Trai proposes market share cap to end monopoly in cable sector

Written by fe Bureau | New Delhi | Updated: Nov 28 2013, 19:08pm hrs
TraiTrai wants changes in cable laws so that any merger and acquisition activities between local cable operators. (AP)
In order to curb dominance by a single player in the cable distribution sector across states, the Telecom Regulatory Authority of India (Trai) has recommended restriction of up to 50% in the market share for a single multi-system operator (MSO) in a relevant market comprising at least three MSOs of comparable size.

Trai also wants changes in cable laws so that any merger and acquisition activities between local cable operators and MSOs will need its approval.

In its recommendations to the information and broadcasting (I&B) ministry, Trai has approved the Herfindahl Hirschman Index (HHI) for measuring the level of competition or market concentration in a state. "The Authority recommends that the threshold value for any individual or 'group' entity contribution to the market HHI should be no more than 2,500," Trai said.

Trai characterised markets such as Tamil Nadu, Punjab, Orissa, Kerala, UP and Andhra Pradesh as having dominance of a single MSO while markets like Delhi, Karnataka, Rajasthan, West Bengal and Maharashtra as having a large number of MSOs.

As per Trais recommendations, the cable rules in this regard should be amended to ensure that market share of MSOs is restricted to up to 50%. The regulator said that to ensure at least three MSOs of comparable size operate in a market, it would be desirable to restrict the building up of market share up to 50%.

Trai has made the recommendations after the I&B ministry sought its advice stating that the cable distribution had been virtually monopolised by a single entity in some states. Trai also wants chan-ges to the cable rules to ensure that any merger or acquisition involving MSOs or LCOs should require prior approval of the regulator. The decision on any proposal, complete in all aspects, shall be conveyed in 90 working days, it said.

Trai chairman Rahul Khu-llar told reporters virtual monopolisation of the market was not a pan-India problem, but in certain states it had a serious dimension. He said the-re were complaints that a particular channel wasnt shown if it did not toe a particular line. He said the issue was complex and involved a web of "power, money and politics". "A time of 12 months is given to group(s), contributing over 2,500 to market HHI of a relevant market, to limit its 'control' in MSOs or LCOs in such a way that the contribution of market HHI of that 'group' reduces to less than or equal to 2500," the regulator said.

As per Trai officials, if a single entity is covering over 50% of the market, it will not be allowed to merge with or acquire another MSO or LCO in that particular market. As per Trai, if an entity controls many MSOs and LCOs simultaneously in a relevant market, these shall be treated as inter-connected entities.