Trai proposes ownership curbs, independent regulator for media

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India’s telecom and media regulator on
Tuesday recommended an independent
regulator for the media, barring political
parties and government departments from
entering either broadcasting or TV
distribution (through cable and direct-to-
home, or DTH, TV), and suggested a formula
for calculating “media dominance” that will
likely affect at least some media companies in
some markets.
The recommendations and suggestions—it is
up to the government to accept them—are
likely to prove controversial and immediately
provoked an adverse reaction from Big
Media.
The Telecom Regulatory Authority of India
(Trai) also said the government and the new
regulator that will be created should
“seriously consider” ownership restrictions on
companies entering the media business.
Media companies, some political parties, and
at least some state governments are likely to
have issues with the proposed regulations.
Trai has recommended restrictions on cross-
media ownership, but only if a media
company has dominance across print and
television. The regulator calls this horizontal
dominance (as opposed to vertical
dominance, which is leadership of one
segment).
The dominance will be calculated by the
Herfindahl-Hirschman Index (HHI), and be
market-specific, which could cause problems
for some companies in some markets. HHI is
simply the sum of the square of the
marketshare (expressed in per cent) of all
companies operating in a market, say, English
mainstream dailies in Delhi, or English TV[EM SPACE]
news channels in Delhi. Conventional wisdom
suggests that a market is “concentrated” when
HHI is higher than 2,500.
Trai has chosen to look at the contribution to
HHI[EM SPACE]of a particular market of each media
company and says that the “threshold
contribution to HHI[EM SPACE]by an entity should be
fixed at 1000, which approximately translates
into a market share of 32%”.
And if there is concentration across what Trai
calls horizontals, print and TV for instance,
and the same company has more than a 32%
share in both, then the regulator believes it is
a case of market dominance.
To be sure, much will depend on how markets
are defined.
Bennett, Coleman and Co. Ltd (BCCL), for
instance, could face some issues in markets
such as Mumbai where it runs the largest
English-language newspaper and the largest
English-language TV news channel, and its
own market share numbers show that it
pretty much dominates the market.
However, Trai defines the relevant market for
English as pan-Indian, and not by individual
metros. Therefore, it is likely that regional
media companies will be more affected by the
regulator’s cross-media ownership rules.
At a press conference in New Delhi on
Tuesday, Trai chairman Rahul Khullar said:
“Here we are dealing with print and
television. It does not matter whether you
are present in both. What we are worried
about is undue influence. So we have devised
rules on market concentration. We measure
the degree of market concentration. If
someone has more than the required share of
concentration, he needs to dilute control in
the company.”
To be sure, the rule applies only if the market
concentration is more than the permitted
limit for more than two years.
Ravi Dhariwal, CEO, publishing, at BCCL,
declined comment on any of Trai’s
recommendations. “The recommendations
may have huge implications for us. I do not
wish to comment till I study them in great
detail. We have just concluded our board
meeting and I have not read the document,”
he said, refusing to elaborate on the
proposals.
HT Media Ltd ’s CEO Rajiv Verma said he
wouldn’t comment till he had gone through
the fine print of the recommendations.
Ashish Bagga, group CEO at India Today, said
that given India’s developing market and
today’s digital age, the question of media
monopoly in horizontal cross-media
ownership or lack of plurality of views, does
not arise. “This is because the sheer number
of newspapers, news channels and news
digital platforms are enormous, multilingual,
heterogeneous and growing. Therefore,
instead of attempting to curb consolidation,
the direction by the government should be
aimed at expanding the media market with a
view to foster healthy competition,” he said.
“The only way the government can really
contribute is to allow unfettered growth of
the media and allow economic decisions of
horizontal or vertical integration to be taken
by the media companies themselves.”
In fact, Trai should not include print media in
its purview and issues related to cross-media
ownership should be immediately withdrawn
from its recommendations, Bagga added.
“Print does not fall under its jurisdiction.”
The regulator also recommended restrictions
on vertical integration in broadcasting—that
is, a TV channel owning a cable network, a
DTH platform, or other distribution
companies.
“Vertical integration of broadcasters with
distribution platform operators (DPO), i.e.,
cable/HITS/DTH operators, can restrict
horizontal competition. Any entity which has
been permitted/licensed for television
broadcasting or has more than 20% equity in
a broadcasting company, shall not have more
than 20% equity in any distributor (MSO/
cable operator, DTH operator, HITS operator,
mobile TV service provider) and vice-versa.”
It added that “the existing broadcasters who
may have ‘control’ in distribution (MSO/
cable/DTH) and entities in the distribution
sector who may have similar ‘control’ over
broadcasting should be given sufficient time
of three years for restructuring”.
MSO stands for multi-system operator. HITS
is short for headend in the sky—a digital
delivery system.
The restriction could affect broadcasters such
as Zee Entertainment Enterprises Ltd .
A Zee group executive said on condition of
anonymity that such cross-media restrictions
will not pass muster anywhere, “not even
with the government”. “Why? Because when
the government gave us licences for each of
these businesses, it did not say that we will
have to dilute our stakes in the future. This is
against the government’s original licence
conditions,” said this person. Besides, the
proposals are against DTH, cable and HITS
companies’ right to do business, he added.
“This would not stand a chance in a court of
law either.”
The Trai recommendations seem to be in
contrast with what the authority has
recommended for the telecom sector, where
a uniform licence has been allowed, this
person argued. “And here we not only
struggle for separate licences, but also are
now being told to dilute equity.”
In the past few years, there has been an
outcry over corporate ownership of media,
although some analysts have pointed out that
there is little difference between the
behaviour of a media company owning media
and that of a non-media company, say, a
bank or an oil company, owning media.
Khullar said there are two problems. One,
many non-media corporate entities with
varied commercial interests are increasingly
interested in controlling media outlets
because of the benefits this has for their
other businesses. Two, many media
corporates diversify into other, non-media,
businesses by leveraging their clout and
visibility.
In effect, it is the potential for conflict of
interest that seems to be bothering Trai.
As a result, ownership restrictions on
corporate entities entering the media should
be seriously considered by the government
and the proposed media regulator, Trai said.
This may entail restricting the amount of
equity holding in a media company or loans—
or any other form whereby it can exercise
control. “Editorial independence must be
ensured through a regulatory framework,”
the recommendations said.
Corporate ownership of the sort highlighted
by Khullar also causes problems for
journalists. There needs to be Chinese walls
between corporate owners and editors, Trai
said.
The regulator also frowned upon channels
owned by political parties, religious groups
and even the government or its departments.
Trai has strongly recommended that its
earlier proposals barring political and
religious bodies and other central and state
government ministries from entering news
broadcasting and television channel
distribution business be enforced. It said that
in case permission has been given to such
bodies, they should be granted an exit route.
N. Ram , chairman of Kasturi and Sons Ltd ,
which publishes The Hindu, said that it is not
possible to ban people from entering the
media business whether they are politicians
or other corporate houses. “Such restrictions
will impinge on other rights of people. You
can ensure that people make the relevant
disclosures but you cannot stop people from
owning a media business,” he said.
He said that there was no room for a Chinese
wall between owners and the editorial section
as the two need to talk. “There should be a
clear line but not a wall,” Ram said.
Trai also recommended that the independent
media regulator be free of government
control and composed predominantly of
eminent “non-media persons”.
HT Media, publisher of Hindustan Times and
Mint, competes with Bennett Coleman, the
India Today Group, and Kasturi and Sons in
some markets .
This piece has been corrected to reflect a
more accurate definition of “relevant
market”. http://www.livemint.com/Politics/7eZWwlWkMGW55XvGyEClIO/Trai-suggests-restriction-on-political-parties-corporates-i.html
 
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