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Trai proposes ownership curbs, independent regulator for media

Trai has recommended restrictions on cross media ownership, but only if a media company has dominance across print and television. The regulator calls this horizontal dominance (as opposed to vertical dominance, which is leadership of one segment). Photo: Pradeep Gaur/MintPremium
Trai has recommended restrictions on cross media ownership, but only if a media company has dominance across print and television. The regulator calls this horizontal dominance (as opposed to vertical dominance, which is leadership of one segment). Photo: Pradeep Gaur/Mint

Recommendations are likely to prove controversial as they immediately provoked an adverse reaction from Big Media

India’s telecom and media regulator on Tuesday recommended an independent regulator for the media, barring political parties and government departments from entering either broadcasting or TV distribution (through cable and direct-to-home, or DTH, TV), and suggested a formula for calculating “media dominance" that will likely affect at least some media companies in some markets.

The recommendations and suggestions—it is up to the government to accept them—are likely to prove controversial and immediately provoked an adverse reaction from Big Media.

The Telecom Regulatory Authority of India (Trai) also said the government and the new regulator that will be created should “seriously consider" ownership restrictions on companies entering the media business.

Media companies, some political parties, and at least some state governments are likely to have issues with the proposed regulations.

Trai has recommended restrictions on cross-media ownership, but only if a media company has dominance across print and television. The regulator calls this horizontal dominance (as opposed to vertical dominance, which is leadership of one segment).

The dominance will be calculated by the Herfindahl-Hirschman Index (HHI), and be market-specific, which could cause problems for some companies in some markets. HHI is simply the sum of the square of the marketshare (expressed in per cent) of all companies operating in a market, say, English mainstream dailies in Delhi, or English TV news channels in Delhi. Conventional wisdom suggests that a market is “concentrated" when HHI is higher than 2,500.

Trai has chosen to look at the contribution to HHI of a particular market of each media company and says that the “threshold contribution to HHI by an entity should be fixed at 1000, which approximately translates into a market share of 32%".

And if there is concentration across what Trai calls horizontals, print and TV for instance, and the same company has more than a 32% share in both, then the regulator believes it is a case of market dominance.

To be sure, much will depend on how markets are defined.

Bennett, Coleman and Co. Ltd (BCCL), for instance, could face some issues in markets such as Mumbai where it runs the largest English-language newspaper and the largest English-language TV news channel, and its own market share numbers show that it pretty much dominates the market.

However, Trai defines the relevant market for English as pan-Indian, and not by individual metros. Therefore, it is likely that regional media companies will be more affected by the regulator’s cross-media ownership rules.

At a press conference in New Delhi on Tuesday, Trai chairman Rahul Khullar said: “Here we are dealing with print and television. It does not matter whether you are present in both. What we are worried about is undue influence. So we have devised rules on market concentration. We measure the degree of market concentration. If someone has more than the required share of concentration, he needs to dilute control in the company."

To be sure, the rule applies only if the market concentration is more than the permitted limit for more than two years.

Ravi Dhariwal, CEO, publishing, at BCCL, declined comment on any of Trai’s recommendations. “The recommendations may have huge implications for us. I do not wish to comment till I study them in great detail. We have just concluded our board meeting and I have not read the document," he said, refusing to elaborate on the proposals.

HT Media Ltd’s CEO Rajiv Verma said he wouldn’t comment till he had gone through the fine print of the recommendations.

Ashish Bagga, group CEO at India Today, said that given India’s developing market and today’s digital age, the question of media monopoly in horizontal cross-media ownership or lack of plurality of views, does not arise. “This is because the sheer number of newspapers, news channels and news digital platforms are enormous, multilingual, heterogeneous and growing. Therefore, instead of attempting to curb consolidation, the direction by the government should be aimed at expanding the media market with a view to foster healthy competition," he said. “The only way the government can really contribute is to allow unfettered growth of the media and allow economic decisions of horizontal or vertical integration to be taken by the media companies themselves."

In fact, Trai should not include print media in its purview and issues related to cross-media ownership should be immediately withdrawn from its recommendations, Bagga added. “Print does not fall under its jurisdiction."

The regulator also recommended restrictions on vertical integration in broadcasting—that is, a TV channel owning a cable network, a DTH platform, or other distribution companies.

“Vertical integration of broadcasters with distribution platform operators (DPO), i.e., cable/HITS/DTH operators, can restrict horizontal competition. Any entity which has been permitted/licensed for television broadcasting or has more than 20% equity in a broadcasting company, shall not have more than 20% equity in any distributor (MSO/cable operator, DTH operator, HITS operator, mobile TV service provider) and vice-versa." It added that “the existing broadcasters who may have ‘control’ in distribution (MSO/cable/DTH) and entities in the distribution sector who may have similar ‘control’ over broadcasting should be given sufficient time of three years for restructuring".

MSO stands for multi-system operator. HITS is short for headend in the sky—a digital delivery system.

The restriction could affect broadcasters such as Zee Entertainment Enterprises Ltd.

A Zee group executive said on condition of anonymity that such cross-media restrictions will not pass muster anywhere, “not even with the government". “Why? Because when the government gave us licences for each of these businesses, it did not say that we will have to dilute our stakes in the future. This is against the government’s original licence conditions," said this person. Besides, the proposals are against DTH, cable and HITS companies’ right to do business, he added. “This would not stand a chance in a court of law either."

The Trai recommendations seem to be in contrast with what the authority has recommended for the telecom sector, where a uniform licence has been allowed, this person argued. “And here we not only struggle for separate licences, but also are now being told to dilute equity."

In the past few years, there has been an outcry over corporate ownership of media, although some analysts have pointed out that there is little difference between the behaviour of a media company owning media and that of a non-media company, say, a bank or an oil company, owning media.

Khullar said there are two problems. One, many non-media corporate entities with varied commercial interests are increasingly interested in controlling media outlets because of the benefits this has for their other businesses. Two, many media corporates diversify into other, non-media, businesses by leveraging their clout and visibility.

In effect, it is the potential for conflict of interest that seems to be bothering Trai.

As a result, ownership restrictions on corporate entities entering the media should be seriously considered by the government and the proposed media regulator, Trai said. This may entail restricting the amount of equity holding in a media company or loans—or any other form whereby it can exercise control. “Editorial independence must be ensured through a regulatory framework," the recommendations said.

Corporate ownership of the sort highlighted by Khullar also causes problems for journalists. There needs to be Chinese walls between corporate owners and editors, Trai said.

The regulator also frowned upon channels owned by political parties, religious groups and even the government or its departments.

Trai has strongly recommended that its earlier proposals barring political and religious bodies and other central and state government ministries from entering news broadcasting and television channel distribution business be enforced. It said that in case permission has been given to such bodies, they should be granted an exit route.

N. Ram, chairman of Kasturi and Sons Ltd, which publishes The Hindu, said that it is not possible to ban people from entering the media business whether they are politicians or other corporate houses. “Such restrictions will impinge on other rights of people. You can ensure that people make the relevant disclosures but you cannot stop people from owning a media business," he said.

He said that there was no room for a Chinese wall between owners and the editorial section as the two need to talk. “There should be a clear line but not a wall," Ram said.

Trai also recommended that the independent media regulator be free of government control and composed predominantly of eminent “non-media persons".

HT Media, publisher of Hindustan Times and Mint, competes with Bennett Coleman, the India Today Group, and Kasturi and Sons in some markets.

This piece has been corrected to reflect a more accurate definition of “relevant market".

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