Trai cracks the whip: Restrict market share to curb cable monopolies

The Telecom Regulatory Authority of India (Trai) on Wednesday recommended measures to curb monopoly in the cable TV market, after the information and broadcasting (I&B) ministry had sought the regulator’s views on the matter.

According to the recommendations, no single multi-system operator (MSO) can have more than 50% of the market share in a state.

“Market dominance should be determined based on market share in terms of the number of active subscribers (registered users) of MSOs in the relevant market,” Trai said in a release. The authority has also said the Herfindahl–Hirschman Index (HHI) should be used to measure the level of competition or market concentration in a relevant market.

HHI is calculated by summing the squares of the market share of each competing firm. If there were only one firm, it would have 100 per cent share, and HHI would equal to 10,000, indicating a monopoly. If there were thousands, each would have market share just close to zero — HHI would be close to zero, indicating nearly perfect competition.

Cable operators cheer
While representatives from DEN, Hathway and InCable were unreachable or unavailable for comment, the cable operators’ federation welcomed the recommendations. Said Roop Sharma, president, Cable Operators Federation of India: “We welcome the move and hope that I&B ministry would accept the recommendations. What we think is also important is the recommendations talk about monopoly in states. We would like Trai to also recommend on monopoly in cities. Cities are where maximum monopoly exists and there should be a way to curb that.”

Trai also recommended that the threshold value for any individual or group entity contribution to the market, HHI should not be more than 2,500, essentially keeping the market share at 50 per cent. Although some stakeholders had proposed 60 to 80 per cent market share as the threshold, Trai said 50 per cent would be optimum.

“A 60-80 per cent market share of any particular entity in a relevant market would result in a HHI of more than 4,000. Markets with such a large HHI value are considered highly concentrated and result in restricting competition in the market. At the same time, a very low threshold value for market share of an individual or group entity may not help in reaping the benefits of economies of scale,” Trai said.

The MSOs will also have to bring down their market share within 12 months, if they command more than 50 per cent market share through its group entities or control in a local cable operator (LCO) from the date of issue of guidelines.

In addition, the authority has also made it clear that any MSO which has 50 per cent market share should not be permitted to merge with or acquire the control of any other MSO/ LCO.

The regulator has also said all mergers and acquisitions in the sector would have to be brought to the notice at the beginning and should be taken forward after approval from the authority. The pre-requisite for getting approval in such a case would be that the contribution of the resultant entity should not be more than 50 per cent market share.