Clarity in broadcast

Trai's recommendation on restricting the equity of a broadcaster in cable and DTH cos is good

It is difficult to quarrel with the thrust of the Telecom Regulatory Authority of India’s (Trai) latest set of recommendations on restricting the amount of equity that a broadcaster can have in distribution companies such as cable, direct-to-home (DTH), and headend-in-the-sky (HITS). Trai has recommended that no entity that has more than a 20 per cent stake in a broadcasting firm should be allowed to own more than a 20 per cent stake in a distribution firm. Though every distribution firm is mandated to offer equal access to all customers, the reality is that there are several ways to subvert this objective. So, if a distribution company Distco is owned/controlled by Broadcaster A, all that Distco needs to do is to delay giving Broadcaster B access to its distribution network; if Distco hikes the carriage fee to very high but non-discriminatory levels, this can cause huge losses to Broadcaster B, while for Broadcaster A the loss will be made up by the profits in Distco’s books. And if Distco is a cable network with a limited number of ‘prime’ channels, it can give Broadcaster B’s channels the non-prime slots; the list goes on. That is why it is better to have ownership restrictions, which restrictions already exist for DTH firms. There are no such caps when it comes to cable or HITS firms; if Trai’s recommendations are accepted, these firms will get up to three years to conform to the new rules.

That is not the full story. There are different rules for different media at a time when convergence is the direction in which everything is moving. So, though this is not part of Trai’s mandate/recommendation, how do you justify 20 per cent FDI caps for DTH, 49 per cent for cable TV and 74 per cent for telecom? More important, with the new foreign investment guidelines, how are these caps to be enforced since, for all practical purposes, foreigners can own more than 90 per cent of a company in terms of beneficial interest, and still be within the overall sectoral caps? Also, while the new rules are based on the assumption that beneficial ownership through a series of holding companies does not matter, caps such as the one that Trai is trying to impose will have to take into account all beneficial ownerships.

Trai has chosen to steer clear of the minefield of cross-media ownership — should a television firm, for instance, be allowed to hold a stake in a newspaper, or vice versa? Trai has limited itself to saying there should be safeguards to ensure that plurality and diversity are maintained, and asked the information and broadcasting ministry to do a study of the market and put its analysis in the public domain before any safeguards are put in place. But if vertical integration (a broadcaster also owning the distribution company) is a bad thing, can horizontal integration (a TV firm owning a newspaper, or the other way around) be a good thing? The answer depends on the level of competition in these fields. If you take the case of Sun TV in Tamil Nadu, which has dominance in broadcasting as well as distribution control, and which then moves into a newspaper that achieves rapid growth in circulation, there is the real danger of other voices getting muffled—especially so when the media group concerned has strong political connections as well.