Telecommunications And Media: Legal And Regulatory Environment


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Telecommunications And Media: Legal And Regulatory Environment

  1. 1. Telecommunications And Media: Legal And Regulatory Environment MADHURENDRA NATH JHA
  2. 2. Telecom – Silent Revolution <ul><li>2 nd Largest in the World </li></ul><ul><ul><li>Second only to China </li></ul></ul><ul><li>Since 2004, number of telephones grew @ 40% p.a. (exception of 2005) </li></ul>
  3. 3. India, USA & China 6 – 7 million / month 534.58 million China Jan’ 08 2 – 3 million / month 256 million USA Last Count 8 – 9 million / month 250.93 million India End of Feb’ 08 Addition in No. of Mobile Subscribers No. of Mobile Subscribers Country Month
  4. 5. Regulatory Framework Supreme Court TDSAT TRAI DoT Ministry of I & B
  5. 6. TRAI: Market Regulator <ul><li>Soft Gloved, Light Touch, In Sync with Market </li></ul><ul><ul><li>as technology cannot be policed </li></ul></ul><ul><li>India is plugged into the global market </li></ul><ul><li>Promoter of Technology </li></ul><ul><li>Pro-active and Sound Policy Making </li></ul><ul><li>Promotes Competition </li></ul><ul><li>Social Focus: increase access, lower price, provide choice </li></ul><ul><li>Increase teledensity </li></ul><ul><li>Promotion of consumer interest </li></ul><ul><ul><li>Choice, lower prices and availability </li></ul></ul><ul><li>Relatively Efficient Regulator </li></ul><ul><ul><li>Reason for slow paced reforms in electricity sector- lack of efficient power regulator </li></ul></ul>
  6. 7. Media and entertainment: <ul><li>The Indian Entertainment & Media industry can be categorized as follows: </li></ul><ul><li>Filmed Entertainment (Movies) </li></ul><ul><li>Television </li></ul><ul><li>Music </li></ul><ul><li>Radio </li></ul><ul><li>Print (Primarily Newspapers & Magazines) </li></ul>
  7. 8. FDI Policy for the Telecom  Automatic 100% Manufacture of telecom equipments 4. Automatic upto 49%     FIPB beyond 49% 100% a) ISP without gateway, *   b)  Infrastructure provider providing dark fibre, right of way, duct space, tower( Category –I);   c) Electronic mail and voice mail 3. Automatic upto49%   FIPB beyond 49% 74% ISP with gateways, radio-paging, end-to-end bandwidth. 2. Automatic upto 49%.   FIPB beyond 49%. 74% (including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate foreign equity in Indian promoters/Investing Company) 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   1. Entry route FDI Cap/Equity Sector/Activity Sr..
  8. 9. FDI in Media Sector FIPB 74% Satellites – operation and establishment FIPB 100% Publishing of scientific magazines/ specialty journals/ periodicals FIPB 26% Publishing of newspaper and periodicals dealing with news & current affairs FIPB 100% Up-linking a non-news & current affairs TV channel FIPB 26% Up-linking a News & Current affairs TV channel FIPB 49% Setting up hardware facilities such as up-linking, HUB, etc. FIPB 40% Direct-to-home FIPB 49% Cable Network FIPB 20% FM Radio Entry Route Sectoral Cap Sector
  9. 10. Grant of Licenses <ul><li>Unified Access Services </li></ul><ul><li>Carrier Services </li></ul><ul><li>Registration Certificate Infrastructure provider Category –I (IP-I) </li></ul><ul><li>Voice Mail Service / Audiotex / Unified Messaging Service </li></ul><ul><li>Public Mobile Radio Trunk Service License </li></ul><ul><li>Global Mobile Personal Communication by Satellite Service License </li></ul><ul><li>Other Service Providers </li></ul><ul><li>Very Small Aperture Terminal (VSAT) Service </li></ul><ul><li>Internet and Broadband Services </li></ul>
  10. 11. Indian Market <ul><li>Total Number of telephones </li></ul><ul><ul><li>281.62 million at the end of January 2008. </li></ul></ul><ul><ul><li>Current addition: 8 million lines per month, perhaps the highest in the world </li></ul></ul><ul><li>Target 2010: 500 million connections </li></ul><ul><li>Broadband Subscribers </li></ul><ul><ul><li>March 31, 2005: 0.18 million </li></ul></ul><ul><ul><li>December, 2007: 3.02 million </li></ul></ul>
  11. 13. Public vs. Private
  12. 14. The 4 C’s of Telecom & Media regulation In India <ul><li>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. </li></ul>
  13. 15. Telecom : Major Deals <ul><li>Sistema JSFC acquired 74% equity in Shyam Telelink Limited </li></ul><ul><li>Hutchison and Vodafone Merger </li></ul><ul><li>Spice, Idea and Aircel to merge. </li></ul>
  14. 16. Media : Major Deals <ul><li>UTV acquires majority stake in IT Nation. </li></ul><ul><li>TV 18 acquires a 40 percent stake in Infomedia India. </li></ul><ul><li>Cybermedia buys UBMs stake in publishing JV UBM-Cybermedia LLP. </li></ul><ul><li>9.9 Mediaworx to acquire Jasubhai Digitel. </li></ul><ul><li>Reliance Entertainment acquires Animation Studio Anirights. </li></ul><ul><li>HT Media buys social networking site DesiMartini. </li></ul>
  15. 18. Regulatory Challenges <ul><li>New Entrants vs. Existing Players </li></ul><ul><li>Security </li></ul><ul><li>Incumbent BSNL </li></ul><ul><li>Spectrum Allocation </li></ul><ul><li>Technology, Convergence </li></ul><ul><li>Pro-active and Supportive Regulator </li></ul><ul><li>Need for New Legislation- Existing Legislations Inadequate to manage technology Growth </li></ul><ul><li>Licensing Issues </li></ul><ul><li>Access and Inclusion </li></ul>
  16. 19. New Entrants Vs. Existing Players <ul><li>BSNL </li></ul><ul><ul><li>Existing Incumbent </li></ul></ul><ul><ul><li>Loss of 8% market share p.a. </li></ul></ul><ul><ul><li>Still the Largest </li></ul></ul><ul><li>To promote tele-density </li></ul><ul><li>Promote competition </li></ul><ul><li>Benefits of Technology Must Reach the Last Man in the Last Village </li></ul><ul><li>Teledensity covers only 1/4 th of the Population, hence 3/4 th of the Market untapped </li></ul><ul><li>New entrants would deviate from that model and provide competition </li></ul><ul><li>Existing players left to themselves would skim the market from top to bottom </li></ul><ul><ul><li>would be a time consuming process. </li></ul></ul><ul><li>Inclusion </li></ul>Top Spend Mid Spend Low Spend Average Spending by a consumer on Telephone Per month
  17. 20. Security Issues <ul><li>Telecommunications & Media sector </li></ul><ul><li>Traditionally considered to be Sensitive Sectors </li></ul><ul><li>Securing Sensitive Data communications </li></ul><ul><li>Blackberry Case </li></ul><ul><ul><li>Hosting vs. Routing </li></ul></ul><ul><li>India prefers Hosting </li></ul>
  18. 21. Spectrum Issues <ul><li>Allocation of Spectrum- Conflict between New Players and Existing Incumbents </li></ul><ul><li>Government has started allocating spectrum to new players </li></ul><ul><li>Spectrum Allocated to Defense, Railways, ONGC, BSNL and other Government Departments; </li></ul><ul><li>acquisitions- Major Players acquiring smaller networks for Spectrum (but 3 year lock-in for new entrants to discourage arbitrage impedes consolidation) </li></ul><ul><li>3 G Spectrum- Bone of contention between GSM & CDMA operators </li></ul>
  19. 22. Pro-active and Supportive Regulator <ul><li>Regulators Change with time </li></ul><ul><li>Telecom & Media Policy Making -Constant Learning Curve </li></ul><ul><li>Need to keep pace – Dynamic Environment </li></ul><ul><li>Need to learn from Mistakes in the Past </li></ul>
  20. 23. Potential Areas of Concern <ul><li>TRAI – well regarded / established sectoral regulator </li></ul><ul><ul><li>currently also adjudicating on certain competition issues </li></ul></ul><ul><li>Conflict in the future may occur with the Competition Regulator ( which is not established yet) </li></ul><ul><li>Powers of Telecom Regulator not clearly defined </li></ul><ul><li>Judicial review and activism </li></ul><ul><li>Lack of culture of nurturing institutional memory </li></ul>
  21. 24. Licensing Issues <ul><li>Need for Convergent Licensing requirements for Telecom & Media Sector </li></ul><ul><li>At present under the UASL Telecom Operators can provide both voice & data services; But Cable Networks can only provide data </li></ul><ul><li>ISP’s permitted to Provide Internet Telephony but only to a limited extent </li></ul><ul><li>Vast Differences in the Licensing Fee, Procedures, Offices </li></ul>
  22. 25. Convergence <ul><li>May be classified into two categories </li></ul><ul><li>Convergence of Policy/Regulation </li></ul><ul><li>Dynamic process; already taking place </li></ul><ul><li>2) Convergence of Services </li></ul><ul><li>Will take some time </li></ul><ul><li>some Convergence already achieved </li></ul>
  23. 26. Technology Drives Market & Market Drives Technology TECHNOLOGY MARKET TECHNOLOGY MARKET
  24. 27. 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.
  25. 28. Convergence of Licensing Regime Voice Data UASL LICENSE Access
  26. 29. Convergence of Policy & Regulation <ul><li>TRAI is the Policy recommending Authority to both DOT & I&B Ministry </li></ul><ul><li>Adjudicates disputes pertaining to both Telecommunications & Media & Broadcasting </li></ul>TRAI Department of Telecom Ministry of Information & Broadcasting
  27. 30. IPTV Services <ul><li>Driving Force: </li></ul><ul><li>The fast development in telecommunication technologies </li></ul><ul><li>Enormous capabilities of Internet protocol (IP) platform </li></ul><ul><li>Increasing digitalization in broadcasting sector </li></ul><ul><li>“ Technology drives the Market and Market drives Technology” </li></ul>
  28. 31. Regulatory Challenges in IPTV Services <ul><li>Unclear Policy Framework </li></ul><ul><li>Nature of Service not clear </li></ul><ul><li>Existing legislation not sufficient </li></ul><ul><li>Clarity on down linking guidelines </li></ul><ul><li>Content regulation </li></ul><ul><li>FDI Cap- Non Level Playing field </li></ul>
  29. 32. TRAI Recommendations <ul><li>To solve the regulatory issues concerning IPTV Services TRAI has recommended the following to DOT & I&B Ministry </li></ul><ul><li>Telecom Operators to provide IPTV services under UASL License </li></ul><ul><li>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) </li></ul>
  30. 33. TRAI Recommendations (Contd.) <ul><li>3)The up linking/down linking guidelines should be amended to enable the broadcasters to provide signals to all distributors of TV channels </li></ul><ul><li>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 </li></ul>
  31. 34. Convergence But Not Yet Any Convergence Law <ul><li>Digital Revolution with more efficient compression technologies and driven by powerful competitive forces that are now reshaping the communication landscape </li></ul><ul><li>telecommunication network - nexus for convergence of TV with the internet and the next generation of digital video service. </li></ul><ul><li>Indian media and entertainment industry to grow at 18% CAGR to reach Rs. 1 trillion by 2011 </li></ul><ul><li>Television segment will grow by 22 per cent from Rs 191 billion to Rs 519 billion by 2011 </li></ul><ul><li>2007 </li></ul><ul><ul><li>Internet subscribers – 18 million </li></ul></ul><ul><ul><li>Broadband subscribers – 9 million </li></ul></ul><ul><li>Online Penetration rate to be 7% by 2011 </li></ul><ul><li>Need for statute to keep pace with technology </li></ul>
  32. 35. Contd. <ul><li>E nhancements like mobile TV reception/HDTV/IP based TV and introduction of new convergent multimedia services and new applications such as 3G </li></ul><ul><li>Convergence ‘opens up possibility of greater competition that will benefit consumers with aggressive pricing,increased availability and competitive service packages.’ </li></ul>
  33. 36. Opportunities in Telecom Sector <ul><li>Telecom Infrastructure Services </li></ul><ul><li>Favourable Investment Climate </li></ul><ul><li>Total No. of Subscribers – Increase </li></ul><ul><ul><li>Yield per Subscriber from traditional streams may decrease due to higher competition, new entrants </li></ul></ul><ul><ul><li>Still higher Tariff Margins then any where in the world </li></ul></ul><ul><li>Possibility: </li></ul><ul><ul><li>3G Services – 2009 </li></ul></ul><ul><ul><li>4G Services – 2011 </li></ul></ul><ul><li>Value Added Services – 15% of yield </li></ul><ul><ul><li>Caller Tunes, Ring Back Service </li></ul></ul><ul><ul><li>Less Skimming </li></ul></ul><ul><ul><li>All small and medium players – growth opportunity for international player </li></ul></ul>
  34. 37. Media Sector- Opportunity <ul><li>60,000 Cable operators and 6,000 MSO’s providing cable services with analog technology; </li></ul><ul><li>Digitalization </li></ul><ul><li>Cable Operators disorganized small time players </li></ul><ul><li>Market Consolidation </li></ul><ul><li>Capacity enhancement of existing infrastructure </li></ul><ul><li>Opportunity to provide Cable television to 80 million homes. Therefore Vide untapped consumer base to cater. </li></ul>
  35. 38. THE COMMUNICATION CONVERGENCE BILL, 2001 <ul><li>Aims to facilitate, promote and develop </li></ul><ul><ul><li>carriage and content of communications </li></ul></ul><ul><ul><li>establishment of The Communications Commission of India </li></ul></ul><ul><li>Mandatory license and permission from the Central Government </li></ul><ul><li>Communications Commission of India - super-regulator </li></ul><ul><ul><li>telecommunications, broadcasting, data communication, multi-media and other related technologies and services. </li></ul></ul><ul><li>Bill failure – Blessing in Disguise </li></ul>
  36. 39. Entry Strategies for Foreign Investors <ul><li>As a Foreign Company through: </li></ul><ul><ul><li>Liaison office/Representative office </li></ul></ul><ul><ul><li>Project Office </li></ul></ul><ul><ul><li>Branch Office foreign company through: </li></ul></ul><ul><li>As an Indian company through: </li></ul><ul><ul><li>a Joint Venture – It may be noted that 90% of the JV’s in sectors without sectoral caps fail. </li></ul></ul><ul><ul><li>Wholly Owned Subsidiary </li></ul></ul>
  37. 40. Joint Ventures As An Entry Strategy <ul><li>JV’S regulated by Policies and Laws governing FDI </li></ul><ul><li>Two Tier Approval Mechanism for JV’S: </li></ul><ul><li>Automatic Approval Route </li></ul><ul><li>FIPB Approval Route </li></ul><ul><li>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 </li></ul>
  38. 41. India-entry <ul><li>‘ Same Field’ may be defined as the 4 digit National Industrial Classification (NIC) Code </li></ul><ul><li>Illustration: </li></ul><ul><li>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. </li></ul>
  39. 42. THANK YOU