Television Business in a Network Era

Tracing Regulatory Imprints on the Media Economy·

By Vibodh Parthasarathi°, Project Co-Director – TAD

 

Paper presented at panel Locating the Indian Media Economy, IAMCR, Hyderabad, 16-19 July, 2014

 

Looking back at the last 25 years, we are now able to more coherently decipher imprints of the enabling environment in creating a distinctive characteristic of media abundance in the TV business. The gigantic shift in the TV landscape following successive waves of de-regulation in the 1990s transformed the milieu of broadcasting from one of scarcity to that of energetic abundance. This transformation is usually explained by audience insatiable hunger for images & sound, the commercial acumen of domestic entrepreneurs, the ingress of global media actors, and changes in patterns of consumption by Indians at large. While these together do provide valid explanations of the historical shift in the TV economy, they does not take consider the role of state intervention in actualising and tempering the nature of this shift.

In examining the enabling structures of the TV industry, immediate focus tends to be on instances of explicit regulatory intervention. This unfolds through formal administrative, legal or legislative protocols that form the staple diet of policy analyses. In as much as each pinpointed instrument was designed to meet specific regulatory goals, cumulatively they far from suggest anything close to conceptions of a comprehensive media policy[1]. In fact, conspicuous in the policy history of the media economy in India is the repeated inability to forge legislative will or consensus, as the case may be, on sector-specific or integrated media policy[2].

Parallel to this, the enabling environment is, less visibly, defined by the persistent lack of regulatory response on certain challenges, over a long period of time. These policy silences not only convey a descriptive category but an analytical prism to understand the wider dynamics of economies under de-regulation. Such a frame for unravelling regulatory response shares with the idea of ‘negative policy’ the government’s “reluctance to develop new rules and to secure fresh legislation affecting the media”[3]. Different from regulatory vacuum, which is often short in duration and inadvertent in motivation, persistent silence in regulatory response reflects a deliberate shying away from defining or reformulating coherent statutes on known regulatory challenges in the TV industry over a long period of time. This conscious non-intervention is practised, as many instances will show, either to enhance or protect the interests of certain actors, or more generally to maintain status quo conditions.

The singular aim of this paper is to unravel the regulatory milieu shaping the TV business, from its genesis to its current transition into a network era. Or more precisely, how has regulatory intervention and non-interventions contributed to shaping the contours of the TV business in India? There are two primary sites to evaluate imprints of regulatory interventions in the TV business: the nature of entities participating in private broadcasting and distribution and, the competitive milieu designed for broadcasters and distributors to partake in.

The first section pinpoints the process of re-regulation, from the early 2000s, that transformed satellite broadcasting from its trans-border origins into a domestic enterprise—and, by the end of the 2000s, enabled both the boom in TV channels and the formalisation of the distribution business.

The second section unearths inter-related issues around competition and market power persistently met by regulatory silence— and identifies the public interest consequences and private interests served by such non-intervention.

Re-Regulation, or Elements of Strategic Intent

 

In this section, we review how regulation transformed broadcasting from its trans-border origins to a domestic enterprise at the beginning of the 2000s—and subsequently enabled conditions for the boom of TV channels. We also show how, concurrently, a process of graduated re-regulation evolved an unorganised, primarily local business of cable relays into a near-national, multi-platform distribution system by the end of the 2000s.

  • Regulating Broadcasting – Enabling Market Entry

The growth of private channels during 1990s prompted no coherent regulatory framework since essentially they represented a trans-border enterprise. Despite these C&S TV channels being in Indian languages, addressing Indian audience and often having majority equity by Indian citizens, there was no jurisdiction on the ownership and behaviour of these channels transmitting into India.

Low Entry Barriers for Eligibility

The decisive regulatory intervention was to de-regulate satellite broadcasting domestically, and permit channels, including news channels, to uplink their transmission from India. These regulatory protocols emerged not as a coherent framework but in an ad hoc manner via a series of guidelines. Known as the ‘Uplinking Guidelines’, starting from 2000 and cumulatively modified, they spell out the eligibility criteria for broadcasters to commence News and non-News channels from within India, as also setting up of Teleports and deploying news gathering/relaying equipment.

A potential C&S broadcaster has to obtain two licenses: a Grant of Permission Agreement from the MIB, and a Wireless Operational License from the WPC, after which, the broadcaster applies to the WPC for spectrum assignment[4]. There were separate licenses for channels planning news programming and all others, though the license-term for both was ten years. All thru the license term, companies uplinking one channel were required to maintain a net worth of Rs.30 million, and Rs.20 million for every additional channel. Maintaining low financial barriers/criteria to enter the business, including size of companies, indicated a regulatory environment keen to enable numerous, even small, companies to start TV channels.

FDI in News to limit participation

Uplinking guidelines, along with various ordinances and rules on other aspects of broadcasting, carried statutes pertaining to ownership. In 2002, we see the first specific intervention directly impacting on ownership in news media, when 26 percent foreign investment was allowed, in newspapers and news channels[5]. At least 51% of the total equity (excluding that held by Public Sector Banks and Public Financial Institutions) was to be held by the largest Indian shareholder; at least 75% of the directors on the board were to be resident Indians[6]. Entities making portfolio investment in the form of FII/NRI deposits were not to be treated as “persons acting in concert” with FDI investors. While calculating the foreign holding component for the above limit, the equity of foreign entities in Indian shareholder companies of the TV channel applying for uplinking permissions was reckoned as foreign holding. Thus, compared to the 100% FDI in Entertainment Channels and Advertising Companies, the regulatory caps of 26% FDI and 51% paid-up equity for News Channels suggests the “conditional liberalisation” of the media economy to protect the interests of domestic news broadcaster[7].

FII to appease global finance

Unlike the strategic and sectoral nature of FDI, often accompanied by domain expertise, Portfolio Investment aims for quick returns on invested capital is therefore highly mobile, entails short investment cycles and is not accompanied by any domain or technological expertise. The general thesis of “growing stock markets provide boost to economic growth” rests on the perception of the former playing two crucial roles: price discovery and providing liquidity[8]. There were three significant changes in the structure of financial institutions & markets in India that implied on media companies: increasing mobilisation of resources directly due to growing prominence/centrality of capital markets; increasing inter-linkages between domestic and foreign markets due to reduced barriers to capital mobility; and, propelling the emergence of new financial products and services, and blurring of the distinction between bank and non-bank organisations, caused by financial innovation.

The focus of second-generation reforms in India, coinciding with the IX Plan, was on strengthening the financial markets—institutions, rules and instruments of economic exchange. A crucial policy option exercised in early 2005 was permitting FIIs and OCBs in channels uplinking from India. FDI guidelines were relaxed in 2005 to allow FIIs, non-resident Indians (NRIs), and persons of Indian origin within this limit. Such investments were to be considered part of the overall foreign investment cap of 26 percent in news broadcasting. Media companies had long argued that the Companies Act allowed FII investment in various sectors, subject to sectoral foreign investment caps. The revised policy was envisaged to benefit stock prices of those news broadcasters that had little or no FII presence, like TV Today and NDTV, while not substantially benefiting those already having such significant investments, such as TV-18 which then had 15.39 per cent FII holding. Having won this battle, broadcasters were quick to suggest “that keeping a tab on FII investments in listed companies on a daily basis, where buying and selling happens on the markets, would be difficult”[9]— which our contention about the highly mobile and short-term life of FII. In the specific context of the media industry, we have been warned that ‘market forces are not necessarily synonymous with consumer interests’[10]. Thus, despite imposing caps on the space FDI in 2001, to appease domestic firms, within the available space a window was created for FII to appease global financial interests[11]—in the process encouraging the financialisation in public interest activities like news.

All in all, the initial regulatory framework was rooted in a set of guidelines stipulating, among other matters, basic ownership and foreign investment norms. Bereft of any deliberative process, these executive orders were inert to the legal nature of the entity seeking a TV license as long as it was a commercial company, the entity’s financial health or the sources of domestic capital it was rallying. In other words, these initial regulatory conditions indicate the shaping of a particular rendition of entrepreneurial dynamics in the TV economy. Maintaining low barriers, especially financial barriers, to enter broadcasting enabled numerous small, regional and sub-regional operations to start TV channels. Simultaneously large, national and semi trans-nationalised entities were provided timely opportunities to entertain hot-money and other financial instruments, including from overseas, to lubricate their horizontal expansion and creation of multiple media properties. Taken together, these executive interventions clearly convey the regulatory environment’s keenness to encourage considered forms of entry and expansion in broadcast industry.

  • Administrating Distribution – From Access to Revenues

There was no system of licensing in the cable distribution business at the retail or wholesale levels. The only provision in the Cable Television Networks (Regulation) Act 1995 mandated registration of cable operators with the nearest post office.[12] Licensing was made impractical retrospectively because of the 50,000-plus cable operators across India, though all of them were obligated to carry three channels of the public broadcasters. By the mid-2000s, licensing was found feasible at least at the wholesale level since MSOs were in limited number. In 2005 TRAI argued two advantages of introducing a licensing system under the Act: one, to provide government with a framework to ensure operators meet certain minimum conditions; and second, to provide a clear definition of the area and a basis for them to obtain financing.[13] Consequently, from 2006, MSOs had to get permission (not a license) from the MIB and declare their ownership and areas of operation.

Private DTH operators were licensed from the very start, in 2006 after Doordarshan’s monopoly ceased, principally because they required and occupied spectrum. Being a wireless carriage service, the financial stipulations for DTH were more tuned to Telecom licensees rather than Cable since they required a license fee for spectrum and a revenue share with the government[14]. Nevertheless like cable, DTH licensees retained the reciprocal 20 percent cap on equity investment by/into broadcast and cable companies. But they received a generous cap of 49% foreign investment, compared to 20% for cable[15]; and given their higher channel carrying capacity, public service obligations on Cable were extended to DTH licensees to facilitate access to 8 Doordarshan channels.[16]

On the whole, the regulatory framework for Cable and DTH was piece meal, since it was a product of many ad hoc interventions over 15 years. With negligible entry barriers, it addressed basic norms on FDI and vertical/horizontal caps and was preoccupied with leveraging Cable and DTH to widen access of the public broadcaster’s terrestrial channels. This was largely because the distribution sector of the TV economy was seen as an ancillary to the more visible and visibly remunerative broadcasting sector.

Rationale for mandatory digital switchover

By the late-2000s, the centre of gravity of the TV economy had moved from the broadcast to the distribution sector. Pay channels required an efficient distribution chain to realise greater subscription—not only because the highly fragmented value chain of distribution was unable to provide its due share of subscriptions but also because Ad revenues were getting diffused across competing channels, and platforms. It is here that the commercial compulsion to force a switchover from analogue to digital relays became increasingly intense, culminating in The Cable Television Networks (Regulation) Amendment Act, 2011. This mandated cable operators to digitize their relays and install addressable end-user devices according to a phased plan across the country. Beneath the populist rationale of digitalisation providing more channels and superior signal quality to viewers, stood three inter-related reasons pushing for the switchover:

First, since it was known that most LCOs would be unable or unwilling to invest capital in digitalising their systems, the switchover was expected to create a scenario wherein LCOs either sold-out or became franchisees of MSOs; this, in turn, was visualised to instigate consolidation in the long-tailed cable business whereby numerous, unregistered LCOs would get absorbed by the relatively finite/known number of MSOs. In other words, the compulsory switchover tactically served as a handmaiden for the accumulation of interests in the fragmented distribution value chain. Second, addressable distribution systems (like digital Cable or DTH) enable broadcasters, especially pay channels, to realise higher shares of subscription revenues from the distribution chain[17]. Moreover, digital transmissions enable not only distributors relaying more channels but also not extracting a placement fee from broadcasters. Thus, the mandatory digitalisation of cable, in which broadcasters are not compelled to finance, leads to higher revenues and lower costs for broadcasters. Third, addressable digital systems were expected to accurately identify subscribers and enumerate subscription amounts, thereby widen the net of households and intermediaries liable to pay tax on cable services. With nearly 100 million households being on Cable, an enhanced the tax base is envisaged to translated into a vital source of revenues for the exchequer.

Undoubtedly, increasing revenues for the three main actors in the value chain was the principal rationale for the re-regulatory practice termed as digitalisation. Not surprisingly, after The Cable Television Networks (Regulation) Amendment Act passed in December 2011, analogue MSOs wanting to go digital, rather than exit the business, had to apply afresh for a digital license. Moreover, existing digital MSOs also required to acquire a license—a step ahead from 2006 when for the first time MSOs had to seek permission to commence operations. Although this digital license, unlike broadcast licenses, is free and carries no minimum criteria of net worth, it requires disclosures by MSOs on their ownership, on the LCOs they conduct business with and the number of households they serve. With guidelines such as “must-carry” (cable operators have to carry all channels on a non-discriminatory basis) and “must-available” (channels must make themselves available to all distributors and cannot strike exclusive distribution deals), the enabling milieu sought to prevent—if compliance was enforced uniformly—threats of market dominance to mark the business of digital distribution.

 

Non-Intervention, or Contours of Considered Silence

The series of regulatory interventions from the Uplinking Guidelines of 2001 to the amended cable act of 2011 should not divert attention from policy silences equally marking this decade. This section spotlights inter-related issues in the terrain of competition that have been consistently met by negative policy; more specifically, how challenges in the policy framework of distribution and more generally of anti-competitive practices have been met by regulatory silence.

  • Puzzling Silences in Distribution Policy

Fifteen years after the Cable Act of 1995, there are not only a large numbers of players but different types of capital has been ploughed into distribution, including from local and sub-regional levels, from within and outside the media industries. There have been major technological: the introduction of CAS, the advent of DTH which created a whole new, wireless segment in the distribution sector, and digital cable in the traditional, wired-segment of TV distribution. On the face of it, the introduction of these three technologies convey elements of regulatory design: viz. CAS being made mandatory in pockets of 4 major cities through administrative ordinance in 2003; DTH services, disallowed in the late 90s, being given executive assent in the mid 2000s, and digital cable, introduced by some large MSOs in the late 2000s, being made mandatory, in a phased manner, though legislative statutes in 2011.

However, one has to look a bit deeper to find a critical set of regulatory silences.

Lack of Standards

The adoption of technical standards for the various forms of transmission and compression involved in digital distribution has not been uniform. TRAI’s Consultation Paper on Digitization of Cable TV in 2005 discussed the benefits of digitization, along with the timeframe, license, carriage and network upgrading, and other technical issues. Although TRAI recommended promoting the digitization of cable distribution, it left the option of Conditional Access System (CAS) digitization with the cable operators, since CAS can be implemented via analogue or digital transmission, and costs involved for small networks could be very high.[18] This vacuum precipitated a lack of standardization in the push toward digitization since MSOs and LCOs pursued different, potentially incompatible, technologies so as to minimise the burden on their financial and technical capabilities.

TRAI recommended technical interoperability be retained in DTH licensing to protect consumers[19], and in September 2007 issued a directive to DTH operators seeking to sort out interoperability issues.[20] The lack of technical standards and their compliance in DTH services has proved to be a bigger regulatory challenge for DTH services. The DTH License Agreement of 2003 required STBs to be of open architecture (i.e. non-proprietary) to ensure technical compatibility and effective interoperability among different service providers. In August 2010, TRAI issued a consultation paper after the implications of different compression, broadcasting, and encryption standards were realized. The regulatory vacuum on interoperability stands against public interest since it results in the costs of migration between service providers being placed on the subscriber/viewer. This leads to subscribers being effectively locked into particular DTH vendors, thereby typically facilitating first-movers in a particular geographical market to retain their advantage. The absence of coherent Interoperability protocols was noted by CCI[21]; since open STBs do not exist and DTH operators do not enable third party STBs to decrypt their signal, CCI saw in this an abuse of dominance[22]. Its investigation confirmed lack of Interoperability having adverse effects on competition. However CCI exercised forbearance while deferring the matter to TRAI and MIB who were long reviewing Interoperability protocols but not enforcing—despite TDSAT also directed them to enforce this within a specific time. Not having done so till date has inhibited genuine competition in the fastest growing segment of the TV distribution industry.

The decisions and debates emanating from all this suggest that until DTH licensing clauses on technical interoperability are fully addressed, the licensing framework will remain unfair to consumers, and possibly even to late-entrants.

Threats of Bundling

Digital multiplexes like MSOs, CAS and DTH providers tend to curate and price bouquets of individual channels into a range of, but pre-defined, service packs. These predefined bouquets contain varying quantum and permutations of channels—based on regional language channels[23], specific language feeds for one channel[24], channels belonging to one genre (for example sports or cinema channels) or a bouquet from one broadcaster that cannot be independently subscribed. Such as ‘Bundling’ of channels is based on channel popularity,[25] carriage fee paid by less popular channels to cable operators, type of programming mix, and bandwidth taken by the channel.[26]

Until à la carte pricing[27] was made mandatory, on Cable in 2010 and on DTH in 2011[28], it was possible to view certain channels of a broadcaster only by subscribing to the entire bouquet provided by it. While the retail price of channels on Cable got regulated by TRAI, the same is not so for DTH operators. This creates scenarios wherein subscribers find it more expensive to individually cherry-pick channels to create their own, taste-specific packs than buy any of the predefined service packs on offer. Like with Interoperability, the regulatory silence on Bundling benefits large broadcasters with multiple channels, and proves dis-advantageous to small, stand-alone channels. This creates an unfair competitive milieu in the wholesale market for channels, i.e. the market where broadcasters meet distributors; unfair terms here invariably also trickle-down to shape pricing of channels and service packs in the retail, household market.

Inefficacy of Interconnection

The Telecommunication (Broadcasting and Cable Services) Interconnection Regulation in 2004 aimed for broadcasters and distributors treating one another on non-discriminatory terms while providing/buying channels. This was as much to enable fair competition as to ensure a variety of channel-genres reach viewers. Nevertheless, for one, protocols mention “non-discriminatory” carriage of signals, and did not mandate ensuring a minimal combination of channel-genres. In other words, distributors are not encouraged to carry any specific permutation of genres (besides those specified by the public broadcaster) as long as they treated channels from all broadcasters equally. Thus, policy options turned a blind eye to ensuring diversity in the supply of channels. Second, interconnection protocols fell conspicuously short of their competition regulation aims. The Telecom Disputes Settlement Appellate Tribunal (TDSAT), the arbitration arm of TRAI, explored the ambit of the existing provisions in an important dispute over access to TV signals, Sea TV Network vs. Star India[29], between a broadcaster and an MSO. While Star India insisted Sea TV obtain signals from its designated distributor, Sea TV refused, arguing that the designated distributor was a competing MSO. While deciding in favour of Sea TV, TDSAT noted some broadcasters were very strong because of vertical integration (i.e. owning or controlling MSOs as well) leading to inherent disparities in bargaining power. Thus, the interconnection regulation failed to prevent unfair means being leveraged when MSOs controlled by broadcasters denied signals to their standalone competitors.

To see the three instances discussed above—Interoperability, Bundling & Interconnection—as snags in regulatory protocols, reduce matters to a narrow, technical grasp of the enabling environment. It is precisely the nature of these snags and gaps, the interests they serve and the consequences they bare that convey a sense of strategic, negative policy. For, regulatory inaction in all cases aide dominant interests—be it first-movers in the DTH segment, large broadcast networks and vertically integrated MSO—and, more widely, fails to stand up for public interest.

This brings us to perhaps the biggest instance of strategic silence—that of regulating market power. This opens on to a terrain of regulatory challenges criss-crossed by the inter-related matters of ownership, cross-ownership, vertical integration and market share.

  • Negative Policy on Anti-Competitive Regulation

We recall that the first-movers in broadcasting during the 1990s did not have interests in other sectors of the traditional or emerging media economy. But with the enabled boom of channels during the 2000s, the entry of dominant newspapers into TV and subsequently of large business houses—first into broadcasting and then into distribution— was inevitable. While the few instances of broadcasters expanding into the overcrowded newspapers sector is attracts surprise, it is not all surprising that majority of big business entering TV distribution were already running Telecom companies. Rudimentary insights from the ASCI study and various consultations papers by TRAI have found clear cases of market domination by diversified media groups in certain geographies[30].

Distribution Firms – Concentration & Abuse of Dominance

The TV distribution segment had substantially grown since 2006, and had come to include two, competing segments, Cable and DTH. There are no ex-ante restrictions to prevent market dominance for MSOs and LCOs in their area of operation (in a city, district, State or country). This is unlike in the FM radio sector; TRAI argued that while the scarcity of frequencies in a city called for restrictions in ownership of FM stations, no such resources are required to be allotted to MSOs for their operations[31]. Consequently, in some cities, MSOs have ended up with controlling more than 80 percent of the market; and in some states, a single entity has come to acquire several MSOs and LCOs[32]. While TRAI has shown concern on the implications of this “in terms of competition, pricing, quality of service and healthy growth of the cable TV sector”, it has failed to recognise near-monopolistic dominance[33]. Such MSOs are in a position to exercise market power in negotiations with the LCOs on the one hand, and with the broadcasters on the other. They leverage their accumulated interests to bargain with broadcasters for content at a lower price and demand higher carriage and placement fees; and based on this, are simultaneously in a position to offer better revenue share to LCOs as also dangle incentive to LCOs to move away from smaller MSOs and align with them.

One of the risks catalysed by concentration in the distribution is that of market foreclosure. Much like that catalysed by integration between broadcasters and distributors, high concentration enables a distributor to prevent a broadcast signal reaching viewers, either due to commercial or political considerations. TRAI’s Interconnection Regulations (2004) aimed at preventing MSOs to influence retail prices or deny carriage of channels of rival entities, does not seem to have sufficient legal legitimacy or power of compliance to check such anti-competitive behaviour. A prominent case of market foreclosure came to the Competition Commission of India (CCI) in 2011, when the news broadcaster Kansan News alleged a group of MSOs in Punjab together worked to deny market access to its channel. The CCI investigation revealed that not only three MSOs had acquired substantial market share in the state’s cable market, but one of them, Fastway Transmission, indirectly wielded control across the other two[34]. Despite CCI recognising and acting upon the silences on anti-competitive traits in the regulatory milieu, no statutory protocols were evolved either by TRAI or MIB.

TV Firms – Vertical Integration

Vertical integration among Broadcasters and MSOs had been anticipated by TRAI’s Interconnection Regulations (2004); it aimed to prevent anti-competitive behaviour like influencing retail prices, practicing content exclusivity and disable channels of rival entities from being relayed. Restrictions in the television distribution segment prevent the possibility of broadcasters with majority stakes in distribution companies gaining an unfair advantage. Broadcasters and cable distributors were barred from holding more than 20 percent of the paid-up equity of a DTH company, and vice versa. The subsequent DTH License Agreement stipulated a service provider neither to discriminate against any channel, nor to strike exclusive deals with broadcasters—viz. allow all broadcasters uniform access to their distribution platform. Likewise, broadcasters are compelled to share their signals with distributors on a non-discriminatory basis. What happens when a broadcaster finds an MSO to be an affiliate of a business group which also has its own, rival broadcast network? Case law generated by TDSAT reflects loopholes and non-compliance. Yet some media groups run TV, cable and DTH operations under different companies and management, such as the Essel Group (owners of the Zee TV network) and Sun TV Group, who do this via different legal entities connected through a maze of affiliate, “sister” companies. In its recommendations on media ownership in 2009, TRAI candidly admitted that legally the practice of proxy and indirect holdings “doesn’t violate the DTH license condition but defeats the basic intent of this restriction.”[35] Does the silence on Vertical Integration, despite its known implications on competition and diversity and disputes conspicuous at TDSAT, suggest tacit support for large, integrated entities?

Cross-Media 1 – Horizontal Expansion by Print Firms

On paper, cross-media caps exist barring print media firms to own more than 20 percent in broadcast firms, and vice versa. But through a maze of intermediary companies, large media conglomerates have managed fingers in all major segments of the media pie. A striking example is India’s largest news media company, Bennett, Coleman & Company Ltd (BCCL), a historically diversified portfolio comprising market leaders in the English daily and English business daily segments, besides significant radio and online presence. BCCL entered the TV news segment in 2006 with Times Now and subsequently the sub-genre of English business news with ET Now, without any regulatory hiccup. India’s quintessential media-leisure conglomerate Essel Group, has several news, entertainment, and film/music channels under the Zee brand in over ten regional languages, a strong business in the cable, DTH and HITS[36] segments, film production houses—all housed under different entities to sidestep legal violations and exploit regulatory loopholes. Seamless presence across a gamut of platforms empowers outlets to offer attractive advertising deals—they command steep advertising rates because of their ability to provide audiences across languages and platforms.

Cross-Media 2 – Horizontal Expansion by Telecom Firms

Much like regulatory silence empowered firms to expanded horizontally across content sectors in the news media, so with carriage firms. The most significant instance of horizontal carriage expansion involves Telecom firms. Since the late 2000s, group companies of leading telecoms, like Reliance ADAG, Tata and Bharti have ventured into DTH services, leveraging their strong on-ground presence and brands, either through subsidiaries (RCom and Airtel) or their group companies picking equity (Tata Sky). The latter route is common route for telecoms to achieve minority control in news channels (such as Birla Group’s Idea Cellular in Aaj Tak and Headlines Today, and Reliance ADAG’s RCom in Bloomberg UTV). But telecoms being one of the leading advertisers on TV, such moves carry incremental market power in the overall TV economy. The silence on effective regulatory protocols on cross-media provide an enabling environment for large entities, from within and outside the TV economy, to attain or consolidate market power. The risks emanating from the absence of cross-media stipulations—in the content and carriage segments alike—can only get enhanced in light of negative policy on market share regulations.

Cross-Media 3 – Corporate Entrants skewing market share

There are no market share restrictions for Indian media companies, save for FM Radio, which are not in the news segment. The licensing conditions for TV, elaborated earlier, do not have any inbuilt safeguards to prevent concentration; even after 10 years of spurt in TV channels, this regulatory challenge is marked by silence. Evidently this has helped big business, which stayed away from TV in the 19990s, to suddenly realise dominant share through acquisitions of leading broadcast networks, or controlling a media group with entrenched cross-media interests—both of which occurred in 2012[37]. Large entities, with deep pockets and traction across television, print, and online sectors, flex their muscles against others in the value chain. This gives rise to practices of nudging advertisers for discounts, third-party content producers, and “exclusive” interviews/information in return for broad coverage across their platforms, or, threaten a news blackout on their platform[38]. All such practices, catalysed in large part by negative policy in cross-media protocols, fall by the wayside of oversight mechanisms.

Corporate Practices enabling Share Dominance

For long there has also been regulatory silence on ownership disclosures; private, unlisted companies, as most media companies are, do not require divulging their secondary owners, financiers, or big lenders[39]. The practice of promoters and real owners using fronts with proxy stakes to lead their companies is rampant in India, especially in sectors like real estate—a sector, coincidentally, that has shown unusual interests in starting TV channels. Despite this, there is a tendency in policy thinking to view proxy ownership as a matter of corporate governance not media regulation—despite horizontal, cross-ownership being peculiar to media industries.

There are numerous known silences in the Companies Act adversely affecting the enumeration of cross-ownership, and consequently that of market power. These pertain to the mechanisms media firms adopt to sneak round to wield control over the decision-making process of another media firm. One such mechanism is indirect equity holdings of investors in media companies—thru tertiary co-investors—which masks the real nature of ownership. This translates into higher equity and affective control than visible in the formal caps of 20 percent in horizontal and vertical holdings—thereby also masking the extent of cross-media ownership[40]. Thirdly, indirect control is exercised thru common directors, more so when some of them are closely related. Persistent non-intervention here is extremely significant since for all the corporate discourse generated by the media economy, the traditional Indian model of family enterprises, with its signature of related directorships, still dominate the TV industry. Thirdly, regulatory protocols are mute on private contracts or legally binding agreements between the promoter(s) and board of directors of an investing firm and those of a recipient firm. Such contracts are signed regularly by private equity firms on taking minority stake in unlisted firms, like most TV news channels and cable operations are; this allows director(s) appointed by private equity firms “veto rights” over crucial board decisions across many media companies. Since a space was created for FII within FDI caps, as explained earlier, that catalysed tremendous PE involvement in the media economy, non-intervention on private contracts can only be explained in terms of strategic intent.

Being silent on all such mechanisms is cumulatively indicative of a purposive neglect of the financial conditions and entrepreneurial contexts within which TV firms have been operating.

In lieu of a Conclusion

We have unravelled the enabling environment that fashioned the TV industry through a complex of pinpointed interventions and forms of non-intervention. While the former largely shaped the nature of participants in private broadcasting and distribution, the latter tempered the terms at which these participants compete with each other. These together show that the persona of the TV economy is not solely a product of entrepreneurial gust and organic growth, but in large parts the result of a gestating set of active and passive enabling conditions.

From the early 1990s, successive political regimes in India were acutely self-conscious of not being (seen) intrusive in this sunrise sector of the Indian economy. Except for the loose protocols of Cable Act of 1996, there were no regulatory interventions in the sphere of satellite broadcasting and cable distribution; rather, attention was directed at the response of the PSB to the onset and expansion of commercial, trans-border broadcasting. When the process of Re-regulation got initiated, in 2000, the scope of interventions was circumscribed to tactfully minimal sites[41]. Initially, a discrete set of ad hoc and knee-jerk mechanisms aimed to strike a balance between trans-nationalisation and protectionism. At their core, all measures were geared to encourage the growth of broadcasting within the country, keeping in mind various interests that had come to be entrenched in or attracted by this business. These interventions were defined by their ability to catalyse and achieve a certain degree of entrepreneurial momentum and, at the meso-level, commercial buoyancy in the market.

In parallel, we also notice that moves away from minimal intervention to a more integrated regulatory framework, which were predominantly driven by apprehensions of market failure. Hence, whenever the buoyancy of participants carries a threat, however arguable, to the resilience and sustainability of the competitive milieu, a more concerted regulatory framework unfolded. Two examples of this we pointed out: first, when the boom of channels was perceived to carry risks of over-competition, fragmentation of ad revenues or financial infringements, the net worth of applicants for TV licensees was revised, thereby increasing financial barriers to market entry. Secondly, when broadcasters & MSOs received small, disproportionate shares of revenues from the value chain, addressable systems were made mandatory—first with CAS, the limited success of which inspired the holistic approach of DAS.

  • This paper emerged from research over two projects ‘Mapping Media Policy & Law in India’ (2010-2013) and ‘Tracking Access under Digitalisation’ (2013- ) at the Centre for Culture Media and Governance, Jamia Millia Islamia and supported by the Ford Foundation. Some ideas were shared at the symposium on The Indian Media Economy at Raglan in February 2014, supported by New Zealand India Research Institute and Faculty of Arts and Social Sciences, University of Waikato.

° Vibodh Parthasarathi, Associate Professor and Project Co-Director ‘Tracking Access under Digitalisation’, Centre for Culture, Media & Governance, Jamia Millia Islamia, New Delhi (vibodhp@yahoo.com) The author deeply acknowledges conversations at various times with Biswajit Das, Adrian Athique, Pradosh Nath and Alam Srinivas.

Notes & References

[1] K. Nordenstreng (1974) ’Comprehensive Communications Policies – an Example from Finland’, Mimeo

[2] A cross-country comparison around convergence regulation highlights India’s peculiar systemic reticence; see, Martha Garcıa-Murillo (2005) “Regulatory responses to convergence: experiences from four countries”; INFO Vol.7/1 (pp. 20-40)

[3] Freedman, D. (2010) ‘Media Policy Silences: The Hidden Face of Communications Decision Making’; The International Journal of Press/Politics Vol. 15/3 (pp.344-361) p.345

[4] Each uplink/teleport station is allocated a band of spectrum, or if the license is for a channel, the television channel is allocated a frequency after the license has been obtained and the WPC notifies the broadcaster regarding the appropriate license/spectrum fees.

[5] News Corporation was obliged to hive off its TV news channel Star News, launched in 1998, and house it under a joint venture, MCCS, with Kolkata-based media house Anand Bazar Patrika Group in 2003—a JV from which Newscorp exited nine years later, in 2012.

[6] Foreign news channels such as CNN, CNBC, and BBC News are allowed to downlink in India after setting up a registered office in the country; but they are not allowed to adapt either their content or their advertising for the Indian market.

[7] As was the case following the intense debate with FDI in newspapers in the early 1990s.

[8] They provide a fillip to the primary issues market and enable companies to undertake huge projects. The liquidity aspect provides incentives to the ultimate savers in the economy, by linking surplus units to ultimate borrowers; Abhay Pethe & Ajit Karnik (2000) “Do Indian Stock Markets Matter? Stock Market Indices and Macro-Economic Variables”; Economic and Political Weekly Vol.35, No.5 (Jan. 29 – Feb. 4) pp. 349-356

[9] “I&B ministry clears FII investment in TV news channels”; 30 December 2004 Indiantelevision.com’s News Room Headlines

[10] Renaud, J. (1993) ‘International Trade in Television Programmes: Quotas Policies and Consumer Choice Revisited’, in E. Noam & J. Millonzi (Ed.) The International Market in Film and Television Programmes; Ablex, Norwood/NJ (pp. 151–62) p154

[11] Although predominantly in the entertainment segment, PE did not leave the news segment un-attended and, especially from mid-2000s, have invested in traditional firms like, Warburg Pincus in Dainik Bhaskar (2004), DE Shaw in Amar Ujala (2006), Blackstone in Dainik Jagran (2010), and in new entities like by SAIF in TV9 (2010) and IL&FS Investment Managers Ltd. in Global Broadcast News. There have been similar forays in the distribution segment; in fact, Apollo Management’s US$100 million investment in Dish TV, amounting to 11 percent, was the largest PE deal in the media industry in 2009; FICCI-KPMG (2011) p.147

[12] http://tdsat.nic.in/books/THE%20CABLE%20TELEVISION%20NETWORKS%20(Regulation)%20Act.doc (accessed 7 July 2011).

[13] TRAI (2005), Consultation Paper on Digitalisation of Cable Television, New Delhi, January, pp. 20–21, at http://www.trai.in (accessed 27 April 2011). In 2002, TRAI had issued detailed recommendations for licensing LCOs and MSOs, but they were not accepted; see http://trai.gov.in/WriteReadData/Recommendation/Documents/finalreom5agust.pdf (accessed 27 April 2011).

[14] Revenue share was 10% of gross revenue; other conditions included a one-time entry-fee of Rs 100 million and a Bank guarantee of four times that amount; MIB, Guidelines for DTH Broadcasting Service in India, New Delhi, 16 March 2001, at http://www.indiantelevision.com/dth/dth11.htm (accessed 2 May 2011).

[15] But Telecom’s having DTH affiliates stood at a greater advantage since their FDI cap was 74%. After DAS, the FDI cap, and configurations there, were equalised to 74% across Telecom, DTH and Cable.

[16] MIM identified eight channels in 2007 to be carried as per DTH licenses, including DD National, DD News, Lok Sabha TV, DD Rajya Sabha (now Rajya Sabha TV), DD Bharati, DD Sports, DD Urdu Channel, and Gyandarshan.

[17] Broadcasters traditionally got 15-20 percent of subscription revenues—or nothing, if their unencrypted signals were illegitimately relayed by cable operators—and visualised their share in the digitized regime increasing to 40%. Such projections were based on experiences under the Conditional Access System (CAS) where they were accorded 45% of pay channel subscriptions, while 55% was shared between MSOs and LCOs; TRAI (2011) “Issues related to Implementation of Digital Addressable Cable TV Systems”, Consultation Paper No. 8/2011, TRAI, New Delhi (December) p.21. Higher revenues and lower costs was expected to enable channels becoming less dependent on advertising revenues or may provide additional streams of investments to make programming diverse and inclusive.

[18] For advantages of analog CAS, see Richard Chamberlain, “Conditional Access: The Digital vs Analogue Debate—The analogue viewpoint,” Indiantelevision.com’s CAS Update, 18 December 2002, at http://www.indiantelevision.com/headlines/y2k2/dec/dec95.htm (accessed 12 May 2012)

[19] TRAI, Recommendations on Licensing Issues Related to DTH, New Delhi, 2006, p. 7, at http://www.trai.in (accessed 11 July 2011).

[20] “TRAI Issues Directives for DTH Operators in India”, at http://www.techenclave.com/dth-cas-iptv/trai-issue-directives-dth-operators-india-97253.html (accessed 11 July 2011).

[21] In the first two years of CCI, despite high standards in abuse of dominance cases, some analysts are disappointed by its track record of finding and penalising violations. Aditya Bhattacharjea (2012) “India’s new antitrust regime- the first two years of enforcement”; The Antitrust Bulletin Fall Vol.57, No.3 (pp. 449-484). However its judgements since then have proved otherwise.

[22] Competition Commission of India Case No. 02/2009, Consumer Online Foundation Vs Tata Sky Ltd.

[23] For example, Tata Sky’s Tamil Regional Pack in January 2011.

[24] For example, Disney Channel is available in Tamil/Hindi/English/Telugu feeds, and users have the option to switch feeds.

[25] Clubbing high popularity channels with less popular channels.

[26] Interview with Mr Aravamudhan, Senior Manager–Regulatory Affairs, Star-India, New Delhi, January 2011, cited in Mapping Digital Media – India; A Country Study, The Open Society Foundation, London, 2010-13.

[27] Where the viewer/Subscriber has the option of choosing a discrete number of channels as per their choice, instead of taking a whole package.

[28] See http://www.dth.co/342/trai-orders-dth/ (accessed 5 June 2012).

[29] Petition No. 41 (C) of 2005 (2005), 5 Comp LJ 462 (TDSAT, 24 August 2005) cited in Vikram Raghavan (2007) Communications Law in India, Lexis Nexis (Butterworths), New Delhi (pp.602-603)

[30] ASCI (2009) Study on Cross-Media Ownership: A Draft Report; Compiled by Administrative Staff College of India, Hyderabad; TRAI (2013) Consultation Paper on Monopoly/Market dominance in Cable TV services, Consultation Paper No. 5/2013, Telecom Regulatory Authority of India, New Delhi (June)

[31] Ex-ante restrictions to prevent market dominance exist in the FM radio sector: “No company or Group of companies can operate more than 40% of the total FM Radio channels in each city and the total channels that a company or Group of companies can operate cannot exceed 15% of all channels allocated in the country.” TRAI (2013) Consultation Paper on Monopoly/Market dominance in Cable TV services (p.15)

[32] This is based on share of set top boxes seeded by the top 5 MSOs in Phase I and Phase II of the mandatory switchover to digital cable distribution; since state-wise subscriptions are unavailable, the share of STBs seeded in DAS market is used as a proxy for market share of the entire state.

[33] TRAI (2013) Consultation Paper on Monopoly/Market dominance in Cable TV services, Consultation Paper No. 5/2013, Telecom Regulatory Authority of India, New Delhi (June) p.1. TRAI went on to say “In case the loss in consumer welfare due to inadequate competition outweighs the gains from economies of scale, measures will obviously be required for promoting competition.” (p.7)

[34] M/s Kansan News Pvt. Ltd. v. M/s Fastway Transmission Pvt. Ltd. & Ors., Competition Commission of India – Case No. 36/2011 (order dated 3 July 2012) http://www.cci.gov.in/May2011/OrderOfCommission/362011.pdf (accessed 26 November 2012) The CCI imposed penalties of over Rs.80 million on the MSOs for violating provisions in section 4(2)(c) of the Competition Act 2002.

[35] TRAI (2009), Recommendations on Media Ownership, Telecom Regulatory Authority of India, Government of India, New Delhi, 25 February, Chapter 2, point 2.7.

[36] Acronym for ‘headend in the sky’, an alternative/competing broadcast signal distribution technology

[37] The diversified Aditya Birla Group, picked up a 27.5 percent stake in Living Media Group, owners of a newspaper (Mail Today), several lucrative periodicals (including India Today and Business Today) and a news network—anchored by the top ranked Hindi news channel Aaj Tak—under a listed entity, TV Today Network Ltd.

[38] Mapping Digital Media – India; A Country Study, The Open Society Foundation, London, 2010-13 (p.102)

[39] A case in point is RIL’s investment in the Eenadu Group, a large, privately held media company owning a dominant regional newspaper and news channels in 7 different regional languages: RIL did not publicly disclose its shareholding in this Group until 2012 when it announced that it was divesting part of this to the Network18 Group.

[40] This was the modus operandi of global telecom firms (Vodafone) to bypass FDI caps in their Indian arms. It is also common for large integrated Indian media companies (Zee/Essel) to use a cluster of trading entities, directly or indirectly owned by them, to co-invest in its ventures in TV news channels, TV non-news channels, Cable and DTH—thereby exercising deciding control, while on paper maintaining legally permissible holdings.

[41] Minimalism was also the central reason why an overarching regulatory body for the TV industry has not been created—despite all committees since 1991 urging various regimes to do so, starting with the Varadan Committee of 1991 recommending a Broadcasting Council of India. This is also surprising since in the aftermath of deregulation in the 1990s, many other sectors of the economy have seen regulatory bodies being created. Although matters of TV were appended to the mandate of the Telecom regulator, in 2000, the institutional design of the regulator empowers it to only make recommendations, not implement or administer, policy options.

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