Regulators

Trai, govt lock horns over revenue share

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NEW DELHI: Broadcast and cable regulator, Telecom Regulatory Authority of India (Trai), has reiterated some its earlier suggestions on FM radio broadcasting, while "strengthening" some other aspects after incorporating suggestions from the government.

In this connection, for example, Trai has said instead of all applicants being requested to provide only 50 per cent of the entry fees of phase I, as earlier recommended, they may be asked to provide 50 per cent of the amount bid as a demand draft along with their bids.

This will be refunded if the bidder is unsuccessful. If the bidder is successful, it will have to pay the balance 50 per cent within seven days of being informed that the bid has been accepted.

This is in response to a government observation that Trai's recommendations relating to FM radio broadcasting does not adequately protect the former's interest.

The government had said that Trai's recommendation, with regard to adoption of closed bid tender system without any reserve entry fee and adequate penal provisions for withdrawal and with a provision for a waiting list, is "considered to be susceptible to both pre-tender and post-tender cartelization" and, therefore, unacceptable.

The information and broadcasting ministry had also pointed out that there is a case for prescribing a reserve entry fee, with sufficient withdrawal penalty to deter a non-serious bidder, from participating in the tender process.

To an another suggestion from the government on the method of licensing and arresting loss of revenue, Trai, in its response to the government today, assured that under-reporting of revenues earned by the private FM radio players could be effectively neutralized.

"One of the ways that advertising revenues can be under reported is by appointing an agent for collecting advertisements and then paying such agency heavy commission. It is (now) recommended that the maximum permissible agency commission may be fixed as 15 per cent of gross advertising revenue and this limit may be specified in the license agreement to ensure that there is no wrongful loss to the government," the regulator has said, conceding a government point.

However, Trai has stoutly defended its recommendation on migration to revenue share (4 per cent) from the existing license fee regime despite the government objecting to this on the ground that revenue earnings of a radio operator are expected to be in the form of advertising revenues, which are un-metered, unlike the earnings of a telecom service provider, amongst other things.

Pointing out that decline in revenue for the government cannot be the only criterion for not accepting a revenue share regime, Trai has countered, " The objective of a license share of 4 per cent is to bring down the burden on the industry."

It has further added: "If companies make large profits due to the lower license fees then this can always be mopped up by (imposing) corporate tax. On the other hand, if the license fees are kept very high, there will neither be revenue through license fees or corporate tax, nor will there be any development of the radio industry."

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