The Cable Television Networks (Regulation) Act, 1995, was a landmark moment in the history of television viewership in India. Over time, the shortcomings of cable TV, such as selective broadcast, costly installation, and poor penetration in rural areas created opportunities for an alternative in direct-to-home (DTH) television. Technological advancement allowed consumers to access better picture and sound quality, along with other value added features. Currently, six service providers compete for a share in the DTH market in India. More recently, the emergence of flexible OTT services such as Netflix and Amazon Prime Video has led to a slowdown in the rapid growth of the DTH market. Convergence in infrastructure is also allowing for collaborative business development across these categories of services. In 2016, TRAI produced two consultation papers arguing for significant changes in the packaging and tariff structure applicable to the sector. This regulatory intervention was motivated by a desire to do away with perceived malpractices in channel pricing, and to make processes more uniform and transparent, enhancing consumer welfare. The tariff regulations have been met with severe criticism from distributors and broadcasters, who find TRAI’s approach too interventionist, greatly limiting their ability to respond to market needs and to earn profit for the purpose of attracting additional investment and keeping shareholders interested. The objective of this study is to conduct a deeper analysis of the market structure to identify the market failure, if any, and subsequently, identify the optimal approach to regulatory intervention. Recent literature, though scant, has also focused on the welfare impact of regulatory interventions in the cable broadcasting sector, such as mandating a la carte pricing, setting price ceilings for bundles, etc. This literature also focuses on the bargaining dynamics between upstream players (broadcasters) and downstream players (DTH service providers, cable operators) and its consequences for input cost as well as the tariff structure. These theoretical and empirical frameworks will be used to gauge the need for regulation in this sector and evaluate the consequences of existing regulations.
