Phase-II Private FM Broadcasting - Regulatory issues  

A.K. BHATNAGAR

ADVISOR

-SPECIAL [BROADCASTING AND CABLE TV SERVICES] 

TRAI

Synopsis

§ Results, lessons and recognition of problems from Phase I.

§    Open bid system, fixed annual fee with 15% escalation every year, no data broadcasting.

TRAI’s recommendation for phase-II

§    Permission for networking, data broadcasting .

§    Migration of phase- I licenses to phase-II

§    Co-location

Phase II FM policy

§    Close bid system, one time entry fee (OTEF)

§    Annual fee 4% of gross revenue or 10% of one time entry fee whichever is higher.

§    20% FDI, 50% content to be produced in India, 50% broadcast equipment can be hired.

§    AIR’s Programme & Advertisement code to be followed.

§    Networking for ‘C’ & ‘D’ stations and data broadcasting allowed.

§    News and current affairs not allowed  

Results of Phase-I

§    108 FM channels were offered in 40 cities in May 2000.

§    Bids were received for 101 channels for Rs.425 crores against an estimate of about Rs.80 crores.

§    Finally, Government could collect only about Rs.159 crores from 37 channels as bidders of 64 channels defaulted. Though the licenses were issued to 37 channels, only 22 channels are presently operational. Thus Phase-I results were not encouraging as only about 20% of expected licenses could become operational.

TRAI Recommendations.

§    TRAI examined the issue in an open and transparent manner.

§    Issued a Consultation Paper on 14th April 2004.

§    Organised Open House Discussions (OHDs) in Chennai, Delhi and Mumbai in May 2004 as a part of TRAI’s Consultative Approach.

§    TRAI Recommendations were sent to Government on 11th August 2004.

 

TRAI provided Recommendations on the following aspects:

§    Method of Licensing, License fee structure and period of license.

§   Ownership Issues (Monopoly Control, FDI and Cross Media Publicity).

§    Content, News and Current Affairs and Programme Code.

§    License conditions and default obligations.

§    Networking.

§    Increase in Number of frequencies for FM Broadcasting.

§    Co-location.     

§    Technical Standards

§    Data Broadcasting

§    Migration of Phase-I Licenses to the Phase-II Regime.

 

Phase-II FM Policy

Phase-I: Ministry of I&B agreed under the License agreement to grant license to the Licensor under Section–4 of the Indian Telegraph Act, 1985 to establish, maintain and operate FM Radio Broadcasting Station.

Phase-II: Ministry of I&B after execution of Grant of Permission agreement shall grant permission to enable Permission Holder to install the radio station, obtain wireless operating license and operationalize the channel.

 

Tendering System

Closed bid tendering System has been adopted instead of open bid system of Phase I. Highest financial bids which are equal to number of channels offered in a city will be selected

If the number of valid financial bids being more than the number of channels  offered in a city, the unsuccessful bidders have the option to remain in the waiting list with certain conditions.

 

Annual Fee

§    Annual fee will be 4% of Gross Revenue of the Permission Holder or 10% of Reserve OTEF (One Time Entry Fee) whichever is higher.

§    Gross Revenue will include gross inflow of cash, receivables, other considerations, rent, interest, dividend, royalties, commission, income from promotional events, Musical/ Film Star Nights, Sale of cassettes, CDs etc.

§    Gross revenue will be assessed before taxes, agency commission, net of discounts to advertisers.

§    Barter advertising contracts will also be included.

§    Every permission holder will maintain separate financial account for each channel.

 

Ineligibility Criteria

§    A company controlled by a Trust, Society, Non-profit organization, religious body, political party.

§    An advertising company or associate of an advertising company.

§    Defaulters of Phase-I who have gone to courts.

 

Monopoly Control

§    Every applicant cannot have more than one channel in a city.

§    Every applicant cannot have more than 15% of the total channels allocated in India including Phase-I channels.

§    Licensees of Phase-I who have an operational FM channel in a city can not bid for additional channel in the same city under Phase-II.

 

FDI

Total Foreign Direct Investment will not exceed 20% including FDI by OCBs/ NRIs/ PIOs/ etc., portfolio investments by FII.

 

Content production & lease of equipment

        Not more than 25% of the total content shall be outsourced to a single content provider.

Not more than 50% of the total content would be outsourced.

Not more than 50% of broadcast equipment shall be hired or leased on long-term basis.

At least 50% of the programmes are to be produced in India.

 

Programme Code

§    Programme code and Advertisement code of All India Radio are to be followed.

§    Public Interest Announcements of Central and State Governments are to be broadcast for a maximum duration of one hour.

§    No brand names or owners names or Corporate Group names would be used to identify the channels to gain commercial advantage over other permission holders.

Networking

Networking of channels of a Permission Holder has been allowed in “C” and “D” category cities within a region.

Co-location

§    Co-location mandatory for all cities

§    In 84 cities co-location will be on existing AIR/ DD towers

§    In remaining 7 cities (Delhi, Mumbai, Kolkata Chennai, Bangalore, Hydrabad, Jaipur) Ministry of I&B will construct the towers for co-location

§    Pending construction of towers in these 7 cities for co-location purposes, the successful bidders will be allowed to operationalise their channels on stand alone basis for a period of 2 years

§    In Mumbai the existing Phase-I operators will be allowed to migrate to Phase-II Regime only after they make agreements with BECIL and make payments towards their share of common facilities of co-location

Other aspects

§    Permission Period 10 years

§    Data Broadcasting Allowed

§    Period for keeping 3 months

§    Continuous Recordings of programmes

Penal Provisions

§    Permission will be revoked if Permission Holder is unable to operationalise the channel within 18 months of signing of Grant of Permission Agreement.

§    Permission Holder will also be debarred from allotment of another channel in the same city for a period of 5 years.