Panel for delinking licence and spectrum in FM Radio

The committee of ‘Review of Spectrum Usage Charges’ has recommended that FM radio frequencies may be auctioned by the Department of Telecommunications (DoT) after being delinked from the broadcast license of the Ministry of Information and Broadcasting (MIB).

The proposal is aimed at expediting the third phase of expansion of the FM radio industry, by bringing about greater clarity in the roles and the assets of the two ministries. A senior official at MIB said that the ministry is looking into the issue.

Farokh Balsara, leader, media and entertainment practice (India, Europe, Middle East and Africa), Ernst & Young, said, “What is happening because of the spectrum issue is that expansion in the radio industry is getting held-up. Once the license is delinked from the spectrum, the auction process would get expedited.”

The delinking would eradicate confusion about the valuation of radio spectrum and distribution of auction proceeds that the existing system of auctioning of FM broadcast licenses (inclusive of radio frequency) by MIB is likely to result in.

Earlier in July last year, the government had cleared the policy for the third phase of expansion of FM radio by permitting e-auctioning of 839 new private radio stations - the highest number of stations and cities ever offered. The auction is expected to help the government earn about Rs 1,733 crore from auction fees in 227 cities. The I&B ministry has indicated it would award all licenses by 2015.

In the last two phases the government had offered 250 stations across the country to the private sector in 86 cities. The Phase I and Phase II policies have resulted in total revenue accrual of around Rs 1,733 crore up to May this year through one time entry fee, migration fee and annual fee.

At present, the radio industry in India, which has around 36 FM radio operators, is estimated to be valued at Rs 1200 crore. Once all the licenses are sold, stakeholders say revenues would double and the number of stations will increase four-fold to over 1,000 centres.

“The Inter-frequency Gap in FM radio currently stands at 800 Hz, which is double as compared to norms prevalent globally. Once spectrum is delinked from licensing, it would become easier for DoT to reduce the gap and make available a larger number of frequencies for bidding. The increased supply may helping in addressing concerns about e-auctioning irrationally hiking spectrum/license prices in the industry”, said an industry expert on condition of anonymity.

The FM Phase III policy is crucial as it will help the medium enter new geographies. The expansion will further aid in improving radio’s share in the advertising pie from the present five percent to about 7.5-8% by 2017. in mature markets such as the United States radio's share in the overall ad pie stands at around 10%, despite rise of newer media like the internet.