Broadcasters propose corporatisation of MSOs, higher entry-level net worth

MUMBAI: TV broadcasters have supported the idea of having an entry-level net-worth criterion for multi system operators (MSOs). In their submission to the Telecom Regulatory Authority of India’s (TRAI) consultation paper on the subject, the broadcasters have stated that the time has come to corporatise MSOs along with having a higher entry-level net worth.

The Indian Broadcasting Foundation (IBF) submitted that the broadcasters have become dependent on the MSOs for their subscription revenue under the MRP regime.

It further stated that MSOs have not been able to upgrade their existing technologies to ensure that their Subscriber Management Systems (SMSs) and Conditional Access Systems (CAS) are generated in line with the regulations.

The foundation also noted that its member broadcasters have indicated that they still have to deal with the receipt of manual subscriber reports from MSOs, significant under-declaration of subscriber bases, and incorrect subscriber reports. It further noted that the service providers who have the requisite technological expertise are not keen to provide services to such MSOs apprehending non-payment.

“The lack of financial support is a direct consequence of not having an adequate net worth requirement that would ensure financial stability for the MSO,” the IBF said in its submission.

The IBF also stated that the MSOs at individual/proprietorship and partnership level in the absence of net-worth requirement is not in the position to have the infrastructure in the form of customer care centres, the establishment of websites, the supply of customer premise-equipment in place.

“We, therefore, propose the corporatisation of MSOs and higher entry-level net-worth,” IBF stated.

According to IBF, the corporatisation of MSOs is the best way forward for MSOs in terms of compliance and from a transparency perspective. This will ensure that all MSOs are treated at par as regards to maintenance of proper records which are easily accessible, effective control mechanism, penalties for defaulters (as envisaged under the Companies Act, 2013) being made applicable to the cable TV industry.

“Further, this would also complement the non-discriminatory vision of TRAI since broadcasters, DTH operators and HITS operators are mandated to be registered as companies,” it stated.

The IBF has proposed the issuance of district/state/country level license for MSOs. It has also suggested that the district, state, and country level net-worth should be Rs 50 lakh, Rs 2 crore, and Rs 10 crore respectively.

Sony Pictures Networks India (SPNI) has suggested revised net-worth threshold of Rs 5 lakh, and Rs 2 crore, and Rs 5 crore district level, state level, country/national level.

It also stated that the minimum net-worth requirement could be the only solution to ensure that the technology/infrastructure deployed by MSOs are at par with that of direct to home (DTH) and headend in the sky (HITS) operators. This, it said, would also result in the elimination of non-serious players that are presently rampant in the industry.

The foundation has suggested that the MIB should follow the same mechanism that it follows in granting licences to the TV channels. The broadcaster’s net worth before granting of licenses is verified by MIB’s empanelled group of auditors. In addition, each of the applications is also referred to the Ministry of Corporate Affairs (MCA).

Further, all corporates file their audited financial statements with their respective Registrar of Companies annually. The empanelled auditors of MIB and MCA cross-verify the Balance Sheets and Audited Account Statements certified by the statutory auditors of the concerned broadcaster companies.

“This mechanism could work for the MSOs as well,” the IBF submitted.

ZEEL stated that the registration of individuals and group of Individuals to operate as MSOs should not be permitted. In case an individual or group of individuals wish to operate as an MSO they should either register themselves as Limited Liability Partnership (LLP) with a single person as a promoter or alternatively a partnership firm with multiple persons joining the Partnership firm as partners which is registered with the registering authority.

It further stated that a group of persons can also form a Private Limited company or a Public Limited company which in turn can register itself to operate as an MSO.

“This criterion will ensure that Net worth of these individuals operating thru an LLP, Partnership firm, Pvt Ltd company or Public Limited company registered to operate as an MSO could be easily monitored right from registration as well as over the years of its operations as an MSO in the business of distribution of TV channels to end consumers,” ZEEL stated.

SPNI also noted that the licenses going forward should be granted basis area of operation of the MSOs. For existing MSOs, who have pan-India licenses, these licenses will have to be revoked and licenses need to be granted depending upon the area of operation subject to meeting the net-worth requirement (as discussed in detail above).

ZEEL further submitted that the minimum net worth should depend upon the proposed number of subscribers that an applicant MSO would cater. “In our view, a minimum number of subscribers of a substantial proportion should be considered along with the cost of Infrastructure required for setting up the business of distribution of channels while arriving at the minimum net worth.”

Discovery Communications India submitted that the amendments need to have a two-fold focus wherein on one front, MSOs operating in large sectors must have higher net-worth and entry requirements to ensure adequate infrastructure for the particular scale of operations that it is proposing and on the other front, different categories for different MSOs must be created depending upon their scale and area of operations with separate net-worth and entry categories.

In such cases, MSOs operating on a smaller scale or level may always have an option to upgrade subject to meeting the terms and conditions which can be proposed as is being suggested herein.

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