Regulatory Regime To Monitor Cross-Media Ownership Needed: TRAI

The Telecom Regulatory Authority of India (TRAI) has issued a consultation paper on media ownership following a reference from the Ministry of Information and Broadcasting (MIB).

TRAI has now sought comments or views of the stakeholders on the need, nature, and level of safeguards with respect to horizontal and vertical integration in the broadcasting and distribution sectors and cross-holdings across various media sectors.

Formulation of Rules for Merger and Acquisition

In the consultation paper titled 'Issues relating to Media Ownership', the regulator has stated that there is a need to keep a check on mergers & acquisitions (M&A) in the media sector to ensure media plurality. Apart from keeping a check on M&A, it added that there is a need to prevent cross-media holding by the same company.

TRAI has cited the example of Australia where no new transactions (for M&A) can proceed unless a minimum of five independent media operations or groups are maintained in metropolitan markets and four in regional markets.

"In light of the same, the issue which needs consideration is if there is a need to impose additional restrictions in M&A in the media sector and in case there is a need for such additional requirements, what shall be the basis for the same," TRAI stated.

Cross Media Ownership

The regulator has noted that there is a need to establish oversight and a regulatory regime to monitor and regulate cross-media ownership. According to TRAI, a person or an entity is involved in cross-media ownership when it owns two or more media outlets in print, radio, television, and the internet.

"If one entity becomes dominant in all or most of these media segments, the news content will be homogeneous. Such a scenario may adversely affect the debate and quell disparate viewpoints."

The authority has also observed that there is a trend of “chain ownership" (even though an entity is present in one media segment only, it is in a dominant position in the segment).

Vertical Integration

According to TRAI, vertical integration in the broadcasting sector refers to the Ownership/Control of content/broadcasting services and distribution services by a single entity.

TRAI has pointed out that there are several grey areas as far as restrictions on vertical integration are concerned. Restrictions related to vertical integration have been imposed on DTH only and not on other distribution platform operators (DPOs) such as MSOs and HITS operators.

"Further, there is a need to look into the cross-holding amongst DPOs as well. In light of the same, the issue of vertical integration in the broadcasting sector needs consideration and the comments of stakeholders are invited for the same," it stated.

Capturing cross-holdings

According to TRAI, many transnational corporations are present in a number of sectors, including the media industry. Therefore, there’s a need to establish a new system that focuses on capturing cross-holdings and direct/indirect control of different organisations by a common entity.

"There is a view that restrictions based on control by a company can be easily subverted by creating another set of companies by the same entity. Thus, there is a need for a system that targets both de facto and de jure forms of ownership," the regulator said.

Media Ownership/Control to Market Concentration

While stating that the control of the media by political entities, surrogate organisations, and corporate entities has been in vogue across the world including in India, the regulator said that the need to ensure the independence of media from political and commercial influences is important.

Measurement of Market Concentration

The TRAI CP mentions three commonly used methods to calculate market concentration.

The Concentration Ratio method compares the revenues of the top four or eight companies to the total revenues of that industry. If the top four is higher than 50% or the top eight is higher than 75% of total revenues, then concentration may be considered high.

Lerner’s Index method recognises how the industry is structured and its effect on the market power. It is defined as where p is the selling price of a good and c is the marginal cost required to produce that good.

The Herfindahl-Hirschman Index (HHI) is the sum of squares of market shares (%) of all firms in the identified market. It is more definitive than Concentration ratios but can be tedious in a multiple company market in that each company’s revenue needs to be accounted for and totalled for the total market revenue

Relevant Product Market for Media

TRAI has proposed to re-examine the relevance of genres in the formation of popular perception and the need to ensure viewpoint plurality.

While news and current affairs have a direct influence on plurality and diversity of views, the authority stated that the general entertainment and infotainment channels also have the ability to influence public perception.

Therefore, the TRAI feels that it may be necessary to oversee the control of such entertainment media that has a serious impact on the value system and beliefs.

Restriction based on the presence in a media segment

The TRAI has discussed various methods of cross-media ownership restrictions.

The first method is that of restricting ownership based on mere presence, i.e., a blanket ban on control over media outlets in more than one media segment.

The second method is restrictions based on market share in media segments, where media entities exceeding prescribed market share thresholds in two or more media segments would have to withdraw from one of the segments.

The third approach could be the imposition of a restriction based on the concentration of the market, generally calculated by tools such as HHI.

A media segment in a relevant market is said to be highly concentrated if the HHI of the market segment is 1,800 or more. In case an entity breaches the threshold of the above test, the second step comes up in the form of dilution of equity.

The fourth method is the restriction based on the Diversity Index that considers the overall concentration in a relevant market.