Need for Speed

T RAI has issued on 14 April 2004 a consultation paper on licensing issues
related to the private FM radio-broadcasting phase. This rather comprehensive
and voluminous document, makes for some very interesting reading. TRAI has
invited comments from ‘various stakeholders’ by 7 May 2004.

FM radio broadcasting, which is a superior medium, covers only about 30
percent of the Indian population. Therefore, there is a need to increase its
spread and have a better variety and range of programs. In perspective, All
India Radio (AIR) covers through its MW network about 95 percent of the country
from 213 broadcasting stations. It has programs in 24 languages and 145
dialects! Plus, broadcasts in 15 foreign languages. While its scale of operation
is laudable, the quality of programs and coverage is not. Go a few kilometers
from the major cities or towns and the reception drops dramatically. The
programs are rather predictable and dull.

Hence, private broadcasters have a definite role to play in the growth of the
medium. The consultation paper acknowledges that radio is an underdeveloped
medium. One way of looking at it is to find out the advertising spend on radio.
Globally, the number is six percent. In India, it is just two percent. Radio is
best suited for local information needs and there are a huge number of local
suppliers of goods and services who can use the radio medium very effectively.
But only if we implement the plans well!

So far the implementation feels like a B-grade serial with a plot that is
written at the end of each episode. Assuming that phase 2 will be the final act,
we have reached the mid-point. And now the script is being hastily rewritten.
The story so far is as follows.

n May 2000: 108 frequencies are
auctioned across 40 cities.

n December 2002: Services start
in 14 cities and out of the 37 licenses granted, only 22 are operational. That
is about 60 percent.

n Early 2003: A villain who has
supposedly entered the plot without the knowledge of the directors, producers or
the actors is identified. It is the ‘license fee’. At the time of bidding
for the licenses, the reserve amount had been pegged between Rs 20—125 lakh
per annum on a city-wise basis. In addition, there was an escalation clause of
15 percent per annum for the ten-year license period. The bids received were
between Rs 20—975 lakh–on the basis of ‘speculation’. Maybe the bidders
misread the market. Maybe they were bidding just to trade in the licenses and
found no takers later.

The result: a license fee that works out to between Rs 120—998 percent of
the annual revenues for the year 2003—03 for many operators. With an annual
increase of 15 percent the script has gone horribly off track. Not that the
Government has done that. The TRAI report points out that the first-year license
fee arrived through bidding, was in several cases very unrealistic. "As a
result, several of the licensees defaulted and are even today making huge
losses. The license fee for the first year for the 10 licensees amounted to
about Rs 162 crore, 60 percent more than the annual revenues of AIR," it
elaborates.

n May 2003: To set things right
the Government appoints a Radio Broadcast Policy Committee to recommend a new
script. Meanwhile, the Planning Commission sets up a Tenth Plan target to
increase the FM coverage to 60 percent of the population by the end of 2007.

n November 2003: The committee
submits its report which recommends restructuring of the policy and a series of
recommendations on entry and exit mechanisms, license fee structures, enhancing
scope of services etc.

n February 2004: The report is
sent to the TRAI for recommendations

n April 2004: TRAI puts up the
64-page consultative paper on the policy on its website and invites comments by
7 May 2004 from all stakeholders.

So here we are. Four years down the line and still rewriting the script. Some
questions. Do we really need so many scriptwriters? If yes, why cannot they work
together in the first instance itself? And why cannot we have better
scriptwriters so that changes are not required mid-way?

The ‘consultation’ is now to be done with some 20 parameters including
type of licenses, service-area definitions, duration of license, migration, FDI
limits and so on. In fact, it is a virtually new script. And again while one
admires the range of questions raised–half of the 64-page document is devoted
to articulating the concerns–the time aspect is uncomfortable. When the world
is far ahead and you are playing catch-up, you have to do it right the first
time, and fast. Consider some data from the consultative paper itself. In 2002,
New York had 81 FM stations. Colombo had 18. Two years on, we have only half a
dozen in our much larger cities.

Clearly, as in many other areas, there is a great need for speed.