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TRAI favours 74% FDI cap in TV distribution sector

MUMBAI: In a bid to boost investments in the television distribution sector, the Telecom Regulatory Authority of India (TRAI) has recommended upping the foreign direct investment (FDI) cap for broadcast carriage services like multi-system operators (MSOs), direct-to-home (DTH), IPTV, mobile TV, Teleport and Headend-in-the-Sky (HITS).

FDI cap at 74% for broadcast carriage services

TRAI has recommended that foreign investment limit for the broadcast carriage services who are upgrading to digital & addressable environment should be 74 per cent. However, for MSOs who do not take up digitisation with addressability, the FDI limit should continue at the existing level of 49 per cent, TRAI said.

LCO FDI ceiling at 26%

The authority has recommended a separate FDI limit of 26 per cent for local cable operators (LCOs), who were earlier clubbed with MSOs as cable TV distributors. The LCOs earlier enjoyed a higher FDI cap of 49 per cent along with MSOs.

Explaining reasons behind recommending separate FDI limit for MSOs and LCOs, TRAI said that the MSOs have to make high capital investments in upgrading headend, supplying set-top boxes (STBs) and maintaining subscriber management system (SMS).

LCOs by virtue of their smaller size, on the other hand, don’t require the kind of investments that broadcasters, MSOs, and DTH operators would need. Hence, a smaller FDI cap.

The authority feels that 26 per cent FDI cap is enough for LCOs who would like to have some foreign investment for upgrading/running their network. The authority also stated that in the Cable Television Networks Rules, 1994 (as amended) there is no separate definition for MSOs.

Carriage and content to have different FDI caps

TRAI has divided broadcasting sector into two services. Operations such as teleports, DTH, HITS, Mobile TV, IPTV and Cable TV come under broadcasting carriage services. Television Broadcasting-Uplinking, Downlinking and FM Radio come under broadcasting content services.

TRAI chairman Dr. J. S. Sarma said that the reason for differential treatment is that while the carriage services are infrastructural in nature, content services, especially the news and current affairs services, are considered more sensitive as they have a bearing on maintenance of public order, security of the State, and communal harmony.

News to stay at 26%

In broadcast content services, the authority has recommended that foreign investment limits for News & Current Affairs TV Channels would remain the same at 26 per cent.

Interestingly, in April 2008 TRAI had recommended for enhancement of the FDI limits in respect of News and Current Affairs Television Channels from 26 per cent to 49 per cent.

However, the authority is reviewing that recommendation in light of the stakeholders’ response to the issue.

The authority opined that it is difficult to monitor content in News and Current Affairs TV channels on continuous basis as there are a lot of news channels in different languages across India. In such a scenario, there is a need to maintain sectoral limit on uplinking of news and current affairs channels.

Lift FDI limit in radio to 26%

TRAI wants the foreign investment limit for FM radio to increase to 26 per cent, from the existing limit of 20 per cent.

The authority said that the FDI caps for FM radio and news and current affairs channels are of similar nature from the sensitivity point of view and therefore, there is no justification to have different foreign investment limits for these services.

Equal limits will bring the sectoral FDI cap in News and Current Affairs Channels and FM radio in line with the FDI cap allowed for the print media, the authority opined.

In case of FM radio services, the authority feels that it is more localised in nature, both in terms of content and reach. The investment required to create is much less compared to the television sector.

All foreign investments less than 26 per cent would be through automatic route. Investments above 26 per cent, however, will require prior approval of the government.

FDI limits in the Broadcasting Sector-Recommendations at a glance
Segment Segment Existing Limit Recommendations
Teleport(Hub) 49% 74% *
DTH 49% 74% *
HITS 74% (49% on automatic route) 74% *
Cable Networks-MSOs operating at National or State level 49% 74% *
Other MSOs who don’t take up digitisation 49% Status Quo*
Cable Networks- Local Cable Operators 49% 26% *
FM Radio 20% 26% *
Downlinking of TV Channels 100% Status Quo *
Uplinking of TV News & Current Affairs Channels 26% Status Quo *
Uplinking of TV Non-News & Current Affairs Channels 100% Status Quo *
Mobile TV No Policy 74% *
* FDI below 26% is recommended through automatic route

The Ministry of Information and Broadcasting (MIB) had requested TRAI to review its earlier recommendations dated 26 April 2008 in light of recent changes in FDI policy.

The consolidated FDI Policy dated 31 March 2010 issued by the Department of Industrial Policy & Promotion (DIPP) has come into effect since 1 April 2010. This policy has modified the methodology of calculation of foreign investment in Indian companies.

Therefore the MIB asked TRAI to relook at its earlier recommendations vis-à-vis FDI limit in broadcast sector. The authority said it has sent its recommendation to the MIB on 30 June 2010 following a consultation process with stakeholders.