The Telecom Regulatory Authority of India has proposed a hike in foreign direct investment limits in the broadcasting sectors, chiefly television and FM radio. The move follows the government’s desperation to bring in FDI follows to help bridge the balance of payments problem.
On July 30, the TRAI uploaded a consultation paper on its website where it has outlined the broad changes it is proposing and has invited comments. The TRAI did this exercise after receiving a reference from the Ministry of Information and Broadcasting.
The recommendations in brief:
Segment: Teleport, DTH (direct to home), HITS (Head-end in the sky), Mobile TV, Cable networks-MSOs (multi-system operators).
Existing Limit: 74%, of which 49% is through the automatic limit and for the rest FIPB approval is needed. MSOs who are not upgrading their networks to digital ones, with addressability, are limited to 49% FDI.
Proposed limits: 100%, with 49% through the automatic route and the remaining requires FIPB approval.
Segment: Down-linking of TV channels and up-linking of non-news and current affairs TV updating channels.
Existing limit: 100%, through the FIPB route
Proposed limit: No change.
Segment: FM Radio and up-linking of news and current affairs TV channels.
Existing limit: 26%, through the FIPB route
Proposed limit: 49%, through the FIPB route
Commentary: The paper proposes a higher limit for news and current affairs TV channels, saying that that they can access more resources to run their channels and at competitive rates. These resources can be used for news gathering infrastructure and quality. The note says it can reduce their dependence on advertisement revenue. But that part is a bit of a stretch, as FDI is a capital receipt and advertising is revenue. Reducing dependence on advertising can be managed by increasing subscription revenues by being a paid channel, not by bringing in FDI.
Importantly, the paper also raises the issue of current requirements on FDI in news channels, with conditions such as having resident Indians in key positions, that the largest Indian shareholder should hold 51% equity at least, and certain reporting requirements when foreigners are employed. The note says that if FDI is enhanced to 49% then there can be only one Indian shareholder who will own 51%. The note then goes on to say that these conditions are to ensure that undesirable or subversive content is not telecast. The note then says that the same conditions can be met by having a content code in place and by instituting proper monitoring mechanisms. It suggests a rethink on these conditions.
Similar changes are proposed to FDI in FM radio, where the Phase 3 roll-out will see channels being allowed to broadcast more of current affairs-related programming, though not extending to news. The limit is being proposed to be raised to 49% and also a rethink on the conditions on managerial control in the hands of Indians.
These are only recommendations on which comments from stakeholders have been invited till August 12. After that, TRAI will finalise its note and submit it to the ministry which will in turn put up a note to the cabinet to seek the government’s approval.
The most significant proposal is for hiking FDI caps for news channels as it will give them a fresh lease of life. News channels have been struggling to make money, especially as there is a proliferation of news channels in every genre. Weak economic conditions have not made the going any easier.