The Hindu Business Line : Lifeline for FM radio

THE TELECOM REGULATORY Authority of India (TRAI)'s recommendation for a shift to a revenue-sharing arrangement and greater operational flexibility should provide a lifeline to the FM radio business. The industry is awash in red, with no prospect of profits for several years if the present regulatory dispensation continues. Even operators in a lucrative market such as Mumbai are finding the going tough, and cannot afford the stiff licence fee. That a revenue-sharing arrangement may be more appropriate is clear from the experience in the telecom sector. The proposal of a one-time licence fee and a 4 per cent share in revenues appears equitable, both for the FM operators and the government. There are, however, indications that the Finance Ministry may be unwilling to make the switch as it reckons that the revenue losses would be substantial. Such an approach may serve neither the interests of revenue or the growth of the industry, as players are not going to rush in with their licence fee dues when their operations are intrinsically unviable.

While the contractual commitments are sacrosanct, the Government cannot be oblivious to the ground realities. It may have to allow a staggered schedule of payment of past dues while permitting migration to the new regime. If the cost structure provides for break-even and earnings within a reasonable period, the number of players could go up, especially in non-metro areas, with beneficial effects on society. The move to allow operators to own up to 25 per cent of the frequencies would enable them to offer a variety of content by securing licences for more than one frequency in a licence area. This may help them achieve scale economies, especially in the bigger cities, and also diversify the source of advertisement revenues.

The TRAI has also conveniently passed the baton to the Government in two sensitive areas — limit on Foreign Direct Investment and coverage of current affairs and news. There appears to be no reason why FM radio channels should not be allowed into the current affairs and news space. There is no basis for the official argument that monitoring FM radio channels could be difficult. A combination of broad official guidelines on what constitutes offensive or objectionable material and self-regulation by the industry should suffice. Strengthening the case for entry into this space is the role that FM radio could play, especially in the dissemination of news that is of relevance in the local context. Policy initiatives to encourage FDI flow would also provide a stronger basis for growth; despite the growth of television and the Internet, radio remains big business at the global level, and the operators in the more lucrative markets may find willing foreign investors. If these issues are addressed, and if the bidding is at realistic levels in the next round, a few serious and viable operators may emerge in a business that has elicited interest from listeners, especially in the metros.

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