Thursday, 10 October 2013

Small Businesses must be protected

When in 1994, the Ministry of Industries declared Cable TV Operation as a Small Scale Service and Business Enterprise (SSS&BE) no one knew that this will remain on papers only. However, thousands of cable operators who joined the mushrooming industry were hopeful of a bright future. Little did they know that the Big Brothers in the form of MSOs had arrived to usurp their lucrative business. The first shock to them was when they went to register as small scale business in the state departments numerous hurdles were waiting for them like getting clearances from various departments.
Pay channels, entertainment tax, service tax problems made their life more miserable and the Cable TV Act instead of putting ointment on their wounds sprinkled salt over them. MSOs made sure that every type of hurdle was put in their way till they came to them for help.

Now the government has joined the broadcasters and the MSOs to finally remove them from the scene altogether. After two years of DAS amendment being enacted, small cable operators are still in a state where they do not know whether there is anything good or bad for them, Independent broadcasters are unable to distribute the channels despite digitisation due to monopolistic practices of the Aggregators and their ally MSOs and DTH.
Even during TRAI’s Open House Discussion on aggregators and distribution agents, Rajdeep Sardesai of IBN18 network pointed that his channel, inspite of being very popular was not carried in Nashik. However he avoided to say that it was one of the vertically integrated MSO who refused to carry his channel because his channel was the part of another aggregator’s bouquet.
Regulator must Protect the interests of small businesses.
It is important for the Regulator to understand that the basic structure of the industry rests on thousands of small entrepreneurs, both broadcasters as well as cable operators who own the last mile. It is in the interest of the Nation and the public at large that the regulator must protect the rights of these small business entrepreneurs like FCC did in the USA from where most of these large broadcast groups have come to dominate the Indian Market. An extract from the US Regulator FCC’s website as given below tells how it protected the business of small players when the industry was going through consolidation some 25 years ago:-
“The FCC aims to craft rules and guidelines that enable small businesses and the spirit of entreprenuership to blossom. Much of the FCC’s mission directly impacts the small business community. Many of the recommendations in the National Broadband Plan were designed to help small businesses and entrepreneurs use new communications technologies.
The FCC’s Office of Communications Business Opportunities acts as principal advisor to the Chairman and the Commissioners on issues, rulemakings, and policies affecting small, women-and minority-owned communications businesses.
The FCC has also entered into a strategic partnership with SCORE, a non-profit small business consultation group, and the Small Business Administration to provide direct, hands-on instruction on leveraging broadband’s power for small businesses.”
Our own policy of Universal Licensing separated from Spectrum as introduced this year may encourage thousands of cable operators to offer broadband services to help the Indian economy to grow. But this can be done only if TRAI helps to frame such regulations that help the small businesses to participate fully and without any apprehensions in the digitisation scheme. Some reforms are listed below. 
 Licensing Fee : There should be different licensing regulations for the small operators including fees for small businesses. It is unfair to charge Rs one lakh as license fee from  an independent MSO operating in a small area of a city when a  national MSO pays the same amount for the whole nation. It is also not justified that a DTH operator pays 10 crores as entry fee for operating in the same area where a National MSO is operating after paying just Rs one lakh.  Similarly, it is unfair to charge an international Broadcaster the same amount as License Fee as from a small regional broadcaster.
• Advertisement cap Duration : Small broadcasters cannot afford to run subscription based Pay TV channels. It is only the large international Pay TV groups who dominate in the subscription television. Hence there should be different Advertisement duration caps for FTA channels and ‘Pay’ Channels because pay channels apart from subscription have many avenues to earn revenue like advertising, commercial subscriptions, international sales etc.  Licensing a large number of FTA channels helps the industry control costs to subscribers which is very essential for a country like India where large number of subscribers are ‘Poor’.
• Registraion Fee for FTA Channels : There should also be a difference in what a small broadcaster pays as registration fee for an FTA channel and what is paid by the Pay channel.
• Cable Operators’ Business must be protected : Business of registered cable operators is not protected. In the DAS regime, LMO depends totally at the mercy of the MSO or distributors who even sign on their behalf on documents taking advantage of their low education and lack of legal knowledge. They are made fools giving verbal assurances and then their networks are usurped. They cannot even afford to go to courts against this powerful distribution mafia.
LCOs approaching Courts
Many LCOs either individually or as an  Association in different states are approaching the courts for resolving their issues with the regulations. Before the 2011 Ordinance, they collectively or individually resolved their issues with Broadcasters as well as MSOs in their own way, mostly using support of their subscribers or local administration that they have served for years providing entertainment and other services in a very personalized way. However, now the law has been made completely against them and in favour of the very people against whom LCO was fighting since the beginning. So now LCOs have no other option left than to fight against the unfair law. So LCO is approaching the courts to get the relief. Major issues that are worrying  are:-
1. LCO’s business, his revenue as well as consumer relations and billing has been put under the control of the MSO.
2. MSO who supplies signals to the LCO has legally been allowed to be his own LCO too since he can make direct connections in subscriber homes. Thus situation is same as in the case of an MSO being the distributor agent of a pay channel aggregator, supplying content to his competing MSO in the same city. In fact Supreme Court in the case of Sea TV v/s Star India has categorically stated that such an arrangement is against law and natural justice and cannot be permitted.
3. The revenue share of LCOs which was very low to keep up the standards of service in the CAS regime has further  been lowered to make it completely  unviable to sustain their business. But government ‘s expectations from these small entrepreneurs have doubled. Convincing consumers to pay Rs 1000 or more for a set-top-box and pay twice or thrice for the monthly services is no mean task. And after collecting the revenue he is supposed to hand over all money to the MSOs who will decide how must should the LCO be paid.
It appears that I&B Ministry had wrong advisors or ill informed ones when the DAS Ordinance was drafted. This is the reason that many regulations are under fire and revision and we expect courts to take notice of the many more unfair regulations for the LCOs who have been struggling against all odds to keep their customer base intact.
Frame Separate Regulations for Small Businesses
Many large MSOs and Pay TV broadcasters have been making statements praising the regulations of mandatory digitization and comparing them with the industry environment in the US. However, they fail to understand that what consolidation phase we are undergoing now happened in the US 25 years ago. Small operators existed there too but separate regulations were made to protect them.
Like in the USA, TRAI can even frame separate Tariff Regulations and interconnect regulations based on laid down criteria. US Regulator FCC does not regulate the tariff of a small cable operator but have regulations for large networks. FCC website on the subject states :-
“How Cable TV Rates Are Regulated
Your LFA -- the city, county or other governmental organization authorized by your state to regulate cable television service -- may regulate the rates your cable company charges for the basic service tier. The basic service tier must include most local broadcast stations, as well as the public, educational and governmental channels required by the franchise agreement between the LFA and your cable company. If the FCC finds that a local cable company is subject to “effective competition” (as defined by Federal law), the LFA may not regulate the rates it charges for the basic service tier. The rates charged by certain small cable companies are not subject to regulation - they are determined by the companies.
Your LFA also enforces FCC regulations that determine whether a cable operator’s basic service tier rates are reasonable, as well as reviews rate justification forms filed by cable operators. Contact your cable operator and/or LFA if you have any questions about basic service tier rates.”
Broadcasting Sector can not be considered at par with Telecom Sector at this stage.
Regulator has been always comparing Broadcast sector with Telecom sector from point of view of regulations. It is well known that Telecom sector has been organized from its inception. Both the sectors can never be placed at the same level. Government did everything to help the telecom industry to create the basic infrastructure where as Broadcast sector has not even come out of its fragmented and disorganized state.


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