NEED FOR NEED FOR TRANSPARENT TRANSPARENT

REGULATION OF INDIAN REGULATION OF INDIAN ELECTRONIC MEDIA ELECTRONIC MEDIA

INDUSTRYINDUSTRY

A presentation byAshok Mansukhani

Executive Vice President

Hinduja TMT Limited

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The Indian electronic media industry is The Indian electronic media industry is among the most vibrant and fastest among the most vibrant and fastest growing anywhere in the world after growing anywhere in the world after China.China.

FICCI, in it’s latest Frames 2004 Report FICCI, in it’s latest Frames 2004 Report has forecast a growth of 17% annually has forecast a growth of 17% annually to a gross of Rs. 28852 crores in 2008.to a gross of Rs. 28852 crores in 2008.

CII has recently forecast a more CII has recently forecast a more ambitious figure of Rs 50000 crores by ambitious figure of Rs 50000 crores by 2008.2008.

Overview of Indian Media Overview of Indian Media 20042004

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The Indian Cable TV distribution industry The Indian Cable TV distribution industry has crossed 50 million Cable and Satellite has crossed 50 million Cable and Satellite Homes in 2004 while the total number of Homes in 2004 while the total number of TV homes in India is estimated at 100 TV homes in India is estimated at 100 million homes.million homes.

This stupendous growth has occurred This stupendous growth has occurred without any Government support and without any Government support and represents the tremendous entrepreneurial represents the tremendous entrepreneurial effort of thousands of cable operators.Multi effort of thousands of cable operators.Multi System Operators (MSO’s) too have played System Operators (MSO’s) too have played a major role in consolidating services a major role in consolidating services especially in metros. especially in metros.

Overview of Indian Media Overview of Indian Media 20042004

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The TV broadcast scenario is equally buoyant. The TV broadcast scenario is equally buoyant. An estimated 200 TV channels are available An estimated 200 TV channels are available today over Indian skies.today over Indian skies.

An urban cable home in the 4 metros currently An urban cable home in the 4 metros currently receives approximately 100 TV channels.receives approximately 100 TV channels.

The most popular bouquet is Star followed by The most popular bouquet is Star followed by Sony, Zee and Doordarshan. Sony, Zee and Doordarshan.

60 of these are FTA channels and balance 40 60 of these are FTA channels and balance 40 are pay channels which are bundled into are pay channels which are bundled into bouquets and available at a negotiated price. bouquets and available at a negotiated price.

Overview of Indian Media Overview of Indian Media 20042004

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Global media majors like Disney Global media majors like Disney and Bertelsmann have announced and Bertelsmann have announced their entry to Indian screens.But their entry to Indian screens.But the ground scenario is different. the ground scenario is different.

Agitations and blackouts have Agitations and blackouts have characterized a fractured and often characterized a fractured and often tense relationship between Multi tense relationship between Multi System Operators/Cable Operators System Operators/Cable Operators and Pay TV broadcasters.and Pay TV broadcasters.

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The reason is simple.Pay TV channels are The reason is simple.Pay TV channels are encrypted till the MSO/Cable operator encrypted till the MSO/Cable operator head-end and then supplied Free-To–head-end and then supplied Free-To–Air(FTA)to the subscribers.Hence they are Air(FTA)to the subscribers.Hence they are ‘Pay’ to the cable industry and ‘FTA’ to the ‘Pay’ to the cable industry and ‘FTA’ to the customers.customers.

Traditionally, the bulk of cable TV Traditionally, the bulk of cable TV subscription is retained by local cable subscription is retained by local cable operators who only declare a negotiated operators who only declare a negotiated amount of subscribers to the MSOs paying amount of subscribers to the MSOs paying a portion of subscription fees. a portion of subscription fees.

Overview of Indian Media Overview of Indian Media 20042004

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The Multi System Operators in turn use The Multi System Operators in turn use the ‘paid’ base to negotiate a lump sum the ‘paid’ base to negotiate a lump sum price with the Pay TV broadcasters. price with the Pay TV broadcasters.

This has led to over 95% cable revenues This has led to over 95% cable revenues being paid out by MSOs to Broadcasters being paid out by MSOs to Broadcasters who continue to demand more and more who continue to demand more and more money.money.

Broadcasters resort to frequent blackouts Broadcasters resort to frequent blackouts to enforce their demands which results in to enforce their demands which results in great consumer dissatisfaction with cable great consumer dissatisfaction with cable operators who are really not to blame….operators who are really not to blame….

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Finally Government appointed a multi Finally Government appointed a multi faceted Task Force in 2001 to study faceted Task Force in 2001 to study the problems of the industry. the problems of the industry.

This Task Force recommended in 2002 This Task Force recommended in 2002 that customers be given choice to opt that customers be given choice to opt only for FTA channels at a fixed price.only for FTA channels at a fixed price.

Only Pay channels were to be Only Pay channels were to be encrypted and made available through encrypted and made available through addressability through set top boxes. addressability through set top boxes.

CAS Task Force 2001-CAS Task Force 2001-20022002

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Conditional Access System (CAS) came to be Conditional Access System (CAS) came to be mandated by amendment of the Cable Act mandated by amendment of the Cable Act 1995.Its implementation in four metros was 1995.Its implementation in four metros was postponed to September 2003.Ultimately postponed to September 2003.Ultimately CAS took off only in Chennai in September CAS took off only in Chennai in September 2003 and in Delhi in December 2003.2003 and in Delhi in December 2003.

In January 2004,TRAI was appointed as the In January 2004,TRAI was appointed as the Cable and Broadcast Regulator. It Cable and Broadcast Regulator. It recommended a three month postponement recommended a three month postponement of implementation of CAS in February 2004.of implementation of CAS in February 2004.(Today CAS is operational only in Chennai by (Today CAS is operational only in Chennai by virtue of a Chennai HC order.)virtue of a Chennai HC order.)

Regulatory DevelopmentsRegulatory Developments

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In the past 9 months,TRAI has been extremely In the past 9 months,TRAI has been extremely active in first understanding the dynamics of active in first understanding the dynamics of the electronic media industry and then the electronic media industry and then launching a formal consultative process.launching a formal consultative process.

TRAI has issued two consultative papers,held TRAI has issued two consultative papers,held four Open Houses and conducted a series of four Open Houses and conducted a series of closed door meetings with service providers.closed door meetings with service providers.

It organized an unique meeting of consumer It organized an unique meeting of consumer organizations in Mumbai on June 21 2004 organizations in Mumbai on June 21 2004 which was attended by over 300 consumers which was attended by over 300 consumers and organizations. and organizations.

Role of TRAI in regulating Role of TRAI in regulating cablecable

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Today everyone anxiously awaits TRAIs Today everyone anxiously awaits TRAIs recommendations on CAS and related matters.recommendations on CAS and related matters.

Meanwhile the consumer has happily gone Meanwhile the consumer has happily gone back to life without addressability not realising back to life without addressability not realising that without the benefit of a tariff freeze order that without the benefit of a tariff freeze order issued by TRAI on January 15,2004, his monthly issued by TRAI on January 15,2004, his monthly cable bill would at least double and that without cable bill would at least double and that without mandatory CAS, he would be unable to select mandatory CAS, he would be unable to select and pay only for those pay channels he wishes and pay only for those pay channels he wishes to watch. to watch.

So where do we go from here?So where do we go from here?

Role of TRAI in regulating Role of TRAI in regulating cablecable

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Formation of MSO AllianceFormation of MSO Alliance The MSOs who are the organized face of the The MSOs who are the organized face of the

cable industry got together in May 2004 and cable industry got together in May 2004 and formed a MSO Alliance to provide a cohesive formed a MSO Alliance to provide a cohesive picture to the Government and the Regulator.picture to the Government and the Regulator.

As President of this Alliance, I would like to As President of this Alliance, I would like to compliment all TRAI members and advisers for compliment all TRAI members and advisers for the tremendous time and patience displayed by the tremendous time and patience displayed by them whenever we have met them.them whenever we have met them.

Let me assure all of you that the MSO Alliance Let me assure all of you that the MSO Alliance is conscious that ultimately consumers must is conscious that ultimately consumers must benefit from multitude of technology choices.benefit from multitude of technology choices.

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Key Suggestions To TRAIKey Suggestions To TRAI

The MSO Alliance has therefore been working The MSO Alliance has therefore been working closely with TRAI to usher in a consumer closely with TRAI to usher in a consumer friendly regulatory regime for this industry.friendly regulatory regime for this industry.

Some of our key suggestions are summarized Some of our key suggestions are summarized here only to place in public domain our here only to place in public domain our abiding interest in ushering in a abiding interest in ushering in a transparent,unbiased and fair regulatory transparent,unbiased and fair regulatory regime which allows existing service providers regime which allows existing service providers to survive while at the same time allows new to survive while at the same time allows new technologies to be available at cheapest technologies to be available at cheapest possible cost to consumers.possible cost to consumers.

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Key Suggestions To TRAIKey Suggestions To TRAI CAS will bring three distinctive benefits:CAS will bring three distinctive benefits: Customers will finally have choice of paying for Customers will finally have choice of paying for

only those pay channels they actually wish to see.only those pay channels they actually wish to see. There will be complete transparency of pay There will be complete transparency of pay

channel viewer base ending the whole war of channel viewer base ending the whole war of under declarations/disconnections and disputes.under declarations/disconnections and disputes.

Government will gain a five fold increase in tax Government will gain a five fold increase in tax revenues as full subscriber base is revealed. revenues as full subscriber base is revealed.

For this, TRAI should play the role of an aggressive For this, TRAI should play the role of an aggressive facilitator ensuring fair interconnect/revenue facilitator ensuring fair interconnect/revenue share agreements between broadcasters/MSOs.share agreements between broadcasters/MSOs.

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Key Suggestions To TRAIKey Suggestions To TRAI

TRAI should provide for early rollout of TRAI should provide for early rollout of mandatory CAS in the three metros of mandatory CAS in the three metros of Mumbai/Calcutta and Delhi within a couple of Mumbai/Calcutta and Delhi within a couple of weeks.weeks.

It should formulate an overall staggered It should formulate an overall staggered timetable for mandatory CAS for all 50 million timetable for mandatory CAS for all 50 million cable homes over the next 18 months.cable homes over the next 18 months.

It must mandate a ‘Must Provide’ clause to It must mandate a ‘Must Provide’ clause to ensure that no dominant broadcaster or ensure that no dominant broadcaster or content rights holder refuses content on a rival content rights holder refuses content on a rival technology platform.technology platform.

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Key Suggestions To TRAI Key Suggestions To TRAI

TRAI must ensure that broadcasters TRAI must ensure that broadcasters compulsorily provide a la carte choice of compulsorily provide a la carte choice of channels to customers vis a vis full channels to customers vis a vis full bouquet which should not be forced on bouquet which should not be forced on unwilling customers.unwilling customers.

Assuming a phased rollout of CAS over the Assuming a phased rollout of CAS over the next 18 months,the Tariff Freeze Order issued next 18 months,the Tariff Freeze Order issued on January 15 2004 should be continued in non on January 15 2004 should be continued in non CAS areas till CAS is introduced while allowing CAS areas till CAS is introduced while allowing MSOs/cable operators to charge for new pay MSOs/cable operators to charge for new pay channels launched after January 15 2004. channels launched after January 15 2004.

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Key Suggestions To TRAI.Key Suggestions To TRAI. Even though Section 4A of the Cable Act is Even though Section 4A of the Cable Act is

silent on the issue of fixing Pay TV prices which silent on the issue of fixing Pay TV prices which are left open to market forces,TRAI should are left open to market forces,TRAI should acquire powers to intervene in proven cases of acquire powers to intervene in proven cases of predatory pricing predatory pricing by a dominant broadcaster by a dominant broadcaster or content rights holder.or content rights holder.

This is to ensure that there is a level playing This is to ensure that there is a level playing field for service providers to retain/acquire field for service providers to retain/acquire customers in a technologically competitive era.customers in a technologically competitive era.

This is to also ensure consumer protection This is to also ensure consumer protection from high Pay TV prices for at least the next from high Pay TV prices for at least the next two to three years.two to three years.

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Key Suggestions To TRAI.Key Suggestions To TRAI.

The TRAI Act should be amended to The TRAI Act should be amended to provide for compulsory registration of all provide for compulsory registration of all electronic media service providers like electronic media service providers like Broadcasters/MSOs and Cable Operators.Broadcasters/MSOs and Cable Operators.

While licensing is abhorrent in a free While licensing is abhorrent in a free market economy,registration is necessary market economy,registration is necessary for this industry as many broadcasters for this industry as many broadcasters claim protection of foreign laws.claim protection of foreign laws.

Further many cable operators do not Further many cable operators do not regularly seek registration from the post regularly seek registration from the post office as provided under the Cable Act.office as provided under the Cable Act.

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Key Suggestions To TRAIKey Suggestions To TRAI

Other measures in consumer interest Other measures in consumer interest suggested by MSO Alliance include:suggested by MSO Alliance include:

Consumer friendly STB schemes as Consumer friendly STB schemes as formulated by MSOs be reported to TRAI and formulated by MSOs be reported to TRAI and be available in public domain to enable be available in public domain to enable customers to exercise genuine choice.customers to exercise genuine choice.

Service levels for maintenance/refund of STBs Service levels for maintenance/refund of STBs be fixed in consultation with service providers.be fixed in consultation with service providers.

Commercial interoperability for set top boxes Commercial interoperability for set top boxes be mandated to help customers shifting be mandated to help customers shifting residences.residences.

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Key Suggestions To TRAI.Key Suggestions To TRAI.

Government should reintroduce the Government should reintroduce the concessional rates of customs duty for set top concessional rates of customs duty for set top boxes and give duty/tax exemption for boxes and give duty/tax exemption for digitalization of the industry to widen consumer digitalization of the industry to widen consumer choice for at least three years.choice for at least three years.

State and Central Government should set up State and Central Government should set up CAS implementation committees of government CAS implementation committees of government officials and all classes of service officials and all classes of service providers/consumer organizations.providers/consumer organizations.

Special consumer courts should be established Special consumer courts should be established all over India to deal with only the electronic all over India to deal with only the electronic media consumer disputes with any particular media consumer disputes with any particular service provider. service provider.

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Key Suggestions To TRAIKey Suggestions To TRAI

The MSO Alliance has noted a specific bar The MSO Alliance has noted a specific bar under Section 14 of the TRAI Act wherein under Section 14 of the TRAI Act wherein complaints of individual consumers can only be complaints of individual consumers can only be maintainable before consumer disputes maintainable before consumer disputes redressal forums or the National Consumer redressal forums or the National Consumer Redressal Commission.Redressal Commission.

Recently TRAI has suggested the setting up of Recently TRAI has suggested the setting up of Telecom Ombudsman to redress consumer Telecom Ombudsman to redress consumer disputes. However looking to the sheer size of disputes. However looking to the sheer size of the consumer base of this industry, urgent the consumer base of this industry, urgent action is required immediately to provide a action is required immediately to provide a credible recourse for customer redressal along credible recourse for customer redressal along with reintroduction of CAS.with reintroduction of CAS.

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One of the key criticisms about CAS in its One of the key criticisms about CAS in its present form has been that while it will give present form has been that while it will give choice of selection of channels to the choice of selection of channels to the customers it will not give choice of customers it will not give choice of technology. technology.

Government has addressed these criticisms Government has addressed these criticisms by fast forwarding DTH permissions to Zee by fast forwarding DTH permissions to Zee TV and Prasar Bharati. Zee TV has already TV and Prasar Bharati. Zee TV has already launched its DTH transmissions from Oct launched its DTH transmissions from Oct 2002.Prasar Bharati is currently testing its 2002.Prasar Bharati is currently testing its DTH transmission which has been launched DTH transmission which has been launched in a few cities. in a few cities.

Technology ChoicesTechnology Choices

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The MSO Alliance recommends that Government The MSO Alliance recommends that Government needs to set up an Independent Electronic Media needs to set up an Independent Electronic Media Regulatory Authority as mandated by the Supreme Regulatory Authority as mandated by the Supreme Court in 1995 in the Cricket Association of Bengal Court in 1995 in the Cricket Association of Bengal case. case.

The other way to enlarge the powers of TRAI/TDSAT The other way to enlarge the powers of TRAI/TDSAT on the lines of the Convergence Commission on the lines of the Convergence Commission proposed in the 2001 Bill.proposed in the 2001 Bill.

No doubt the Ministries of Information and No doubt the Ministries of Information and Broadcasting and Communications would be Broadcasting and Communications would be confined to a policy making role. confined to a policy making role.

This may be a small price to pay for bringing order This may be a small price to pay for bringing order and sanity to an industry which is indeed a public and sanity to an industry which is indeed a public utility today as important as ‘roti kapda makaan.’utility today as important as ‘roti kapda makaan.’

Independent Electronic Independent Electronic Media RegulatorMedia Regulator

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THANK YOUTHANK YOU