No need to fix minimum entry-level net worth requirement for MSO registration, TRAI tells MIB

MUMBAI: The Telecom Regulatory Authority of India (TRAI) has recommended to the ministry of information and broadcasting (MIB) that there is no necessity to fix a minimum entry-level net worth requirement for multi system operator (MSO) registration.

The regulator has released its recommendations on consultation paper ‘Entry Level Net worth requirement of Multi-system Operators in Cable TV services’.

The TRAI also stated that any individual, company, corporate firm or LLP that fulfills provisions of the Cable TV Rules, may be granted MSO registration, as is the case now.

Based on the data received from MIB, the TRAI found that the declared net worth among current active MSOs varies from less than Rs. 1 lakh to well over Rs. 1 crore. On the other hand, among the non-operational MSOs also similar variance of net worth from less than Rs. 1 lakh to well over Rs. 1 crore was noticed.

According to TRAI, there seems to be no direct correlation between the net-worth of an applicant and successful operations.

Further, it noted that in a Digital Addressable System (DAS) based environment, the quality of service is dependent on the CAS and SMS system. Once a DAS based system is established properly in full compliance to the regulatory provisions and made functional, it ensures the Quality of Service (QOS).

The TRAI also contended that in case of MSO registration, no public or scarce resources are granted for exclusive or non-exclusive use.

It further stated that one of the purpose for fixation of entry level net worth-based eligibility criterion is to bring seriousness to business. However, it added that MSOs are granted registration as per their application on non-exclusive basis. They are further allowed to operate in any part of the country irrespective of their registration for specified DAS notified area.

“Thus, the sector is by design already a multi-operator and competitive sector with presence of other MSOs as well as DTH players. Fixation of net worth based eligibility criteria seems unwarranted from this perspective either, as there is no limit on the number of service providers that can provide service in a defined area,” the TRAI said.

In addition, the New Regulatory Framework for the Broadcasting and Cable TV sector also prescribes norms for establishing the headend and other equipment besides mandating MSOs to follow quality of service (QoS) norms.

The authority also recommended that there is no basis for introducing minimum net worth classification based on the area of operation for MSO registration. The DAS system enables subscription-based billing and there is no rationale for introducing area-wise registration.

It also recommended that there is no need to prescribe minimum net worth for remote areas of Jammu & Kashmir or North-East region as the area-wise minimum net worth classification for registration of MSO is not required.

The TRAI noted that the MIB has allowed all registered MSOs are free to operate in any part of the country, irrespective of registration for specified DAS notified areas granted by the Ministry of I&B. This development is aligned with the final implementation of the DAS regime.

Pursuant to ithe mplementation of DAS, the authority stated that quite-a-few MSOs expanded through the merger and joint venture route. Almost all large MSOs have multiple joint ventures in different regions.

By re-introduction of any registration based on the area of operation, all the issues that caused the issuance of MIB letter will re-surface causing hindrance to stakeholders, it stated.

It also said that the DAS implementation has enabled a new system, whereby the emphasis has shifted from area of operation to the actual number of subscriptions.

Further, the authority has recommended that there is no merit in introducing minimum net worth for registration of MSOs based on network cost criteria.

The TRAI reasoned that an applicant seeking registration is aware that as soon as it gets a registration, an investment will be required to establish the head-end, CAS, SMS and other equipment.

“In this way, the MSO business is akin to any other business entity where an entrant establishes a new business by taking an entrepreneurial risk. Adding a requirement of any entry-level net worth can at best be an additional entry barrier without any distinct advantage,” it stated.

The authority has also recommended that MIB may prescribe a standard proforma for self-declaration of net worth by applicants seeking registration as MSOs. It also recommended that MIB may consider skill development requirement of the sector and take appropriate action so that trained manpower is available to perform specialised tasks.

The ministry of information and broadcasting (MIB) had requested TRAI to give its recommendations on the appropriate entry-level net worth for the MSOs.

The current framework is governed as per Rule 11(3) of CTN Rules, 1994. The rule mentions only the financial strength of the applicant for the grant of MSO registration without explicitly defining or quantifying it.

The authority, after preliminary analysis, sought data as regards the net-worth of existing operational and non-operational MSOs.

In addition, information was also sought on the structure of business entities registered as MSOs. The information was necessary to correlate the existing structure of the MSOs with the proposal to consider entry-level net worth. MIB vide its reply dated 27th August 2018 and dated 13th December 2019 provided the said information.

An analysis of the MIB data reveals that the top 15 MSOs have 52.33 million subscribers which is nearly similar to the active subscriber base of top 5 DTH operators at 51.09 million. The analysis further reveals that there are more than 1100 active MSOs across the country. More than five hundred such MSOs have a subscriber base less than 2500.

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