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Post-elections, regulatory shot ready for FM radio

03-May-2004
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Post-elections, regulatory shot ready for FM radio

The telecom regulator will intervene in the radio revolt being stirred by the country’s private FM service providers.

A source in the Telecom Regulatory Authority of India (Trai) said the Rs 110-crore default by private operators on the annual licence fee merited a shot of regulatory intervention.

The source said Trai will recommend that defaulters pay their dues to the government in easy installments and migrate into a revenue sharing arrangement suggested by Ficci’s Amit Mitra.

A letter will be despatched once the electoral process is over. That’s because Trai doesn’t want to get into a scrap with the Election Commission.

Trai’s underlying argument will be that delays in sorting out the government’s tangle with existing operators are hurting the launch of the second phase in FM radio.

The regulator will borrow ideas floated by the Radio Broadcast Policy Committee chaired by Mitra. The Ficci secretary-general, whose group had finalised a conciliatory report in November last, concluded that the existing operators had made “euphoric projections of revenues which were wide off the mark.” He suggested a migration package where the operators could pay a one-time “entry fee” and 4 per cent of their gross revenues as annual licence fee instead of the 10-year licence fee and 15 per cent escalation on the base of first year fee they had committed to pay in open auction bids held in May 2000.

Also, Mitra suggested that the “entry fee” be calculated as licence fee dues payable by the licensees upto July 31, 1999.

108 FM radio frequencies (VHF: 87-108 Mhz) across 40 cities (divided into five categories) were put up for open auction bidding in May 2000. In a blitz of optimism, 101 bids were received for Rs 425 crore. Later, 64 bidders defaulted and the actual collection was Rs 158 crore for 37 frequencies. Of these, 24 became operational (2 have deemed status, pending commercialisation of actual broadcast).

FM players have claimed that licence fee as a percentage of revenue/ expenditure hasn’t worked out for them. For example in Delhi and Mumbai, licence fee is 234 per cent of revenue and 59 per cent as a percentage of expenditure. Both Mitra and Trai have prime facie accepted these numbers.

Trai floated a consultation paper in April on the second phase of FM radio development. It sought reactions on migration-related issues and flagged ideas like lower revenue sharing percentage in rural markets; the concept of regional or national licences instead of the city-based ones at present; changes in the licence period and renewal conditions; an FM Radio Fund to promote roll out and non-commercial programming; foreign investment; and the threat of monopolies and oligopolies.

The working group of the information and broadcasting sector for the Tenth Plan has cautioned against treating FM radio as a source of revenue. FM presently covers 30 per cent of the country’s population. The Tenth Plan aims to take this number to 60 per cent with a thrust on private participation and replacing the existing system with revenue sharing.

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