Monday, 16 September 2013

FDI Increased for Broadcasting Sector

The Telecom Regulatory Authority of India (TRAI) has given its Recommendations on 22nd August 2013 on the subject of FDI in broadcasting, recognising the growing convergence between the broadcasting and telecom sectors increasing the FDI cap to 100 % for distribution platforms like DTH, MSO and IPTV, bringing it at par with the telecom sector. The Authority has been broadly guided by the principles of ensuring a level-playing field between competing technologies and maintaining consistency in policy across both sectors. Due to convergence of telecom and broadcasting technologies, telecom as well as broadcasting networks can be used to provide broadcasting carriage services. Ministry of Information & Broadcasting had sent a reference to the Authority dated 12th July 2013, indicating that the Government is re-examining the current FDI policy with a view to easing FDI inflow and liberalising the limits/caps.
Earlier the TRAI had taken up the issue in August, 2004, September 2005, March 2006, and October 2007, given its recommendations, suo motu, on the subject of FDI in the broadcasting sector.
On December 11, 2007, the Ministry of Information and Broadcasting (MIB) sought a comprehensive set of recommendations from the Authority on FDI in the different segments of the broadcasting sector. The Authority gave its recommendations on 26th April 2008. In 2009, Department of Industrial Policy and Promotion (DIPP) modified the methodology of assessment of foreign investment in Indian companies vide its Press Note Nos. 2 and 4 of 2009. In view of this, the ministry on September 30, 2009 once again made a reference to TRAI to revisit the recommendations on FDI in the broadcasting sector. The Authority gave its recommendations on 30th June 2010. Based on the views expressed by the Government, these recommendations were partially revised on 3rd June 2011. In line with the last recommendations of TRAI, the FDI limits and approval route for various segments of the broadcasting sector were revised by the Government on 20th September 2012. 
A table showing the present recommendations is given on the page. Broadcasting services can be broadly grouped into carriage services and content services. Carriage services essentially provide the medium for carriage of content/ information. This category broadly refers to cable TV services, DTH services, terrestrial TV services, Headend in the Sky (HITS) services, mobile TV services, IPTV services and teleport services. Technically, it is possible for cable TV networks to also provide voice telephony and broadband. Similarly, the modern telecommunications networks are capable of triple play, i.e. offering voice, video and data services; In short, carriage services are in the nature of infrastructural services. They provide the pipes through which content service providers deliver content to end-users.
Content services pertain to creation and packaging of content. Broadcasters fall in the category of content service providers. A TV broadcaster is primarily a provider of content and this content is delivered to the end user by a carriage service provider.
Most of the stakeholders, including the industry associations, DTH operators, FM radio operators, teleport operator, broadcasters etc. have supported the proposed enhancement of FDI limits in carriage services from 74% to 100% in the hope that it will speed up the pace of digitization across India. This will also help build information highways of the future that will support India's economic development and enable the social infrastructure.
According to TRAI the very presence of foreign firms contributes to overall productivity, aids the cause of competition as domestic industry gradually replicates and builds up the best practices institutionalized by such foreign firms. Thus, allowing such foreign firms to have an establishment in the country also enables better enforcement of checks and balances and ensures greater accountability.
However, the facts tell a different story altogether Cable Operators Federation of India (COFI) has opposed any further increase in FDI in broadcasting sector at this point of time that the Government must regulate use of foreign funds so that it helps in the building up of infrastructure and growth of indigenous businesses. It has proposed that the enhancement of FDI limits should have certain strings attached to it e.g. allow FDI only when the MSO is ready to invest certain percentage in rural areas, the MSOs build two way broadband triple play networks etc.
Some stakeholders have stated that even though FDI limits were liberalised to 74% for broadcast carriage services in September 2012, there is hardly any funding that is coming in from abroad. They have attributed it to the restrictions on vertical integration, presently in place for platforms like DTH, HITS and IPTV in India. They have further stated that unlike India, major stakeholders in the media space abroad are all vertically integrated as there are hardly any restrictions on vertical integration.
A DTH operator has said that the business of providing television service to viewers through the DTH platform is capital intensive and the investments have a long gestation period. Thus, investment in the DTH business is suited for strategic global investors who have already invested in content production and/or distribution. They have argued for relaxation in the restriction whereby broadcasters cannot have more than 20% stakes in a DTH company. 
Government was contemplating enhancement in the FDI limit for telecom services to 100% and that the ongoing digitisation of the cable TV services in the country would give a big impetus to the convergence of the broadcasting and telecom infrastructures, the consultation paper proposed the same limits and route, to be made applicable to the carriage services in the broadcasting sector.
On the suggestion of attaching strings to the FDI investment in MSOs networks like rural coverage, the Authority is of the view that no such conditions linking such obligations to the type/nature of investment can be mandated. The stakeholders, including the MSOs, have their own business models and seek investments accordingly. Therefore, prescribing any conditions regarding the same may be detrimental to their business interests. Moreover, prescribing any such conditions will place the MSOs in a disadvantageous position vis-a-vis their competitors viz. the operators of DTH and HITS platforms.
Recommendations of TRAI
i. The Authority recommends that FDI limit should be enhanced to 100% in the broadcast carriage services i.e. Cable TV, DTH, IPTV, Mobile TV, HITS and Teleport.
ii. The Authority recommends that FDI in broadcast carriage services up to the level of 49% should be allowed on the automatic route and beyond 49%, FDI should only be allowed with prior approval of the FIPB.
iii. The Authority recommends that the Government should ensure that the process of FIPB approval is streamlined and the requests for FDI are processed in a time bound manner.
Television Content Services
i. Downlinking of channels and Uplinking of non-„News and Current Affairs TV channels.
 It has reasoned that giving controlling stake in content, especially in news segment, to foreigners may lead to the danger of gradual manipulation of the public views and ultimately can destroy the delicate fabric of composite culture and value system as well as the secular credentials of the country.


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