Tarun Katial: What the new government (and MIB) must do for Radio

13 Nov,2014

 

By Tarun Katial

 

1. Foreign Direct Investment (FDI) in Radio Broadcast Sector

Key Issues:

:: The current FDI limit in the radio broadcast sector is restricted to 26%.

 

:: In respect of television broadcasting sector, the FDI limits are as below:

 

Non-news content – FDI is permitted up to 100%; and

News & current affairs content – FDI has been restricted to 26%.

 

TRAI Recommendation:

:: TRAI on August 22, 2013 recommended that FDI limit for radio sector should be enhanced to 49%.

 

Requests:

:: There should be parity in the FDI limits for the television and radio broadcast industry.

 

:: For FM radio broadcasters airing news & current affairs, the FDI limit should be increased to 49%.

 

:: For all other FM radio broadcasters airing non-news content, the FDI limit should be increased to 100%.

 

2. Deferred payment mechanism for Non refundable One time Entry Fee (NOTEF) and Migration Fee

Key Issues:

:: Based on current guidelines the migration fee payable by existing players to migrate to new regime and NOTEF by successful Phase 3 bidders has to be paid upfront and in full.

 

:: It is estimated that the FM radio broadcasting sector will require additional capital investment of Rs. 3,000 crores or more for meeting the outgo on account of migration fees, Phase 3 auction license fees and capex for the creation of infrastructure.

 

:: This additional capital investment of Rs. 3,000 Crores amounts to 200% of the annual revenue of the radio industry.

 

:: The telecom industry which is much larger than the Radio Industry and which has an annual turnover of Rs. 3,00,000 Crores has already been allowed a deferred payment mechanism for the recent spectrum auction in 1800MHZ and 900 MHZ Bands. It is pertinent to note here that the total spectrum fee in the auctions was Rs. 61,000 Crores, which when compared to the annual turnover of Rs. 3,00,000 Crores,  amounted to only 20% of their annual revenue.

 

Request:

:: On the lines of the recent spectrum auction polices for Telecom, we request a deferred payment mechanism for the migration fee and NOTEF as under:

Upfront – 25%

Moratorium – 2 years

Balance payment – Annually over the license period

 

3. Migration of Phase 2  to Phase 3 regime

Key Issue:

:: With licences of Phase 2 expiring from March 2015, the migration to Phase 3 is the critical concern of the Radio industry.

 

TRAI Recommendation:

:: TRAI on February 20, 2014 recommended that the policy of migration of existing operators to Phase 3.

 

Request:

:: We request that the Government accept TRAI’s recommendations and announce the migration policy at the earliest.

 

4. Channel Spacing

Key Issues:

:: Limited number of FM channels available in various cities and high license price makes it difficult to shift the focus away from mainstream film music. Consequently there is lack of content plurality thereby affecting radio listenership.

 

:: The additional capacity could provide a platform for special focus genres, regional/folk content, dedicated channels for sports and news, etc.

 

TRAI Recommendation:

:: TRAI on April 19, 2012 recommended that it is technically feasible to reduce the channel spacing to 400 KHz from the current 800 KHz and thereby, double the number frequencies in A/A+ and B category cities.

 

Requests:

:: TRAI’s recommendation of reducing channel spacing from 800 KHz to 400 KHz should be accepted.

 

:: The government should announce immediately the proposed number of additional frequencies that can be auctioned in A/A+ and B category cities and the associated time frame for their auctions.

 

:: This will enable industry players and incumbents to take informed decisions during Phase 3 bidding.

 

5. Reserve price for cities undergoing auction for the first time in Phase 3

Key Issues:

:: In Phase 3, 228 cities (707 frequencies) out of a total of 294 cities will be undergoing auction for the first time. The Ministry has proposed the following methodology to calculate reserve price for cities undergoing auctions for the first time as under:

>> Highest bid price received during FM Phase 2 for that category of cities in that region.

>> In case the benchmark from Phase 2 for a particular region is not available, then the lowest of the highest bid received in other regions for that category of cities may be taken as the reserve price

 

The table shows the reserve price in some of the cities based on the rules provided in Phase 3 guidelines:

Ministry of Information and Broadcasting; Census 2011

 

 

:: In view of the table above, it is unreasonable to expect, that the price set for Chandigarh, a C category city in North region and the city which received the highest bid of Rs. 15.61 Crores during Phase 2 auctions with per capita income of Rs. 21,141, is a fair reserve price for Shahjahanpur with per capita income of only Rs. 6,164.

 

:: Similarly, the reserve prices for most other fresh cities look unreasonable. For instance, Moradabad a B category city in North region with a per capita income of Rs. 6,164 cannot be compared with Amritsar, which received the highest bid of Rs. 3 Crores and which has a per capita income of Rs. 21,141.

 

TRAI Recommendation:

:: TRAI on February 20, 2014 recommended that the methodology for determining the reserve price for fresh cities in Phase 3 should be reconsidered.

 

Request:

:: In case of cities going for auction for the first time, the reserve price should be ‘Average bid across all regions in the country for the same category of city’. This will eliminate any outliers and e-auction will allow fair price discovery of each city.

 

6. Expedite Empanelment with DAVP (Directorate of Advertising & Visual Publicity) of some radio stations

Key Issues:

:: The revision of DAVP rates for FM has been pending since last 3 years

 

:: Empanelment of radio station of some radio broadcasters, which is pending since 2008.

 

Requests:

:: DAVP rates/policy be revised appropriately based on the growth of FM listenership across India

 

:: Expedite empanelment of radio station of some radio broadcasters to ensure fair allocation of funds by DAVP.

 

Post a Comment 

One response to “Tarun Katial: What the new government (and MIB) must do for Radio”

  1. Himanshu Agarwal says:

    Nice post. The points are valid and have been presented with supporting facts.

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