service to be telecommunication service including broadcasting services.]
|Section 11(1)(b)(iv):||[(1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 , the functions of the Authority shall be to:
(b) discharge the following functions, namely: –
(iv) regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services
|Section 11(1)(d)||(d) perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act|
|Section 11(2)||(2) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the Authority may, from time to time, by order, notify in the Official Gazette the rates at which the telecommunication services within India and outside India shall be provided under this Act including the rates at which messages shall be transmitted to any country outside India|
The Parliament probably confused itself while drafting Section 2(1)(k): it explicitly excludes broadcasting services from the purview of telecommunication services and in the very next breath empowers the Central Government to include it in the future. Nevertheless, the Central Government exercised this power and issued a notification in 2004 to include ‘broadcasting services’ within meaning ‘telecommunication services’. More importantly, Rule 2 of S.O. 45(E) of the notification authorized TRAI “to specify standard norms for, and periodicity of, revision of rates of pay channels”. Therefore, all of TRAI’s powers under the Act were made applicable to broadcasting services.
The question of TRAI’s power to tariff had cropped up in Star India v. TRAI before the Delhi High Court. The Court held that:
“…the TRAI is clearly competent to prescribe the conditions and tariff impugned before us by virtue of the TRAI Act itself. TRAI must regulate arrangements amongst service providers of sharing their revenue derived from providing telecommunication services [see Section 11(1)(b)(iv)] and generally to perform such other function including such administrative and financial functions as may be entrusted to it by the Central Government… [see Section 11(1)(d)… there is no scope for any controversy concerning the competence of the TRAI to prescribe the impugned rates at which telecommunication services are to be provided. Therefore … TRAI is otherwise competent to fix tariffs…”
Subsequently, the TDSAT also held that broadcasting services are liable to be regulated by TRAI since they are essential services. Furthermore, the Tribunal also concluded that the construction of Section 11(2) reflects the legislature’s intent towards empowering TRAI to regulate broadcasting services. As for broadcaster’s freedom to contract in the context of TRAI’s tariff orders, the TDSAT has previously observed that it is “neither an absolute right nor an immutable principle.” This finding of the TDSAT is supported by two previous judgments of the Supreme Court.
Therefore, the Order is consistent with the TRAI Act. Accordingly, TRAI has the power to fix a cap on the MRP of a pay channel. In the next part, I will discuss the validity of the Order in light of the copyright act.
Image from here: http://www.trentradio.ca/crtc/dunbarleblanc/dunbarleblanc.jpg