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May 2019

MIB WANTS TO RESTRICT MSO DAS LICENSE ONLY TO LARGE ENTITIES


BACKGROUND

In its July 2008 recommendations on "Restructuring of Cable TV Services" TRAI 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."




Also, no annual license fee was recommended.

The MIB did not accept this, and instead 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.


MIB WANTS NEW RECOMMENDATIONS

Vide its letter dated 16 May 2018, the MIB has requested TRAI to give it's considered recommendations on entry level net worth of (DAS) MSOs.

The ministry has 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.


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!




FAILURES OF MIB

Clause 11 of CTN Rules, 1994 (as amended for DAS) states '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 the following:

1. The MIB must Grant or refuse a DAS MSO license within 30 days of application.

2. The MIB must have various details of DAS MSO license holders, including the net-worth of the registered MSOs.


TRAI: There Is No Relation Between A DAS MSO's Net-Worth & It Being Non-Operational.



MIB IGNORES TRAI

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

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

However, MIB has not reverted to TRAI on this.

TRAI has observed that there is no relation between a DAS MSO's net-worth & it being non-operational.



NET WORTH

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 MIB as on 31/03/2018.


No Net Worth For DTH But ₹ 10 Cr for HITS - Now Net Worth For MSOs Also



EXISTING NET WORTH REQUIREMENTS

DTH operators- No net worth requirement.

HITS operators- Minimum Net worth of ₹ 10 crores

Now the MIB wants to impose a minimum net worth even on MSOs. Why is the Cable TV sector being discriminated against?



ISSUES FOR CONSULTATION

TRAI has listed 24 issues for consultation. The broad gist and important factors can be summarised as:

  1. Do the present rules and provisions of eligibility & net worth for (DAS) MSOs require a review or modification? Should individuals (as currently permitted) 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?
  2. How do fixed & variable costs depend upon the scale of the operation, i.e. for small, medium and large operators? Should the minimum net worth required be based upon the average fixed cost?
  3. Should the minimum net worth depend upon the proposed channel carrying capacity (100/200/300/500 channels) of the entrant? Should the minimum net worth depend upon the proposed number of subscribers to be catered to?


DEADLINE

Written comments on the consultation paper are due by 08.05.2019.

Counter comments, if any, may be submitted by 15.05.2019. n


Satellite & Cable TV Magazine's Editorial 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.
  • It is Shocking & Deplorable to see attempts to keep aside Cable TV only for large corporates & business houses, because:
  • 1. It is against the declared manifesto of every political party to create jobs & self-employment.

    2. It restricts the right of citizen to continue the business that they have been doing for more than 20 years ... since CATV commenced in India. (The MIB has remained silent on whether it proposes to cancel existing licenses that do not meet the financial criteria)

    3. The Cable TV industry was born from the entrepreneurial initiative by thousands of citizens, who have invested their own funds (bank loans are not available for this) and grown the Indian cable TV Business to the LARGEST in the Free World.

    Thanks to the individual CATV Entrepreneur, Today India has more Cable TV that:

    • The USA
    • Entire Europe Combined!
    • Rest Of Asia Pacific Combined!
  • Almost all large corporate MSOs are incurring losses in their Cable TV operations. ORTEL Communication Ltd has been served a notice by the NCLT under Section 9 of the Insolvency and Bankruptcy Code.
  • 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."
  • 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 2 years, despite Court Instructions to expedite processing of more than 1 hundred pending DAS MSO applications.