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Trai proposals may thwart media growth

Its recommendation on corporate ownership is not in alignment with the need to get more capital into the sector

Vanita Kohli-Khandekar  |  New Delhi 

"It will kill the media," says Abhinav Shrivastava, an associate with the law offices of Nandan Kamath in Bangalore. He is talking of the Telecom Regulatory Authority of India's recent recommendation on of organisations. "By restricting corporate ownership, you will be clamping down on the sector's ability to raise funds as a whole," says Shrivastava. "On the face of it, Trai's recommendation looks untenable," adds Chinmayi Arun, assistant professor, National Law University, Delhi. "If the cannot be incorporated into a company, it cannot grow beyond a point. By not allowing it to corporatise, you could be crippling the media," says she.

Funnily enough, Trai's 23 recommendations on "issues relating to ownership" released last month are intended to do exactly the opposite. They are meant to foster plurality, independent journalism and build a stronger industry. While several of the recommendations are sensible, the one on is vexing lawyers, owners and investors alike.



recommends that "on grounds of the inherent conflict of interest, ownership restrictions on corporations entering the should be seriously considered by the government and the regulator. This may entail restricting the amount of equity holding/loans by a corporation in a company to comply with provisions relating to control." The three parameters it uses to define control are: equity holding of 20 per cent or more, 51 per cent voting rights or de facto control by means of being a party to agreements, contracts, or understandings. (Ironically , one of the conditions for getting into the news is that "the largest Indian shareholder should hold at least 51 per cent of the paid up equity".)

Rahul Khullar
uses various examples of to talk about how commercialisation of news is harming journalistic ethics, and has brought in practices like private treaties and paid news. It talks about how self-regulation has failed. Therefore, there is a need to use ownership as a lever for controlling quality and bringing plurality. "The marketplace for news is different but can you treat news commercially? In the name of pursuing commerce some abhorrent practices have come into play. What we have done is put the facts down," says Chairman

IT ISN’T EXCITING ENOUGH
The government has done immense harm to the plurality and quality of news in India. It blows up more than Rs 1,500 crore of taxpayer money every year on 33 television channels that only few people watch. Doordarshan is usually referred to as a “government mouthpiece” irrespective of the government in power. Prasar Bharati Corporation, which runs DD and All India Radio, is a bloated (32,000 people), inept body that has been deliberately kept that way. Compare it to BBC, funded by the British taxpayer. It is a world class broadcaster of both news and entertainment, dominates a competitive home market and has forced private broadcasters to get their act together. Is the government of India then qualified to be a owner? Yes it is, like any other citizen, entity or body in India.

The tricky questions
This is dangerous territory, say owners and lawyers, many not willing to go on record. The first question it raises is: "Who is a corporation? How do you define an 'eligible or ineligible corporation'? For instance, a corporate entity may not qualify, but its owner would - so the same person who owns a corporate entity which is ineligible could become eligible under the individual category. Wouldn't that go against the spirit of the guidelines? The guidelines should avoid such definitional booby traps," says Raghav Bahl, founder and non-executive director, Network18. According to Shrivastava, corporations came into being because they made it easier to raise funds and brought in transparency. There has been talk recently of raising foreign investment limits in news from the current 26 per cent to 49 and even 74 per cent. However, almost all the global are owned by corporations. How then do we reconcile these two conflicting policy statements - control on versus the need to get more capital into the sector?

For more than a hundred years, brands have been created and owned by corporations - in the US, Europe as well as India. The Malayala Manorama, one of the largest selling dailies in India, began in 1888 and survived some serious skirmishes with the British because its founders owned a rubber factory and a bank, among other businesses. The Essel group used its rice export business to finance Zee Television. Ramnath Goenka's other businesses helped finance The Times of India survived years of unprofitable existence because of the family's chemical and other businesses. "If you are in the business and want to get into IT, there is no restriction, so why should there be a restriction for anybody from any other industry getting into the media," asks Jayant Mathew, director, Malayala Manorama.

The recommendations completely ignore the economic realities of the industry. News is an expensive and unprofitable business globally. Advertisers cannot fund it completely and audiences are unwilling to pay for them. "If corporations can't fund it, that leaves only one other option, the underworld," quips one broadcast CEO in frustration. Khullar says that the ownership controls are designed to stop more damage to the in the future.

India is a free market, so how can anyone be stopped from getting into the media, ask experts. This then is the second question. "Instead of trying to impose ownership limitations which can be breached in a million ways, regulators should allow for full plurality and remove entry and exit barriers," says Bahl. Anyone can set up, own and run a company in a democracy and India's record so far has been wonderful - maybe too much so with thousands of newspapers and 135 news channels. About a third of these are owned by politicians and random real estate developers, making for some terrible news television. More than 60 per cent of the cable systems are owned by politicians who block other channels at will. So reiterates a suggestion made in 2008 that political, governmental or religious bodies or their surrogates should be barred from broadcasting and distribution of television signals. And any such body already into news should be provided an exit.

Bahl agrees with that. "They (religious and political bodies) are different - their objective is not to operate in a competitive market but to further a religion or a political party. The is a competitive economic activity and survives on advertising and other forms of commercial revenues, so only those entities should be allowed to participate which are mandated to compete in commercial activities," says he. Other supporters of the ban -the-politicians-from-news brigade point to Ofcom (the communications regulator in the UK) which regulates ownership by religious and political bodies. "Ofcom is a quasi-judicial body, it has (legal) competence," points out Shrivastava.

This then brings us to the third and most critical question: Trai's authority to make recommendations in the whole area of plurality and ownership. It is after all just the broadcast carriage regulator. The Competition Commission of India, according to Shrivastava, is the right body to regulate on issues of influence and dominance in any market, a point many firms have made to in their submissions.

The way out
doesn't agree with that view. It makes suggestions on cross-restrictions such as a newspaper with a dominating share in one market cannot own a dominating TV channel in the same market and vice versa. "The vertical and horizontal limits will take care of plurality. But to handle conflict of interest, you need regulation that is outside of the government. That is where a regulator would help," says Khullar.

Maybe giving teeth to self-regulatory bodies such as the or the News Broadcasters Association will be more effective, says one broadcast CEO. Others suggest getting the Union ministry of information and broadcasting out of the regulatory picture. Its conflicting roles, as the policymaker, regulator and one of the biggest advertisers, have created havoc with regulation for years.

The other is cleaning up the existing guidelines. For example, the rule that 51 per cent stake should be held by one Indian shareholder must go, says Bahl. As a first-generation entrepreneur, Bahl says he laboured under it "especially since our holding company was a news firm unlike Zee. By insisting on 51 per cent, by law you are mandating concentration of ownership, which is patently unfair, and also flies in the face of the current recommendation." He reckons control can be exercised through non-ownership limits - like insisting on a CEO and editor who are Indian residents.

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Trai proposals may thwart media growth

Its recommendation on corporate ownership is not in alignment with the need to get more capital into the sector

Its recommendation on corporate ownership is not in alignment with the need to get more capital into the sector "It will kill the media," says Abhinav Shrivastava, an associate with the law offices of Nandan Kamath in Bangalore. He is talking of the Telecom Regulatory Authority of India's recent recommendation on of organisations. "By restricting corporate ownership, you will be clamping down on the sector's ability to raise funds as a whole," says Shrivastava. "On the face of it, Trai's recommendation looks untenable," adds Chinmayi Arun, assistant professor, National Law University, Delhi. "If the cannot be incorporated into a company, it cannot grow beyond a point. By not allowing it to corporatise, you could be crippling the media," says she.

Funnily enough, Trai's 23 recommendations on "issues relating to ownership" released last month are intended to do exactly the opposite. They are meant to foster plurality, independent journalism and build a stronger industry. While several of the recommendations are sensible, the one on is vexing lawyers, owners and investors alike.

recommends that "on grounds of the inherent conflict of interest, ownership restrictions on corporations entering the should be seriously considered by the government and the regulator. This may entail restricting the amount of equity holding/loans by a corporation in a company to comply with provisions relating to control." The three parameters it uses to define control are: equity holding of 20 per cent or more, 51 per cent voting rights or de facto control by means of being a party to agreements, contracts, or understandings. (Ironically , one of the conditions for getting into the news is that "the largest Indian shareholder should hold at least 51 per cent of the paid up equity".)

Rahul Khullar
uses various examples of to talk about how commercialisation of news is harming journalistic ethics, and has brought in practices like private treaties and paid news. It talks about how self-regulation has failed. Therefore, there is a need to use ownership as a lever for controlling quality and bringing plurality. "The marketplace for news is different but can you treat news commercially? In the name of pursuing commerce some abhorrent practices have come into play. What we have done is put the facts down," says Chairman

IT ISN’T EXCITING ENOUGH
The government has done immense harm to the plurality and quality of news in India. It blows up more than Rs 1,500 crore of taxpayer money every year on 33 television channels that only few people watch. Doordarshan is usually referred to as a “government mouthpiece” irrespective of the government in power. Prasar Bharati Corporation, which runs DD and All India Radio, is a bloated (32,000 people), inept body that has been deliberately kept that way. Compare it to BBC, funded by the British taxpayer. It is a world class broadcaster of both news and entertainment, dominates a competitive home market and has forced private broadcasters to get their act together. Is the government of India then qualified to be a owner? Yes it is, like any other citizen, entity or body in India.

The tricky questions
This is dangerous territory, say owners and lawyers, many not willing to go on record. The first question it raises is: "Who is a corporation? How do you define an 'eligible or ineligible corporation'? For instance, a corporate entity may not qualify, but its owner would - so the same person who owns a corporate entity which is ineligible could become eligible under the individual category. Wouldn't that go against the spirit of the guidelines? The guidelines should avoid such definitional booby traps," says Raghav Bahl, founder and non-executive director, Network18. According to Shrivastava, corporations came into being because they made it easier to raise funds and brought in transparency. There has been talk recently of raising foreign investment limits in news from the current 26 per cent to 49 and even 74 per cent. However, almost all the global are owned by corporations. How then do we reconcile these two conflicting policy statements - control on versus the need to get more capital into the sector?

For more than a hundred years, brands have been created and owned by corporations - in the US, Europe as well as India. The Malayala Manorama, one of the largest selling dailies in India, began in 1888 and survived some serious skirmishes with the British because its founders owned a rubber factory and a bank, among other businesses. The Essel group used its rice export business to finance Zee Television. Ramnath Goenka's other businesses helped finance The Times of India survived years of unprofitable existence because of the family's chemical and other businesses. "If you are in the business and want to get into IT, there is no restriction, so why should there be a restriction for anybody from any other industry getting into the media," asks Jayant Mathew, director, Malayala Manorama.

The recommendations completely ignore the economic realities of the industry. News is an expensive and unprofitable business globally. Advertisers cannot fund it completely and audiences are unwilling to pay for them. "If corporations can't fund it, that leaves only one other option, the underworld," quips one broadcast CEO in frustration. Khullar says that the ownership controls are designed to stop more damage to the in the future.

India is a free market, so how can anyone be stopped from getting into the media, ask experts. This then is the second question. "Instead of trying to impose ownership limitations which can be breached in a million ways, regulators should allow for full plurality and remove entry and exit barriers," says Bahl. Anyone can set up, own and run a company in a democracy and India's record so far has been wonderful - maybe too much so with thousands of newspapers and 135 news channels. About a third of these are owned by politicians and random real estate developers, making for some terrible news television. More than 60 per cent of the cable systems are owned by politicians who block other channels at will. So reiterates a suggestion made in 2008 that political, governmental or religious bodies or their surrogates should be barred from broadcasting and distribution of television signals. And any such body already into news should be provided an exit.

Bahl agrees with that. "They (religious and political bodies) are different - their objective is not to operate in a competitive market but to further a religion or a political party. The is a competitive economic activity and survives on advertising and other forms of commercial revenues, so only those entities should be allowed to participate which are mandated to compete in commercial activities," says he. Other supporters of the ban -the-politicians-from-news brigade point to Ofcom (the communications regulator in the UK) which regulates ownership by religious and political bodies. "Ofcom is a quasi-judicial body, it has (legal) competence," points out Shrivastava.

This then brings us to the third and most critical question: Trai's authority to make recommendations in the whole area of plurality and ownership. It is after all just the broadcast carriage regulator. The Competition Commission of India, according to Shrivastava, is the right body to regulate on issues of influence and dominance in any market, a point many firms have made to in their submissions.

The way out
doesn't agree with that view. It makes suggestions on cross-restrictions such as a newspaper with a dominating share in one market cannot own a dominating TV channel in the same market and vice versa. "The vertical and horizontal limits will take care of plurality. But to handle conflict of interest, you need regulation that is outside of the government. That is where a regulator would help," says Khullar.

Maybe giving teeth to self-regulatory bodies such as the or the News Broadcasters Association will be more effective, says one broadcast CEO. Others suggest getting the Union ministry of information and broadcasting out of the regulatory picture. Its conflicting roles, as the policymaker, regulator and one of the biggest advertisers, have created havoc with regulation for years.

The other is cleaning up the existing guidelines. For example, the rule that 51 per cent stake should be held by one Indian shareholder must go, says Bahl. As a first-generation entrepreneur, Bahl says he laboured under it "especially since our holding company was a news firm unlike Zee. By insisting on 51 per cent, by law you are mandating concentration of ownership, which is patently unfair, and also flies in the face of the current recommendation." He reckons control can be exercised through non-ownership limits - like insisting on a CEO and editor who are Indian residents.
image
Business Standard
177 22

Trai proposals may thwart media growth

Its recommendation on corporate ownership is not in alignment with the need to get more capital into the sector

"It will kill the media," says Abhinav Shrivastava, an associate with the law offices of Nandan Kamath in Bangalore. He is talking of the Telecom Regulatory Authority of India's recent recommendation on of organisations. "By restricting corporate ownership, you will be clamping down on the sector's ability to raise funds as a whole," says Shrivastava. "On the face of it, Trai's recommendation looks untenable," adds Chinmayi Arun, assistant professor, National Law University, Delhi. "If the cannot be incorporated into a company, it cannot grow beyond a point. By not allowing it to corporatise, you could be crippling the media," says she.

Funnily enough, Trai's 23 recommendations on "issues relating to ownership" released last month are intended to do exactly the opposite. They are meant to foster plurality, independent journalism and build a stronger industry. While several of the recommendations are sensible, the one on is vexing lawyers, owners and investors alike.

recommends that "on grounds of the inherent conflict of interest, ownership restrictions on corporations entering the should be seriously considered by the government and the regulator. This may entail restricting the amount of equity holding/loans by a corporation in a company to comply with provisions relating to control." The three parameters it uses to define control are: equity holding of 20 per cent or more, 51 per cent voting rights or de facto control by means of being a party to agreements, contracts, or understandings. (Ironically , one of the conditions for getting into the news is that "the largest Indian shareholder should hold at least 51 per cent of the paid up equity".)

Rahul Khullar
uses various examples of to talk about how commercialisation of news is harming journalistic ethics, and has brought in practices like private treaties and paid news. It talks about how self-regulation has failed. Therefore, there is a need to use ownership as a lever for controlling quality and bringing plurality. "The marketplace for news is different but can you treat news commercially? In the name of pursuing commerce some abhorrent practices have come into play. What we have done is put the facts down," says Chairman

IT ISN’T EXCITING ENOUGH
The government has done immense harm to the plurality and quality of news in India. It blows up more than Rs 1,500 crore of taxpayer money every year on 33 television channels that only few people watch. Doordarshan is usually referred to as a “government mouthpiece” irrespective of the government in power. Prasar Bharati Corporation, which runs DD and All India Radio, is a bloated (32,000 people), inept body that has been deliberately kept that way. Compare it to BBC, funded by the British taxpayer. It is a world class broadcaster of both news and entertainment, dominates a competitive home market and has forced private broadcasters to get their act together. Is the government of India then qualified to be a owner? Yes it is, like any other citizen, entity or body in India.

The tricky questions
This is dangerous territory, say owners and lawyers, many not willing to go on record. The first question it raises is: "Who is a corporation? How do you define an 'eligible or ineligible corporation'? For instance, a corporate entity may not qualify, but its owner would - so the same person who owns a corporate entity which is ineligible could become eligible under the individual category. Wouldn't that go against the spirit of the guidelines? The guidelines should avoid such definitional booby traps," says Raghav Bahl, founder and non-executive director, Network18. According to Shrivastava, corporations came into being because they made it easier to raise funds and brought in transparency. There has been talk recently of raising foreign investment limits in news from the current 26 per cent to 49 and even 74 per cent. However, almost all the global are owned by corporations. How then do we reconcile these two conflicting policy statements - control on versus the need to get more capital into the sector?

For more than a hundred years, brands have been created and owned by corporations - in the US, Europe as well as India. The Malayala Manorama, one of the largest selling dailies in India, began in 1888 and survived some serious skirmishes with the British because its founders owned a rubber factory and a bank, among other businesses. The Essel group used its rice export business to finance Zee Television. Ramnath Goenka's other businesses helped finance The Times of India survived years of unprofitable existence because of the family's chemical and other businesses. "If you are in the business and want to get into IT, there is no restriction, so why should there be a restriction for anybody from any other industry getting into the media," asks Jayant Mathew, director, Malayala Manorama.

The recommendations completely ignore the economic realities of the industry. News is an expensive and unprofitable business globally. Advertisers cannot fund it completely and audiences are unwilling to pay for them. "If corporations can't fund it, that leaves only one other option, the underworld," quips one broadcast CEO in frustration. Khullar says that the ownership controls are designed to stop more damage to the in the future.

India is a free market, so how can anyone be stopped from getting into the media, ask experts. This then is the second question. "Instead of trying to impose ownership limitations which can be breached in a million ways, regulators should allow for full plurality and remove entry and exit barriers," says Bahl. Anyone can set up, own and run a company in a democracy and India's record so far has been wonderful - maybe too much so with thousands of newspapers and 135 news channels. About a third of these are owned by politicians and random real estate developers, making for some terrible news television. More than 60 per cent of the cable systems are owned by politicians who block other channels at will. So reiterates a suggestion made in 2008 that political, governmental or religious bodies or their surrogates should be barred from broadcasting and distribution of television signals. And any such body already into news should be provided an exit.

Bahl agrees with that. "They (religious and political bodies) are different - their objective is not to operate in a competitive market but to further a religion or a political party. The is a competitive economic activity and survives on advertising and other forms of commercial revenues, so only those entities should be allowed to participate which are mandated to compete in commercial activities," says he. Other supporters of the ban -the-politicians-from-news brigade point to Ofcom (the communications regulator in the UK) which regulates ownership by religious and political bodies. "Ofcom is a quasi-judicial body, it has (legal) competence," points out Shrivastava.

This then brings us to the third and most critical question: Trai's authority to make recommendations in the whole area of plurality and ownership. It is after all just the broadcast carriage regulator. The Competition Commission of India, according to Shrivastava, is the right body to regulate on issues of influence and dominance in any market, a point many firms have made to in their submissions.

The way out
doesn't agree with that view. It makes suggestions on cross-restrictions such as a newspaper with a dominating share in one market cannot own a dominating TV channel in the same market and vice versa. "The vertical and horizontal limits will take care of plurality. But to handle conflict of interest, you need regulation that is outside of the government. That is where a regulator would help," says Khullar.

Maybe giving teeth to self-regulatory bodies such as the or the News Broadcasters Association will be more effective, says one broadcast CEO. Others suggest getting the Union ministry of information and broadcasting out of the regulatory picture. Its conflicting roles, as the policymaker, regulator and one of the biggest advertisers, have created havoc with regulation for years.

The other is cleaning up the existing guidelines. For example, the rule that 51 per cent stake should be held by one Indian shareholder must go, says Bahl. As a first-generation entrepreneur, Bahl says he laboured under it "especially since our holding company was a news firm unlike Zee. By insisting on 51 per cent, by law you are mandating concentration of ownership, which is patently unfair, and also flies in the face of the current recommendation." He reckons control can be exercised through non-ownership limits - like insisting on a CEO and editor who are Indian residents.

image
Business Standard
177 22