Sunday, July 03, 2005

Radio ga-ga - Revenue-sharing shift should do wonders for FM

Posted online: Saturday, July 02, 2005 at 0000 hours IST
The government's decision to allow existing players in FM to shift from theexisting licence fee regime to a revenue-sharing one is a welcome, thoughbelated, policy correction. It is bound to lend cheer to an industry thathas been struggling for almost five years within the confines of an absurdpolicy framework. Together with the other relaxations in the policy on FMradio - notably, inclusion of foreign direct investment within the overallforeign investment limit - the new policy should see a rekindling ofinterest in FM radio.About time, too. After the first flush of enthusiasm that saw a rush ofplayers bid unrealistically high licence fees when the sector was opened toprivate sector entry in 2000, interest in FM radio had all but disappeared.The reason was simple. Players discovered the returns were just notcommensurate to what they had bid. So, while the government got bids for 101of the 108 frequencies auctioned, and for an aggregate amount of Rs 425crore against the estimated amount of Rs 79.65 crore, the actual amountcollected was far less. Bidders for 64 frequencies defaulted, so only Rs158.8 crore could be collected from 37 frequencies.Worse was to follow. Even of these 37, as many as 13 did not operationalisetheir licences and opted, instead, to surrender them. A few players battledon, even as their losses mounted, in the hope that the government wouldaccede to their pleas to free them from their licence obligations and shiftto a revenue-sharing model. Their hopes have now been realised. Whileexisting players will be allowed to migrate to revenue-sharing, bids for thenext phase of FM will be based on the principle of revenue-sharing. Playersare understandably elated. The recent regulatory corrections should see moregrowth, more revenue and more employment across the country.The parallels with the telecom industry are striking. It was only when the initial licence fee regime (that led to mobile telephones being priced out ofthe reach of most) was replaced by a revenue-sharing model, that we saw aboom in mobile telephony. Hopefully, the same experience will now bereplicated in the FM space. But the government's job is not yet done. Itneeds to reconsider the ban on broadcast of news and current affairs. Theexperience with TV should be a good model to go by. There is no reason whywe should have a different set of rules for radio, as compared totelevision. Policy arbitrariness has no place in a globalising economy.

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