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The Telecom Regulatory Authority of India has come up with recommendations to curb/avoid monopolisation in the cable Tv space. The recommendations come after the Ministry of Information and Broadcasting in December 2012 asked the regulatrory body for the the same in lieu of which, TRAI issues a consultation paper on June 30, 2013.
The main takeaway from the recommendations is that no single multi-system operator (MSO) can have more than 50% of the market share in a relevant market. TRAI has further recommended that the relevant market be considered state wise in the country. The market dominance should be determined based on market share in terms of the number of active subscribers (registered users) of MSOs in the relevant market. For measuring the level of competition or market concentration in a relevant market, the Herfindahl–Hirschman Index (HHI) should be used.
The HHI is a measure of competition with a market that is derived by summing the squares of the market share of each competing firm in the market. If, for example, there were only one firm in an industry, that firm would have 100% market share, and the HHI would equal 10,000 (100 raised to 2), indicating a monopoly. Or, if there were thousands of firms competing, each would have nearly 0% market share, and the HHI would be close to zero, indicating nearly perfect competition.
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While representatives from Den, Hathway and InCable were unreachable or unavailable for comment, the cable operators federation welcomed the recommendations. Speaking on behalf of the Cable Operators Federation of India, president Roop Sharma said, “"We welcome this move and we are hoping that the I&B ministry accept the recommendations and not delay it. What we think is also important is that the recommendations talk about monopoly in states. We would like TRAI to also recommend on the Monopoly in cities. Cities are where the maximum monopoly exist and there should be a way to curb that.”
In its recommendation, TRAI has suggested that he threshold value for any individual/ ‘group’ entity contribution to the market HHI should be no more than 2500 i.e. 50% market share. While some stakeholders proposed 60 to 80% market share as the threshold, TRAI felt that 50% would be optimum. “ A 60-80% market share of any particular entity in a relevant market would result in a market HHI of more than 4000. Markets with such a large HHI value are considered highly concentrated and result in restricting competition in the market. At the same time, a very low threshold value for market share of an individual or ‘group’ entity may not help in reaping the benefits of economies of scale.”
In case an MSO through its group entities or 'control' in LCO's commands more than 50% market share as on date of issue of guidelines, it will have to take remedial measures within 12 months from the date of issue of guidelines, so as to limit its ‘control’ in various MSO(s)/ LCO(s) in such a way that the contribution to market HHI of that ‘group’ reduces to less than or equal to 2500.
Further, TRAI has recommended that any MSO which by itself contributes to more than 2500 HHI (ot 50% market share) in a relevant market should not be permitted to merge with or acquire the ‘control’ of any other MSO/ LCO in that relevant market. Also, the tariff offerings, interconnect agreements, must carry provisions and quality of service of such MSO would be closely monitored by TRAI for any anti-competitive practices.
Even if an MSO's share is not 50%, the regulatory body has recommended that all merger and acquisition activity be brought to it notice at the beginning and that it should be taken forward only once it (TRAI) has approved of it. The per-requisites for getting approval in such a case would be that the contribution to the resultant entity to the market HHI should not be more than 2500 (or the resultant entity's market share should not exceed 50%).
