TRAI rescues small cable operators, says no net worth rule needed

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TRAI Chairman RS Sharma

The Telecom Regulatory Authority of India, which recently come in for a lot of pummeling from the small cable operators for its new tariff rules, has now emerged as a savior of the same set of operators as it has dismissed government’s suggestion of fixing a ‘net worth’ requirement for cable feed providers.

Ministry of Information and Broadcasting had, in May last year, written to the TRAI saying that it is “considering a fixation of entry level networth” for multi-system operators (cable feed providers) across the country.

The letter from the ministry, signed by deputy secretary Shanker Lal, did not give any reason or logic for putting in net worth requirements, but merely asked TRAI to come up with “appropriate levels” of net worth requirements for MSOs.

India has more than a 1000 MSOs who install their own dish antennas on top of buildings and pull down satellite signals, process it and send it to cable operators for further dissemination.

Some of these MSOs are quite large, such as Den Networks, Hathway Cable, GTPL and Citi Cable and have millions of subscribers, while others are limited to a single town and may have only a 1,000 subscribers.

In the last 2-3 years, the sector has attracted the interest of telecom behemoth Reliance Jio Infocomm, promoted India’s richest man Mukesh Ambani.

Since the ministry wrote to TRAI, Ambani has bought two of the biggest MSOs in the country — Den and Hathway — and is likely to look for more.

However, India’s cable operators, including smaller MSOs, have a reputation for being fiercely independent and territorial, and are not easily persuaded to sell their networks to bigger players.

Still, the government’s move to impose net worth requirements would have made it more difficult many smaller players to continue, as they would need to invest lakhs, if not millions, of rupees into their business.

Reliance Jio, on its part, urged TRAI to keep the minimum net worth requirement at Rs 18 cr.

NO JUSTIFICATION

TRAI, however, today said it saw no logic in, or need for, laying down any such artificial requirement for net worth.

It pointed out that if a feed provider is able to provide TV feeds to its clients, that is more than enough in a market-oriented economy like India’s, and there is no need for the government to interfere in such matters.

If a cable feed provider has no money to invest in its business, its clients (local cable operators) will find another MSO to do business with, TRAI pointed out.

TRAI also pointed out that many of the functional MSOs in India have net worth of less than Rs 1 lakh, and said there are already specific laws in place to ensure quality of service in the cable TV sector.

“There seems to be no direct correlation between the net-worth of an applicant and successful operations,” it noted.

“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,” it said.

It also pointed out that cable TV sector is a fiercely competitive area of the Indian economy where market forces are fully at play. These market forces are enough to ensure quality of service, it pointed out.

“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 number of service providers that can provide service in a defined area,” TRAI said.

The regulator also addressed concerns of some players that only a financially strong company can be relied upon to make payments to its suppliers — such as channel providers.

However, TRAI pointed out that such a logic can be applied to any sector or business activity in India, and that it is not practical for the government to enforce net worth requirements in all businesses in India just to protect the company’s business partners from facing the risk of delays and defaults in payments.

“As a business entity the MSO in the course of running the business will necessary be involved in the financial transaction with other market layers, in action. Such conditions would prevail in any business. Any entity runs its business by integrating itself into the system between suppliers and buyers,” it noted.

“The present set-up makes the MSO business market driven and it is the entrepreneur’s self-assessment that enables the business,” TRAI said.

ENTREPRENEURSHIP

TRAI also pointed out that the cable TV sector employes lakhs of people, and that there are over a 1,000 functional MSOs in India.

Needless regulation would hurt the smaller players and hurt entrepreneurship and employment, the regulator said in its recommendations to the ministry.

It also pointed out that it has recently made new tariff rules that give a level playing field for all MSOs in the country, big and small. This, it said, is expected to give a chance for smaller players to come together and operate as independent MSOs.

Putting in net worth requirements and so on at this stage would seriously hamper the development of the sector, it said.

“The new framework provides an enabling environment for aspiring LCOs to move further in their business and become an MSO either on their own or by forming LCO groups (in form of Cooperative or joint associations).

“The new framework, in this regard fulfils the policy objectives of the government of India to promote entrepreneurship and enable small business…Introduction of minimum net worth as eligibility criteria for MSO registration is likely to stifle these last mile operators, especially the smaller players.

“The MSO is an important link in the television distribution chain. Given the diversity of the country where vernacular language changes in every twenty five to fifty kilometres, the local MSOs can provide a platform where local content is distributed on the local platform channels.

“One might consider that India has more than 1000 operational MSO which is quite large a number, yet given the size of the country, there is ample scope for further development and expansion of the sector.

“From the point of plurality and diversity of content the regional MSOs are necessary in the cable TV sector as they can better provide the program diversity to cater to the regional/local tastes.

“A minimum net-worth criterion or entry could discourage the growth of smaller MSOs in far-flung areas and in-turn may hinder the incubation and growth of local and regional channels. Thus, an entry barrier like fixing a minimum net-worth requirement may adversely affect overall program diversity and development of local and regional content,” TRAI said.

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