Financial Daily from THE HINDU group of publications
Saturday, Nov 20, 2004
Industry & Economy
TRAI favours revenue share regime in FM radio services
New Delhi , Nov. 19
THE Telecom Regulatory Authority of India (TRAI) has favoured migration to a revenue share arrangement from the licence fee regime in FM radio broadcasting. The Government, on the contrary, has been in favour of continuing with the existing licence fee structure.
In its response to queries by the Information and Broadcasting (I&B) Ministry, the broadcast regulator has indicated that with the present levels of licence fees, broadcasters would not be able to continue their operations for a long time.
Backing the revenue share arrangement suggested in its recommendations on FM radio privatisation submitted earlier this year, the TRAI has said that if companies make higher profits due to lower licence fees, the Government would also mop up increased corporate tax collections. On the other hand, if the licence fees are kept very high, there will neither be revenue through fees or corporate tax, nor will there be any development of the radio industry.
The Government currently garners about Rs 100 crore annually as licence fees, which could go down. The TRAI has, however, said, "It needs to be strongly emphasised that the current revenues of more than Rs 100 crore per annum are not sustainable. The important point to emphasise is that all licensees have made a loss and that in aggregate this loss is more than the existing licence fee."
According to data provided by the telecom regulator, for 2003-04, Entertainment Network India Ltd (ENIL) has incurred losses of Rs 29.32 crore, Radio Today (in Delhi and Mumbai) Rs 21.25 crore, Music Broadcast India Pvt Ltd Rs 35.91 crore and Millenium Broadcast made losses of Rs 12.69 crore. Out of the 108 frequencies put on bid, only 21 are operational and of these two have given notice to close down.
While the TRAI has recommended a four per cent revenue share, the I&B Ministry felt that it would be difficult for it to meter the advertising revenues of the operators, especially where earnings from radio operations need to be segregated from other business activities or where it is contracted to a third party which gives rise to the potential of under-reporting.
The regulator has already recommended that the accounts for each licence should be separate and that these could be inspected by the Comptroller and Auditor General. On the issue of under-reporting of advertising revenues by appointing an agent for collecting advertisements and then paying such agency heavy commission, it said that this amount could be capped on the basis of an industry norm.
The Government has also questioned the regulator's decision to do away with the reserve price. To this, the TRAI has said that there is no need for keeping a reserve price as the value of spectrum depends on the use to which it is put to.
Also, the regulator is in favour of permitting broadcast of news and current affairs programmes on private FM channels. It has said that allowing news and current affairs would boost listenership and thus revenues.
On the issue of networking, it said, "Networking has been permitted in a restricted manner and not in a unfettered manner. No networking within the same city and no networking should be permitted across licences except on special occasions."
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