Trai for 74% FDI in cable TV

In a move that will open the doors for foreign investments in the cable sector, the Telecom Regulatory Authority of India (Trai) has recommended a foreign equity cap of 74 per cent for companies which want to operate Headend in the sky (HITS).

HITS is a new technology which will help in faster digitalisation of cable transmission and can also be used for the implementation of the conditional access system (CAS).

Modeled on the lines of the direct-to-home (DTH) services, HITS involves delivery of digital television signals directly to cable operators via satellite who, in turn, pass it on to the consumers (who need a set-top box). But in the DTH services, the television signals directly reach the consumers.

With Trai bringing the foreign equity cap for HITS on a par with telecom, the industry expects that a similar change will happen for both cable and DTH services. Currently, only 49 per cent FDI is allowed in the cable and broadcasting sector.

International cable companies like Liberty Global and Comcast, and strategic investors like Carlyle and Providence have been sitting in the wings, waiting for the government policy to allow them majority equity stake in the distribution business before they come in.

Also, many leading telelcom operators who have recieved licenses for DTH and IPTV operations are expected to leverage the higher FDI stake and get into HITS.

However, in order to operate HITS, Trai has recommended an entry fee of Rs 10 crore and minimum networth requirement of Rs 40 crore for the interested companies.

This, according to the regulator, will ensure that only serious players get HITS license. Also, to avoid vertical integration and to promote competition, cross holding restrictions among broadcasters, DTH licensee and HITS operator has been recommended by Trai.

"No broadcasting company or a DTH licensee can hold more than 20 per cent of equity in a HITS company and vice-versa," Trai said in its recommendations.

But to operate HITS, the operator will have to obtain a teleport licence (licence to uplink signals). Teleport licences in general are required by broadcasters who are seeking to uplink their channels from India.

Under HITS, operators will have to lease transponder space on a dedicated satellite, acquire television channles from broadcasters, uplink them to the satellite and download them and before passing it on to the end-consumer via the cable lines.

According to Trai, HITS is a faster and most cost-effective way of upgrading the current analogue cable transmission to digital.