The Telecom Regulatory Authority of India has recommended that the Ministry of Information and Broadcasting set up a commission, headed by a retired Supreme Court Judge, to examine various issues relating to the media. It has issued a set of recommendations (download) regarding ensuring plurality in the media, and its increasing influence. From an anti-trust perspective, the authority has recommended the usage of the “Herfindahl Hirschman Index” to ascertain the concentration of media within specific states, to ensure that there is adequate compensation, and give media companies two years to diversify. It’s important to note that the TRAI has not taken into account magazines and the Internet, citing a limited reach for the Internet and limited circulation for magazines, and focused only on the TV and Print, due to their pervasive reach and influence.
The Lowdown on TRAI’s recommendations on Media Ownership
1. Defining control: The TRAI highlights the difference between ownership and control of a media outlet, saying that ownership implies economic benefit (shareholding) while control implies the ability to influence. The TRAI relies on the Companies Act 2013 to define the threshold of equity holding that defines control, via associate, subsidiary and relative holdings, but extends the definition of associate companies to also include control through loan and debt instruments, following stakeholder comments that pointed towards the usage of debt instruments.
TRAI’s definition of control is that an entity (C) controls another (M) if, directly or through associate companies, subsidiaries or relatives if it:
a. Directly owns at least 20% of total share capital of M. In case of indirect shareholding, a multiplicative rule is applicable. If C owns 30% in A, which owns 20% equity in M, then the indirect holding in M is 30%x20% = 6%
b. Exercises control by having 50% of voting rights in M, or appoints over 50% of the board of directors, or key managerial personnel, or is a party to agreements that give it control over business decisions in M.
c. Exercises control by giving loans that constitute not less than 51% of the book value of total assets of M.
2. Looking only at News on TV and Print:
– No Issue based TV shows on GEC’s: Stakeholders pointed towards non-news shows that have a “decisive impact on opinion formation” and “directly or indirectly contributing to viewpoint generation” (sic), saying that these should also be considered (for regulation). They were probably pointing towards Satyamev Jayate, an issue based discussion show on NewsCorp owned STAR TV, featuring Bollywood actor Aamir Khan, that appears to have mass appeal. The TRAI has said that the opinion generated via General Entertainment channels has higher viewership, but it is informal and indirect, since the prime objective of this genre is entertainment. Also, “opinion formation through entertainment content on radio and in the print media is negligible”.
– Magazines do not have significant reach: “…not be appropriate to consider magazines as a separate segment owing to their relatively smaller readership and influence as compared to newspapers.”
– Radio not allowed to air news: Radio, though a popular segment, is not of current relevance since private radio channels are not allowed to air their own news content. But once airing of own-news is permitted on private radio and becomes significant in the relevant market, this could be reviewed.”
– The Internet isn’t relevant yet due to low penetration, multitudes of sources for news and opinion, and “general lack of authenticity” surrounding opinions shared on the web. (Ed: we disagree) More on that here.
3. Defining the market where dominance can be identified: Given opinion from stakeholders that it might not be right to restrict publications by language, and others who suggested geographic boundaries, the TRAI has recommended that the market be a combination of both: the language in the state where it is the dominant language, and for English, pan-India. The Markets:
– Languages to be considered later, on the basis of newspaper circulation and TV viewership: Bodo, Dogri, Kashmiri, Konkani, Maithili, Manipuri, Nepali, Sanskrit, Santhali, Sindhi and Urdu
– Cross-media ownership rules would restrict ownership within a relevant market, i.e. between the newspaper and television outlets, and not across different relevant markets. Thus, cross-media rules would specify how entities in the Bengali newspaper market in West Bengal can/cannot control entities in the Bengali television news channel market in West Bengal and vice-versa. The rules would not restrict entities in the Bengali market from controlling entities in other relevant markets, like say, the Odia newspaper or the television news channel market in Odisha.
4. Calculating market dominance: For a “specific language x geographical market” combination, the market share of a TV channel or a newspaper will be calculated by taking into account reach and volume metrics.
The TRAI considered three approaches to determining dominance: C3 (sum of the three largest market shares in a relevant market), the Herfindahl Hirschman Index (HHI- sum of squares of market shares of all entities in a relevant market) and the Diversity Index. Of the three, most stakeholders preferred the HHI, and felt that the Diversity Index would not be apt, because it would be impossible to assign relative weights to different media segments, and the FCC of the USA was shifting away from it. Some criticized HHI, stating that it does not reflect influence over opinion formation directly, it is inaccurate and poses a high risk of distorting the market. The TRAI has still chosen the HHI to measure concentration in a media segment in a relevant market.
The recommendation: If the television as well as newspaper markets are concentrated in a relevant geographical market (HHI> 1800 in each), then, an entity contributing more than 1000 to the HHI of the television market, cannot contribute more than 1000 towards HHI in the newspaper market as well, and vice-versa. If it does so, it will have to dilute its control in one of the two segments.
Note: not sure if this fits the Indian regulation, but here’s an online HHI calculator.
5. Mergers & Acquisitions limits based on HHI calculations: The TRAI has recommended that Mergers and Acquisitions (M&A) in the media sector will be permitted only to the extent that the rule based on HHI, as indicated in point 4, is not breached. TRAI recommends that the media ownership rules be reviewed three years after they are announced, and once every three years thereafter. The existing media entities that are in breach of these rules should be given a maximum of one year to comply.
6. Disclosure Norms:
A. To be placed in public domain:
(i) Shareholding pattern of the entity
(ii) Foreign direct investment pattern of the entity
(iii) Interests, direct and indirect, of the entity in other entities engaged in media and non-media sectors
(iv) Interests of entities, direct and indirect, having shareholding beyond 5% in the media entity under consideration, in other media entities/companies
(v) Shareholders Agreements, Loan Agreements and any other contract/ agreement
(vi) Details of key executives and Board of Directors of the entity.
(vii) Details of loans made by and to the entity
(viii) For all channels registered as news channels with MIB – Registered language(s) of operation, actual language(s) of operation, time slots for news programs
B. Reports to be submitted to the Licensor and regulator (confidential)
(ix) Subscription and advertisement revenue of the entity/ company
(x) Advertising rates
(xi) Top ten advertisers for each media outlet of the entity
Changes in any of the parameters (i) to (vi) listed above must be reported to the licensor and regulator within thirty days of implementation of the change.
7. Vertical Integration: The TRAI has referenced its recommendations for vertical integration between DTH providers and broadcasters. Relevant clauses for broadcasters:
– The entity that controls a broadcaster or the broadcaster itself, shall be permitted to control only one Distribution Platform Operator (MSO/HITS operator or DTH operator) in a relevant market and vice-versa.
– If a vertically integrated DPO, while growing organically or inorganically, acquires a market share of more than 33% in a relevant market, then the vertically integrated entities will have to restructure in such a manner that the DPO and the broadcaster no longer remain vertically integrated.
– A vertically integrated broadcaster can have only charge-per-subscriber (CPS) agreements with various DPOs which should be non-discriminatory.
– A vertically integrated broadcaster shall file its RIO for its approval by the Authority. The RIO should cover all scenarios for interconnection and interconnection agreements should be only on the terms specified in the RIO.
– A vertically integrated DPO will have to declare the channel carrying capacity of its distribution network. And, at any given point in time, it shall not reserve more than 15% of this capacity for its vertically integrated broadcaster(s). The rest of the capacity is to be offered to the other broadcasters on a non-discriminatory basis.
– A vertically integrated DPO shall publish the access fees for the carriage of channels over its network. The access fee so specified shall be non-discriminatory for all the broadcasters. DPO shall file the specified access charge, with justification, with the Authority.
8. Paid News & Private Treaties: As an indication of corporatisation of the media, the TRAI quotes Vineet Jain, Managing Director of BCCL as saying that “We are not in the newspaper business, we are in the advertising business. If ninety per cent of your revenue comes from advertising, you’re in the advertising business.” Bhaskar Das, former President and Principal Secretary to Vineet Jain, is quoted as saying that “We are a derived business. When the advertiser becomes successful, we are successful. The advertiser wants us to facilitate consumption.” To this, The TRAI opines: “Even if a more benign view is taken of the tendency of media owners to assume increasing control over the newsroom, questions regarding where the line should be drawn to separate ownership and editorial independence persist.”
From a Paid News perspective, it cites work by P. Sainath, a Times of India story on Monsanto that allegedly appeared as both an advertorial and a news story at different times, the Parliamentary Standing Committee on Paid News (MediaNama’s submission here), Private Treaties, the Niira Radia tapes and her conversations with Barkha Dutt and Vir Sanghvi, as well as Parcha Kodanda Rama Rao of the Loksatta Party disclosing an advertorial transaction with an Eenadu advertorial executive.
– Private Treaties: “Given the inherent conflict of interest arising from practices such as “private treaties”, the Authority recommends that such practices be immediately proscribed through orders of the Press Council of India, or through statutory rules and regulations. This would cover all forms of treaties including (i) advertising in exchange for the equity of the company advertised; (ii) advertising in exchange for favourable coverage/ publicity; (iii) exclusive advertising rights in exchange for favourable coverage.”
– Paid News: “The Authority recommends that in “advertorials” (for that matter any content which is paid for), a clear disclaimer should be mandated, to be printed in bold letters, stating that the succeeding content has been paid for, and a fine print will not suffice. Also, “it is imperative that liability reposes in both parties to the transaction if it is tried to be passed off as news. For instance, if an MP/ MLA seeks favourable coverage in the media in exchangefor payment, then if such coverage was given in the garb of ‘news’, responsibility would be that of both parties, not only of the politician.”
9. Media ownership by political, religious and government bodies: The TRAI has recommended that
– Political bodies, religious bodies, urban, local, Panchayati Raj, and other publicly funded bodies, and Central and State Government ministries, departments, companies, undertakings, joint ventures, and government-funded entities and affiliates and their surrogates, to be barred from entry into broadcasting and TV channel distribution sectors, and in case permission to any such organisations have already been granted an appropriate exit route should be provided
– The arm’s length relationship between Prasar Bharati and the Government be further strengthened and that such measures should ensure functional independence and autonomy of Prasar Bharati
10. Ensuring Editorial Independence: “Editorial independence in the media has to be ensured. If owners’ interventions damage the veracity of the content or violate the public’s right to information (through self-censorship), such a practice must be subject to regulatory jurisdiction viz., the editor or any other journalist must have the right to raise the matter before a regulatory authority as well as a right to obtain a remedy.”
11. On a Media regulator:
(a) Government should not regulate the media;
(b) There should be a single regulatory authority for TV and print mediums;
(c) The regulatory body should consist of eminent persons from different walks of life, including the media. It should be manned predominantly by eminent non-media persons;
(d) The appointments to the regulatory body should be done through a just, fair, transparent and impartial process;
(e) The “media regulator” shall inter alia entertain complaints on “paid news”; “private treaties”; issues related to editorial independence; etc, investigate the complaints and shall have the power to impose and enforce an appropriate regime of penalties.