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77. OP-3 has submitted that the DG incorrectly conflated 'provision of PPP services' with 'delivery of content and issue of KDM' and concluded that all the components of PPP services (including mastering) are tied with supply of DCEs. It has been submitted that OP-3 supplies DCEs on lease to CTOs at monthly rent which covers 1% of the cost of DCEs, keeping in mind the weak financial position of most of the CTOs in India, with the exception of large multiplexes. It has been submitted that OP-3 is able to subsidize its rent by charging producers of content a VPF, which allows it to recoup its investment in the DCEs leased by it. If for any reason OP-3 is unable to issue KDM for the content played on its leased DCEs, it charges the CTOs a fixed VPF (in lieu of the VPF that it would otherwise have been able to collect), which does not amount to a penalty and does not deter CTOs from procuring the content from other service providers.

2) on OP-1's leased DCEs and restrict supply of any content from other PPP service providers.

88. OP-1, in its submissions, has stated that the standard sale agreements of OP-1 for DCI- DCEs are customary equipment sale agreements which do not impose any obligations on CTOs to purchase other services from UFO. CTOs are free to choose their preferred suppliers for other services, including content delivery. It is stated that OP-1 only requires exclusivity in content delivery when it is required to collect VPF, either when providing a DCS bouquet or when the CTOs enter into an agreement requiring OP-1 to collect the VPF on their behalf and transfer the same to them, after retaining a portion of it as service fees. This exclusivity is stated to be necessary to enable OP-1 to collect VPF from the producers. Under such agreements, OP-1 does not retain the VPF rather .. .........................................................................................................

And then they are threatening the producers that if they work with PF they will have to pay more money to them for digitalisation including cloning.
What happens is there is something called a VPF. If you remember that was another case in CCI which was filed by Ronnie Screwvala in which these two companies collect VPF from the producers. VPF is nothing but a charge that UFO and Real Image charges to the producers for every show which plays into the theatre. Now, because they want this charge they want the control of KDM which is the business we are into. We are not into VPF business. So if the control of KDM goes away from their hand to my hands then their main business which is VPF collection business that takes a ..because the producers and exhibiters may not give them the correct data as to how many shows are played in a day and what VPF should be collected. So they are desperate that they don't lose the control of the market through this KDM. So they are not allowing people like us to enter into the market and they are putting all this.

101. OP-3 has submitted that its agreements with CTOs do not tie mastering with the supply of DCEs, and CTOs are free to procure it from any service provider, even when DCE is procured from OP-3 under a lease model. OP-3 generates Qube specific KDMs using distributor-KDM ("Master KDM"), which is generated after mastering the film, and sends such KDMs to individual CTOs free of cost, as per the VPF option chosen and paid for by the distributor. Therefore, there is no restriction as such, on accepting content mastered by third-party service providers. In fact, around 54% of Bollywood and Hollywood content exhibited through OP-3's leased DCEs between 2016 to 2023, were mastered and cloned by third party PPP service providers other than OP-3. It has been submitted that OP-3 mandates procurement of other PPP services (cloning, encryption and delivery) under its Deployment Model to ensure that the content is screened only after entering the KDM issued by them, which in turn, is essential for accurate calculation and collection of VPF. It has been submitted that only when OP-3 is not able to provide content and issue KDMs, OP-3 charges a fixed one-time amount of Rs. 20,000/- from the CTOs for screening third party content. If OP-3 does not ensure collection of VPF, then the following counterfactuals arise: (a) If CTOs, which are primarily small proprietorship firms and MSMEs, are forced to pay increased rent (proportionate to the loss of revenue through VPF), their financial situation would worsen if they had to absorb the VPF charges through payment of higher rents; (b) If OP-3's revenue from VPF ceases, and such cost is not passed on to its CTO clients, it would increase OP-3's bankruptcy risk due to substantially reduced revenues, rendering its business models financially unviable. It is also pertinent to note that issues concerning quantum of VPF are no more res integra, as they have already been considered by the Commission in the Unilazer case.