telecommunications and media: legal and regulatory environment
TRANSCRIPT
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Telecommunications And Media:Legal And Regulatory Environment
MADHURENDRA NATH JHA
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Telecom – Silent Revolution
2nd Largest in the World
Second only to China
Since 2004, number of telephones grew @ 40% p.a. (exception of 2005)
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India, USA & China
Month Country No. of Mobile
Subscribers
Addition in No. of Mobile Subscribers
End of Feb’ 08
India 250.93 million
8 – 9 million / month
Last Count
USA 256 million 2 – 3 million / month
Jan’ 08 China 534.58 million
6 – 7 million / month
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Regulatory Framework Supreme Court
TDSAT
TRAIDoT Ministry of I & B
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TRAI: Market Regulator
• Soft Gloved, Light Touch, In Sync with Market • as technology cannot be policed
• India is plugged into the global market• Promoter of Technology • Pro-active and Sound Policy Making• Promotes Competition• Social Focus: increase access, lower price,
provide choice • Increase teledensity • Promotion of consumer interest
• Choice, lower prices and availability
• Relatively Efficient Regulator • Reason for slow paced reforms in electricity sector- lack of efficient power
regulator
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Media and entertainment:
The Indian Entertainment & Media industry can be categorized as follows:
Filmed Entertainment (Movies)
Television
Music
Radio
Print (Primarily Newspapers & Magazines)
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FDI Policy for the Telecom
Sr.. Sector/Activity FDI Cap/Equity Entry route
1. Basic and cellular, Unified Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS) Global Mobile Personal Communications Services (GMPCS) and other value added telecom services
74% (including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate foreign equity in Indian promoters/Investing Company)
Automatic upto 49%. FIPB beyond 49%.
2. ISP with gateways, radio-paging, end-to-end bandwidth.
74% Automatic upto49% FIPB beyond 49%
3. a) ISP without gateway, * b) Infrastructure provider providing dark fibre, right of way, duct space, tower( Category –I); c) Electronic mail and voice mail
100% Automatic upto 49% FIPB beyond 49%
4. Manufacture of telecom equipments 100% Automatic
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FDI in Media Sector
Sector Sectoral Cap Entry Route FM Radio 20% FIPBCable Network 49% FIPB
Direct-to-home 40% FIPB
Setting up hardware facilities such as up-linking, HUB, etc.
49% FIPB
Up-linking a News & Current affairs TV channel
26% FIPB
Up-linking a non-news & current affairs TV channel
100% FIPB
Publishing of newspaper and periodicals dealing with news & current affairs
26% FIPB
Publishing of scientific magazines/ specialty journals/ periodicals
100% FIPB
Satellites – operation and establishment
74% FIPB
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Grant of LicensesUnified Access ServicesCarrier ServicesRegistration Certificate Infrastructure provider Category –I (IP-I)Voice Mail Service / Audiotex / Unified Messaging ServicePublic Mobile Radio Trunk Service LicenseGlobal Mobile Personal Communication by Satellite Service LicenseOther Service Providers Very Small Aperture Terminal (VSAT) ServiceInternet and Broadband Services
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Indian Market Total Number of telephones 281.62 million at the end of January
2008. Current addition: 8 million lines per
month, perhaps the highest in the world Target 2010: 500 million connectionsBroadband Subscribers March 31, 2005: 0.18 million December, 2007: 3.02 million
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Public vs. Private
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The 4 C’s of Telecom & Media regulation In India
i. Customer's interest,
ii. Competition in a level paying field,
iii. Convergence of technologies, and
iv. Commitments both financial and legal, involving regulators, licensers, and licensees.
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Telecom : Major DealsSistema JSFC acquired 74% equity in Shyam Telelink Limited
Hutchison and Vodafone Merger
Spice, Idea and Aircel to merge.
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Media : Major Deals UTV acquires majority stake in IT Nation.
TV 18 acquires a 40 percent stake in Infomedia India.
Cybermedia buys UBMs stake in publishing JV UBM-Cybermedia LLP.
9.9 Mediaworx to acquire Jasubhai Digitel.
Reliance Entertainment acquires Animation Studio Anirights.
HT Media buys social networking site DesiMartini.
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Regulatory Challenges
New Entrants vs. Existing PlayersSecurity Incumbent BSNLSpectrum AllocationTechnology, Convergence Pro-active and Supportive RegulatorNeed for New Legislation- Existing Legislations Inadequate to manage technology Growth Licensing Issues Access and Inclusion
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New Entrants Vs. Existing PlayersBSNL
Existing Incumbent Loss of 8% market share p.a. Still the Largest
To promote tele-densityPromote competitionBenefits of Technology Must Reach the Last Man in the Last VillageTeledensity covers only 1/4th of the Population, hence 3/4th of the Market untapped New entrants would deviate from that model and provide competitionExisting players left to themselves would skim the market from top to bottom
would be a time consuming process.
Inclusion
Top Spend
Mid Spend
Low Spend
Average Spending by a consumer on Telephone Per month
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Security IssuesTelecommunications & Media sector
- Traditionally considered to be Sensitive SectorsSecuring Sensitive Data communicationsBlackberry Case Hosting vs. RoutingIndia prefers Hosting
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Spectrum IssuesAllocation of Spectrum- Conflict between New Players and Existing Incumbents
- Government has started allocating spectrum to new players
- Spectrum Allocated to Defense, Railways, ONGC, BSNL and other Government Departments; acquisitions- Major Players acquiring smaller networks for Spectrum (but 3 year lock-in for new entrants to discourage arbitrage impedes consolidation)3 G Spectrum- Bone of contention between GSM & CDMA operators
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Pro-active and Supportive Regulator
Regulators Change with time
Telecom & Media Policy Making -Constant Learning Curve
Need to keep pace – Dynamic Environment
Need to learn from Mistakes in the Past
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Potential Areas of ConcernTRAI – well regarded / established sectoral regulator currently also adjudicating on certain competition
issues Conflict in the future may occur with the Competition Regulator ( which is not established yet) Powers of Telecom Regulator not clearly definedJudicial review and activismLack of culture of nurturing institutional memory
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Licensing IssuesNeed for Convergent Licensing requirements for Telecom & Media Sector
- At present under the UASL Telecom Operators can provide both voice & data services; But Cable Networks can only provide data
- ISP’s permitted to Provide Internet Telephony but only to a limited extentVast Differences in the Licensing Fee, Procedures, Offices
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ConvergenceMay be classified into two categories
1) Convergence of Policy/Regulation
- Dynamic process; already taking place
2) Convergence of Services- Will take some time
some Convergence already achieved
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Technology Drives Market& Market Drives Technology
TECHNOLOGY
MARKETTECHNOLOGY
MARKET
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Regulatory trends in service Convergence
Spectrum licensing:The government of India has moved from a technology and service specific Licensing regime to a Technology neutral regime in their unified access service license.
Service regulation: QoS regulations and content regulations need to be followed.
On the broadcasting side, public service or public access television and radio are types of universal service obligations.
Authorizations and licensing:In a converged setting, there are overlaps and,: broadcasters (e.g. cable companies) are offering telecom services (Internet, voice), while telecom services are offering broadcasting services (IPTV). Further, cellular operators are providing mobile television services.
A case in point for approach is the development of IPTV in India.
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Convergence of Licensing Regime
Voice Data
UASL LICENSE
Access
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Convergence of Policy & Regulation
TRAI is the Policy recommending Authority to both DOT & I&B MinistryAdjudicates disputes pertaining to both Telecommunications & Media & Broadcasting
TRAI
Department of Telecom
Ministry of Information &Broadcasting
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IPTV ServicesDriving Force:
The fast development in telecommunication technologiesEnormous capabilities of Internet protocol (IP) platform Increasing digitalization in broadcasting sector
“Technology drives the Market and Market drives Technology”
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Regulatory Challenges in IPTV Services
Unclear Policy FrameworkNature of Service not clearExisting legislation not sufficientClarity on down linking guidelinesContent regulationFDI Cap- Non Level Playing field
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TRAI Recommendations To solve the regulatory issues concerning IPTV
Services TRAI has recommended the following to DOT & I&B Ministry
1) Telecom Operators to provide IPTV services under UASL License
2) Telecom licensees while providing TV channels
through IPTV shall transmit only such channels in exactly same form (unaltered) for which broadcasters have received up-linking/down-linking permission from Government of India (Ministry of Information and Broadcasting)
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TRAI Recommendations (Contd.)
3)The up linking/down linking guidelines should be amended to enable the broadcasters to provide signals to all distributors of TV channels
4)Telecom service providers providing IPTV service not to produce any news content and to show only those news channels which have permission from I & B Ministry
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Convergence But Not Yet Any Convergence Law
Digital Revolution with more efficient compression technologies and driven by powerful competitive forces that are now reshaping the communication landscapetelecommunication network - nexus for convergence of TV with the internet and the next generation of digital video service.Indian media and entertainment industry to grow at 18% CAGR to reach Rs. 1 trillion by 2011Television segment will grow by 22 per cent from Rs 191 billion to Rs 519 billion by 20112007
Internet subscribers – 18 million Broadband subscribers – 9 million
Online Penetration rate to be 7% by 2011Need for statute to keep pace with technology
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Contd. Enhancements like mobile TV reception/HDTV/IP based TV and introduction of new convergent multimedia services and new applications such as 3GConvergence ‘opens up possibility of greater competition that will benefit consumers with aggressive pricing,increased availability and competitive service packages.’
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Opportunities in Telecom Sector
Telecom Infrastructure ServicesFavourable Investment ClimateTotal No. of Subscribers – Increase
Yield per Subscriber from traditional streams may decrease due to higher competition, new entrants
Still higher Tariff Margins then any where in the worldPossibility:
3G Services – 2009 4G Services – 2011
Value Added Services – 15% of yield Caller Tunes, Ring Back Service Less Skimming All small and medium players – growth opportunity for
international player
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Media Sector- Opportunity 60,000 Cable operators and 6,000 MSO’s providing cable services with analog technology; Digitalization Cable Operators disorganized small time playersMarket Consolidation Capacity enhancement of existing infrastructure Opportunity to provide Cable television to 80 million homes. Therefore Vide untapped consumer base to cater.
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THE COMMUNICATION CONVERGENCE BILL, 2001Aims to facilitate, promote and develop carriage and content of communications establishment of The Communications
Commission of IndiaMandatory license and permission from the Central GovernmentCommunications Commission of India - super-regulator telecommunications, broadcasting, data
communication, multi-media and other related technologies and services.
Bill failure – Blessing in Disguise
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Entry Strategies for Foreign Investors
As a Foreign Company through: Liaison office/Representative office Project Office Branch Office foreign company through:
As an Indian company through: a Joint Venture – It may be noted that 90% of
the JV’s in sectors without sectoral caps fail. Wholly Owned Subsidiary
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Joint Ventures As An Entry Strategy
JV’S regulated by Policies and Laws governing FDITwo Tier Approval Mechanism for JV’S:
- Automatic Approval Route- FIPB Approval Route
If the Foreign Partner has entered into JV in the same field before then NOC of the previous JV partner and approval of the Government also required
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India-entry‘Same Field’ may be defined as the 4 digit National Industrial Classification (NIC) Code
Illustration: If the foreign investor has collaboration
for the manufacture of tarpaulin Code 268.3, he can invest in the manufacture of rubberized cloth Code 268.2 as there is no restriction to enter into JV’s in allied fields. The restriction shall apply to any item whose code NIC code is 268.2.
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THANK YOU