'Regulation is a tricky job': Trai chief Baijal

The government has entrusted the Telecom Regulatory Authority of India with a new job "� regulating sections of the entertainment industry.

In a rare interview, TRAI chairman Pradip Baijal tells Surajeet Das Gupta that TRAI's new task poses several challenges.
Excerpts:

What are the main challenges TRAI faces after the government mandated it to regulate the broadcasting and cable industry?

All over the world it has been recognised that voice, data and pictures are carried on the same media. So the carriage has converged because of technology.

If the carriage has converged, you cannot have a different regulatory environment for carriage on the same wire. So regulators all over the world regulate telephony, TV and broadcasting. In the UK and the US the regulator regulates both content and carriage.

In 2000 the law makers amended the TRAI Act and added a clause which said that any service other than telephony can be so declared that it will become a telephony service for the purpose of this Act.

Through a notification, the government has done precisely that: it has declared broadcasting and TV to be telephony services. By virtue of this notification you have converged carriage.

There are six million PCs, 55 million cable homes, 43 million telephone lines. You can now use this entire medium for telephony, internet and for cable television. So it gives subscribers many options at a cheaper price.

One of TRAI's key tasks is to protect the consumer. With the introduction of the conditional access system (CAS), many customers think that their interests are being ignored. How do you address this issue?

The cable industry in India has developed in an unregulated environment. You must give credit to the entrepreneurship of the cable operator. China has 360 million TV homes but only 80 million cable homes. India has 100 million TV homes and over 50 million cable homes.

Two things have happened in India. One, the broadcasters have a relationship with multi-system operators (MSOs). The MSOs have bought out a number of cable operators.

So right from the broadcaster to cable operators, a vertical integrated monopoly exists "� and a monopoly always creates problems. And because there is no viable model in a geographical area to have two cable operators (except in some areas), competition has been thrown to the winds.

Secondly, the broadcaster expects a lot from MSOs. MSOs expect a lot from cable operators; the cable operator expects a lot from subscribers. Amidst these competing claims the subscriber is at a disadvantage.

You will recall when CAS was being proposed by the industry, it said that it would give more choice to the customer and that he would have to pay less.

But now that hope has gone to the winds. Why did this happen? Because the vertically integrated monopoly gave you hope "� and, as there was no regulator, consumers were not fully organised. So they were being exploited.

Of course there are many challenges in regulation. One issue is: should the regulator permit a relationship between the broadcaster and the MSO? If not, you at least create competition in one of the links in the cable industry.

Will you need to regulate tariffs to ensure that customers are treated fairly?

We have to see whether there is space for enforcing competition so that we don't have to do tariff regulation. Can we have more than one cable operator or do we have to see if direct to home (DTH) or broadband becomes a viable option? The presence of broadband and DTH is very low. It will take a long time before they reach anyway near the 50 million cable homes.

To my mind, it is virtually impossible to regulate tariffs because there is a cable operator, then the MSO and then the broadcaster. The broadcaster does not broadcast to India alone "� he beams to 30 countries.

So how do we work out the costing? We would not like to regulate tariffs if there is an option, but that option should ensure that the consumer is not exploited by a vicious monopoly.

But what are the main challenges that you are facing while trying to regulate the broadcasting and cable industry?

Take the case of pay channels. All over the world, there is some kind of regulation of advertising. But when we thought of that in our consultation paper, we were told it is against Article 19 of the Constitution.

There are articles similar to Article 19 in many Constitutions around the world. Yet the cable industry is regulated "� India and Taiwan are the last two countries that are attempting to regulate the cable industry.

Cable operators fear that they will be wiped out by the large telecom companies that are getting into TV content distribution, that they won't be able to face competition from the likes of Reliance and the Tatas.

There are 55 million TV homes and fewer than 30,000 fixed line connections of Reliance. So the fear is over emphasised. But at the same time I am not saying there are no challenges You will recall that many video cassette shops existed.

Now they are not there. You cannot tell me now, look, we must have video casette shops because there is business there. After all, these shops closed because of cable TV. So if the technology offers a choice to the customer, the regulator must fight for that technology rather than be concerned about the turf of the incumbents.

I will always say that this protection, if given, is to the disadvantage of the consumer. Suppose the government had licensed these shops, like it licensed the cellular operators. They could say, pay us compensation because HBO and Star movies have come. Is it fair to the taxpayer to pay compensation to the so-called small players?

I am not saying that cable technology is becoming obsolete "� cable TV is present all over the world, despite all kinds of DTH and broadband. So I think cable TV will continue and flourish.

But is the fear valid?

I will not subscribe to this fear. But if cable TV technology becomes obsolete it must go.

Many telecom companies say that they should be allowed to use Bharat Sanchar Nigam Ltd's (BSNL) near monopoly of the last mile access to homes. It has over 40 million customers and without this access broadband cannot take off. Will you allow BSNL's last mile access to be accessed by others?

Broadband can be delivered on a fixed line, through wireless and by the cable operator. So the first thing one has to ask is whether a monopoly exists.

Secondly, last mile unbundling has been done in a number of countries with varied kinds of experiences. But that is not the main issue. The main issue today is low penetration.

In India, internet penetration is four out of 1,000 (homes); broadband penetration is two out of 10,000. This poses both a problem and an opportunity. It is a problem because we call ourselves a knowledge-based society.

So we cannot have such low numbers. It is an opportunity because you can design a regulatory system, which will deliver these services at an affordable price.

The prices here should be right; secondly, there should be content in broadband. If you see the content on the internet today, there is very little regional or Indian content. So there has to be relevant content.

Also, there must be more business applications in broadband, like gaming and financial services transactions. All the stakeholders should ensure this.

Are we going to see a unified licensing regime which will offer real convergence?

Yes, of course. That is why we circulated the consultation paper. But remember that unified licensing will bring to the fore those turf issues, those competition issues, and we have to deal with them.

Can TRAI assure the consumer that he will continue to get his bouquet of channels, including free to air and pay channels, at the same price even after CAS is implemented?

I would have assured you that but the problem is that there is no published rate. I as a regulator cannot get hold of a document saying that this is the rate. Rates vary from colony to colony, MSO to MSO and even within a colony. So it is a totally unregulated market. The job of regulation is a tricky one.