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TRAI's view on vertical integration discriminatory: Zee
The Telecom Regulatory Authority of India (TRAI) recently came out with its recommendations on cross media ownership. It said there would be no cross-control caps across print/TV/radio and there would be no change in the license limits.

A Mohan, Executive VP at Zee Network feels that the guidelines on vertical integration are discriminatory. Rajesh Jain, National Industry Director for Communication and Entertainment at KPMG is of the view that some amount of consolidation is required, which can come only through cross-media ownership.

Here is a verbatim transcript, exclusive interview with A Mohan and Rajesh Jain on CNBC-TV18. Also watch the accompanying video.

Q: On the area and issue of vertical integration you believe that the recommendations that have come in are discriminatory. Can you take me through why you think that way?

Mohan: As far as the media and telecom sector is concerned, if you go through the recommendations, it is amusing to see that the concerns of the regulator so far relate to the anti-competitive practices, monopolization or the abuse of dominance in the market that are very much prevalent in the telecom sector as well.

On one hand you are saying that a broadcasting entity cannot have more than certain percentage of stake in a distribution platform and on the other hand you are saying the telecom companies can hold a DTH license and also have the mobile-TV license. This is the era of technological convergence.

What a telecom operator can do is that it can aggregate the content, then aggregate in its server and beam it through its IPTV operation or through mobile-TV.

Q: Your first grouse is that telecom has not been treated at par with broadcasting, your other grouse was that these recommendations are at variants with the new foreign investment ownership norms that have come in; explain that point as well.

Mohan: About a week ago the government announced its FDI policy. So basically it relaxed the FDI norms in various sectors. By indirect route in fact in certain sectors the FDI can go as high as upto 80-85% as well. What will happen in this sector is that while granting the media sector licenses, there is no effective see-through process. By see-through we mean that the actual ownership is not properly investigated by the licensing authorities.

For example, if a broadcaster is based in US, they have to take a stake in maybe a Mauritius based company which in turn will take a stake in a Hong Kong based company and that Hong Kong based company can invest in a DTH company in India. So, effectively speaking on paper, it is the Hong Kong company which is owning the DTH licenses and complying with the apparent guidelines or recommendations of TRAI. I will still call it a recommendation because till the time the government takes a particular view on that and converts it into licensing guidelines or so they will remain recommendations. Presuming that they become guidelines, on paper of course technically they maybe complying with that, but in reality it is the actual broadcasting company which is sitting in US maybe basically controlling the DTH license.

Q: Do you believe that these guidelines on vertical integration are discriminatory as Mr. Mohan has pointed out?

Jain: We have to look at it from the spirit of competition and what is good for the consumer. As long as there is a strong competition in every sphere of the broadcasting side or the distribution side, it is critical to provide an enabling regulatory framework rather than a restrictive regulatory framework. From that point of view, if you look at distribution, it is highly fragmented especially in the cable space and there has to be significant amount of consolidation for the benefit of the consumers in order to get better quality and digitalization process, which is critical to the whole process. So at one level, restriction is good but another level we need to see some amount of consolidation which can only come through cross-media ownership.

Q: Do you believe that these recommendations on vertical integration are restrictive and discriminatory?

Jain: The only aspect that I would like to stress on is that if telecom companies are allowed to have a play both on distribution and content in a form because mobile and TV can be done through telecom. And in today’s conversion environment there is different dissemination of content. So the regulator should look that as a moot point of thing if it wants to look at cross-media ownership.

Q: It is curious that the TRAI has not recommended any ownership cap or cross-control cap when it comes to the horizontal integration i.e. between print, television and radio. Why do you think? Is it because any one dominant owner across those three mediums could substantially influence an audience?

Jain: At one level what you say is true but the fact is today a consumer has a choice of getting his content from different aspects. Today, the internet opens up a whole spectrum of taking downloads of various consumption of things. You have adequate competition in news channels; you have adequate competition in every sphere of activity that you can look at. At one level, India is very fragmented and another level there is high intense competition. Vertical integration or horizontal integration is necessary to bring about good synergies to the whole process of media. In a today’s complex environment there are several amounts of media players which will need to look at consolidation as a basis to grow and provide better service. The important thing to note is that we should have adequate competition.

Q: Anything that is missing in these recommendations that you were expecting to see but hasn’t been addressed by the telecom regulator?

Jain: I think the key issue is that we should try and keep in mind what the international framework is. Some companies allow open access on cross-ownership but there are some countries which have restrictions including US and Europe. So, one will also have to see a balancing act of quid pro quo to enable the Indian companies to have some benefits.

Mohan: I fully endorse Mr. Jain’s view. If you see the restrictive regime in certain countries, in media sector, the regulator has tried to explain the international scenario but it has failed to notice a vital and an important element i.e. certain countries have strict FDI regimes. It is very difficult for Indian companies to go there and set up their base. For instance, in the US, no Indian company can set up a DTH platform neither can any Indian company bid for a spectrum whereas it is free for all in India. So what the regulator should have done was to create some kind of reciprocity.

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