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    The telecommunications and media sector in India is experiencing rapid growth and convergence. India has the second largest number of telephone subscribers in the world, growing at around 40% annually. The regulatory framework includes the TRAI as the market regulator promoting competition, social goals, and consumer interests. Major deals in telecom and media include mergers and acquisitions. Regulatory challenges include managing new entrants versus existing players, security issues, spectrum allocation, technology convergence, and the need for new legislation to manage growth. IPTV services are an example of convergence that requires clarity on regulatory issues.

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    The telecommunications and media sector in India is experiencing rapid growth and convergence. India has the second largest number of telephone subscribers in the world, growing at around 40% annually. The regulatory framework includes the TRAI as the market regulator promoting competition, social goals, and consumer interests. Major deals in telecom and media include mergers and acquisitions. Regulatory challenges include managing new entrants versus existing players, security issues, spectrum allocation, technology convergence, and the need for new legislation to manage growth. IPTV services are an example of convergence that requires clarity on regulatory issues.

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    The telecommunications and media sector in India is experiencing rapid growth and convergence. India has the second largest number of telephone subscribers in the world, growing at around 40% annually. The regulatory framework includes the TRAI as the market regulator promoting competition, social goals, and consumer interests. Major deals in telecom and media include mergers and acquisitions. Regulatory challenges include managing new entrants versus existing players, security issues, spectrum allocation, technology convergence, and the need for new legislation to manage growth. IPTV services are an example of convergence that requires clarity on regulatory issues.

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    141 views42 pages

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    The telecommunications and media sector in India is experiencing rapid growth and convergence. India has the second largest number of telephone subscribers in the world, growing at around 40% annually. The regulatory framework includes the TRAI as the market regulator promoting competition, social goals, and consumer interests. Major deals in telecom and media include mergers and acquisitions. Regulatory challenges include managing new entrants versus existing players, security issues, spectrum allocation, technology convergence, and the need for new legislation to manage growth. IPTV services are an example of convergence that requires clarity on regulatory issues.

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    of 42

    Telecommunications And Media: Legal And Regulatory Environment

    MADHURENDRA NATH JHA

    Telecom Silent Revolution


    2nd Largest in the World

    Second only to China

    Since 2004, number of telephones grew @ 40% p.a. (exception of 2005)

    India, USA & China


    Month Country No. of Addition in No. Mobile of Mobile Subscribers Subscribers

    End of Feb 08 Last Count Jan 08

    India

    250.93 million

    8 9 million / month
    2 3 million / month 6 7 million / month

    USA China

    256 million 534.58 million

    Regulatory Framework
    Supreme Court

    TDSAT

    DoT

    TRAI

    Ministry of I & B

    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

    Relatively Efficient Regulator

    Choice, lower prices and availability

    Reason for slow paced reforms in electricity sector- lack of efficient power regulator

    Media and entertainment:


    The Indian Entertainment & Media industry can be categorized as follows: Filmed Entertainment (Movies)

    Television
    Music Radio Print (Primarily Newspapers & Magazines)

    FDI Policy for the Telecom


    Sector/Activity Sr.. 1. Basic and cellular, Unified Access Services, National/International Long Distance, VSat, 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%. FDI Cap/Equity Entry route

    FIPB beyond 49%.

    2.

    ISP with gateways, radio-paging, end-toend bandwidth. a) ISP without gateway, * b) Infrastructure provider providing dark fibre, right of way, duct space, tower( Category I); c) Electronic mail and voice mail

    74%

    Automatic upto49% FIPB beyond 49%

    3.

    100%

    Automatic upto 49%

    FIPB beyond 49%

    4.

    Manufacture of telecom equipments

    100%

    Automatic

    FDI in Media Sector


    Sector FM Radio Cable Network Direct-to-home Setting up hardware facilities such as up-linking, HUB, etc. Sectoral Cap 20% 49% 40% 49% Entry Route FIPB FIPB FIPB FIPB

    Up-linking a News & Current affairs TV channel


    Up-linking a non-news & current affairs TV channel Publishing of newspaper and periodicals dealing with news & current affairs Publishing of scientific magazines/ specialty journals/ periodicals Satellites operation and establishment

    26%
    100% 26%

    FIPB
    FIPB FIPB

    100%

    FIPB

    74%

    FIPB

    Grant of Licenses
    Unified Access Services Carrier Services Registration Certificate Infrastructure provider Category I (IP-I) Voice Mail Service / Audiotex / Unified Messaging Service Public Mobile Radio Trunk Service License Global Mobile Personal Communication by Satellite Service License Other Service Providers Very Small Aperture Terminal (VSAT) Service Internet and Broadband Services

    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 connections Broadband Subscribers


    March 31, 2005: 0.18 million


    December, 2007: 3.02 million

    Public vs. Private

    The 4 Cs 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.

    Telecom : Major Deals


    Sistema JSFC acquired 74% equity in Shyam Telelink Limited Hutchison and Vodafone Merger
    Spice, Idea and Aircel to merge.

    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.

    Regulatory Challenges
    New Entrants vs. Existing Players Security Incumbent BSNL Spectrum Allocation Technology, Convergence Pro-active and Supportive Regulator Need for New Legislation- Existing Legislations Inadequate to manage technology Growth Licensing Issues Access and Inclusion

    New Entrants Vs. Existing Players


    BSNL Existing Incumbent Loss of 8% market share p.a. Still the Largest To promote tele-density Promote competition Benefits of Technology Must Reach the Last Man in the Last Village Teledensity covers only 1/4th of the Population, hence 3/4th of the Market untapped New entrants would deviate from that model and provide competition Existing 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

    Security Issues
    Telecommunications & Media sector - Traditionally considered to be Sensitive Sectors Securing Sensitive Data communications Blackberry Case

    Hosting vs. Routing

    India prefers Hosting

    Spectrum Issues
    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

    Allocation of Spectrum- Conflict between

    New

    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

    Potential Areas of Concern


    TRAI 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 defined Judicial review and activism Lack of culture of nurturing institutional memory

    Licensing Issues
    Need 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 - ISPs permitted to Provide Internet Telephony but only to a limited extent Vast Differences in the Licensing Fee, Procedures, Offices

    Convergence
    May 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

    Technology Drives Market & Market Drives Technology

    MARKET

    TECHNOLOGY

    TECHNOLOGY

    MARKET

    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.

    Convergence of Licensing Regime


    UASL LICENSE

    Access

    Voice

    Data

    Convergence of Policy & Regulation


    TRAI is the Policy recommending Authority to both DOT & I&B Ministry Adjudicates disputes pertaining to both Telecommunications & Media & Broadcasting
    TRAI

    Department of Telecom

    Ministry of Information & Broadcasting

    IPTV Services
    Driving Force: The fast development in telecommunication technologies Enormous capabilities of Internet protocol (IP) platform Increasing digitalization in broadcasting sector

    Technology drives the Market and Market drives Technology

    Regulatory Challenges in IPTV Services


    Unclear Policy Framework Nature of Service not clear Existing legislation not sufficient Clarity on down linking guidelines Content regulation FDI Cap- Non Level Playing field

    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)

    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

    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 landscape telecommunication 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 2011 Television segment will grow by 22 per cent from Rs 191 billion to Rs 519 billion by 2011 2007

    Online Penetration rate to be 7% by 2011 Need for statute to keep pace with technology

    Internet subscribers 18 million Broadband subscribers 9 million

    Contd.
    Enhancements like mobile TV reception/HDTV/IP based TV and introduction of new convergent multimedia services and new applications such as 3G Convergence opens up possibility of greater competition that will benefit consumers with aggressive pricing,increased availability and competitive service packages.

    Opportunities in Telecom Sector


    Telecom Infrastructure Services Favourable Investment Climate Total No. of Subscribers Increase

    Possibility:

    Yield per Subscriber from traditional streams may decrease due to higher competition, new entrants Still higher Tariff Margins then any where in the world 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

    Media Sector- Opportunity


    60,000 Cable operators and 6,000 MSOs providing cable services with analog technology; Digitalization Cable Operators disorganized small time players Market Consolidation Capacity enhancement of existing infrastructure Opportunity to provide Cable television to 80 million homes. Therefore Vide untapped consumer base to cater.

    THE COMMUNICATION CONVERGENCE BILL, 2001


    Aims to facilitate, promote and develop carriage and content of communications establishment of The Communications Commission of India Mandatory license and permission from the Central Government Communications Commission of India - super-regulator telecommunications, broadcasting, data communication, multi-media and other related technologies and services. Bill failure Blessing in Disguise

    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 JVs in sectors without sectoral caps fail.

    Wholly Owned Subsidiary

    Joint Ventures As An Entry Strategy


    JVS regulated by Policies and Laws governing FDI Two Tier Approval Mechanism for JVS: - 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

    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 JVs in allied fields. The restriction shall apply to any item whose code NIC code is 268.2.

    THANK YOU

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