Dinyar Contractor questions attempt to restrict MSO DAS licenses to large entities

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“MIB,” says CATV veteran and distribution-space thought leader Dinyar Contractor, Editor of Satelilte & Cable TV Guide, India’s largest magazine for the Cable TV, Broadband, IPTV and the Satellite Industry, “seems set on restricting MSO DAS licenses to large entities.” The stated aim was ‘to restrain the non-serious players from entering in the business’. But MIB has persisted despite that fact that the Telecom Regulatory Authority of India (TRAI) has already specified that ‘there is no relation between a das mso’s net-worth and it being non-operational’.

So here’s Dinyar Contractor, feisty champion of the MSO, the LMO / LCO, and indeed all stakeholders  in the distribution industry, in a deep-dive conversation on the issue, starting from the background, to what the consultation paper had mainly sought views on, and Dinyar’s own take on the matter.

Dinyar, tell us about the background to TRAI issuing a consultation paper on whether setting a minimum net worth criteria for MSOs?

In its July 2008 recommendations on Restructuring of Cable TV Services, TRAI had suggested a minimum-net-worth criterion for MSOs, depending on their geographical area of operation. The aim was “to restrain the non-serious players from entering in the business.’

The net worth criteria as per the area of operation, were:

  • At the District level – a recommended net-worth of Rs 5 lakhs
  • At the State level – a recommended net-worth of Rs 10 lakhs
  • At the Country level – a recommended net-worth of Rs 25 lakhs

Also, no annual license fee was recommended.

Ánd we know the MIB did not accept this…

No it didn’t. Instead, it prescribed a uniform entry fee of ₹ 1 Lakh for DAS MSO registration.

Later when inadequate applications were received for DAS 3 & 4 areas, the MIB extended the geographical area of all DAS MSO licenses, to be valid All-India.

And then it sought new recommendations from TRAI…

Yes. Vide its letter of 16 May 2018, the MIB had requested TRAI to give its considered recommendations on entry-level net worth of (DAS) MSOs. The ministry had pointed out that the current framework is governed by Rule 11(3) of Cable TV Network (CTN) Rules, 1994, which speaks of the financial strength of the applicant for MSO registration, but does not explicitly define or quantify it.

Now let’s see what Clause 11 of CTN Rules, 1994 (as amended for DAS), says. It states that, and I quote, ‘The Ministry of Information & Broadcasting in the Government of India shall, within thirty days of the receipt of the application, grant, or refuse, permission to the applicant to provide addressable systems in the notified areas after considering its suitability or otherwise on the basis of information given in respect of its existing operational area, actual number of subscribers and addresses of its local cable operators in each of the notified areas, commercial arrangements with the broadcasters and local cable operators, if any, financial strength, management capability, security clearance and preparedness to supply and maintain adequate number of set top boxes for its subscribers, installation of its subscriber management system and compliance with all other quality of service standards as may be specified by the Authority’.

This implies that  the MIB must grant or refuse a DAS MSO license within 30 days of application, and that the MIB must have various details of DAS MSO license holders, including the net-worth of the registered MSOs.

Clause 11 Of The Cable Act Requires The MIB To Grant Or Refuse A DAS MSO License Within 30 Days Of Application – But More Than 100 Applications Are Pending For More Than 2 Years!

And TRAI did seek information on the net-worth of the already registered MSOs…

Vide its 25 July 2018 & 3 October 2018 letters, TRAI had requested the MIB to provide information on the net-worth of the already registered MSOs.

TRAI had also sought reasons for MIB decision to prescribe net worth requirements at this stage.

However, MIB has not reverted to TRAI on this. Meanwhile,  keep in mind that TRAI has already observed that there is no relation between a DAS MSO’s net-worth and it being non-operational.

And what are the current net worth requirements?

As you know, conceptually, net worth is the value of all the nonfinancial and financial assets minus the value of all its outstanding liabilities owned by an individual or institutional unit. As per MIB data, there are 1471 MSOs registered with it as on 31st of March of 2018.

No net worth for DTH,  but 10 cr for HITS! And now, net worth for MSOs too

What I personally find very discriminatory is, that the current net worth requirements stipulate NO net worth requirement for DTH operators, but it stipulates a minimum net worth of Rs 10 crores, and now the MIB wants to impose a minimum net worth even on the MSOs.

My questions  to the MIB are: Why is the Cable TV sector being discriminated against? And why have you disregarded TRAI’s observations to you about there being no relation between an MSOs net worth and it being non-operational. Also, why have you not shared with TRAI the information it had sought on net worth of MSOs already registered?

Dinyar, what  is also particularly baffling is that this consultation paper has come at a time when we have the NXT Digital HITS platform from the Hinduja Group. NXT Digital is perfectly equipped to make LCOs and LMOs the owners of their own little networks by giving them their own headends, not at the erstwhile costs of Rs 1 to 2 crores for setup, but at fractions thereof, ranging from 7-8 lakhs to a maximum of around 15-16 lakhs. They are even offering white label services, with SMS, customer helplines, etc. Surely there was absolutely no need for this call to recaliberate net worth requirements at such restrictive, forbidding, non-inclusive,  high numbers?

I agree. 

What are the issues for consultation? TRAI had listed 24. Can you summarise the broad gist and important factors

TRAI has asked if the present rules and provisions of eligibility and net worth for (DAS) MSOs require a review or modification. Also, if individuals, as currently permitted, should be barred from becoming DAS MSOs. Should a minimum Net Worth be specified? Should it be dependent on area of operation? How should it be applied to existing MSOs? How should it be verified?

Then there is the matter of how fixed and variable costs depend upon the scale of the operation ie for small, medium and large operators. Another question is: Should the minimum net worth required be based upon the average fixed cost?

Also, if the minimum net worth should depend upon the proposed channel-carrying capacity  — 100/200/300/500 channels — of the entrant. Also if the minimum net worth should depend upon the proposed number of subscribers to be catered to.

Written comments on the consultation paper were due by 8th of May, and counter comments were to be submitted by the 15th of May.

What is your view on the MIB’s move to restrict DAS MSO licenses on the basis of net worth?

This move to further restrict MSO licenses to large corporates & or the Rich needs to be condemned in the strongest terms, because of these reasons: (counts them out one by one):

One – It is against the declared manifesto of every political party to create jobs and self-employment.

Two – It restricts the right of citizen to continue the business that they have been doing for more than 20 years; in fact, ever since CATV commenced in India. In fact, the MIB has remained silent on whether it proposes to cancel existing licenses that do not meet the financial criteria.

Three – The Cable TV industry was born from the entrepreneurial initiative by thousands of citizens, who have invested their own funds – remember, bank loans are not available for this. These are the people who have grown the Indian cable TV Business to the largest in the free world. In fact, thanks to the individual CATV entrepreneur, today, India has more Cable TV than the USA; entire Europe Combined; rest Of Asia Pacific combined!

Four – Almost all large corporate MSOs are incurring losses in their Cable TV operations.  For instance, ORTEL Communication Ltd has been served a notice by the NCLT under Section 9 of the Insolvency and Bankruptcy Code.

Five – Smaller MSOs with their keen entrepreneurial spirit continue to make a profit. TRAI also admits “There Is No Relation Between A DAS MSO’s Net-Worth & It Being Non-Operational.”

See, The Ministry Of Information & Broadcasting needs to set its own house in order. Not a Single DAS MSO license has been issued in more than two years, despite Court Instructions to expedite processing of more than 100 pending DAS MSO applications.

Your thoughts, please