(25 July 2007 7:00 pm)

NEW DELHI: The Telecom Regulatory Authority of India (Trai) is seriously pushing for digitalisation and a step in this direction is the consultation paper on Headend-In-The-Sky that it has released on 24 July.

The Trai paper has asked all stakeholders, including broadcasters, cable operators, multi-system operator and direct-to-home (DTH) companies, for their response to the policy framework on HITS. This comprises issues like whether HITS should be allowed to operate in C or Ku band which is used by DTH operators.

Another area Trai has sought feedback from the stakeholders is on the FDI cap in the sector which is at 49 per cent and is inconsistent with the telecom industry (74 per cent), particularly when there is an industry movement towards convergence.

"In the era of convergence where the distinction between voice, internet and video is vanishing, having different FDI
limits for different carriage medium is anomalous," the Trai paper has said.

"It is against this background that the Authority had stated in its recommendation on 'Issues relating to Broadcasting and Distribution of TV channels" (October 1.2004) to the Government that there should be consistency in policy and level playing field between competing technologies," Trai further points out.

Trai has in the latest consultation paper argued that "there is need for a complete review of the FDI policy so that it is consistent across all sectors and that this would ensure that policies are not a stumbling block where there is a natural convergence of technologies."

The paper reads: "Unlike DTH, HITS has to rely on the vast cable network structure at the last mile level for transmission of signals to the consumer homes.

"Digitalisation and addressability are the two essential ingredients for HITS to succeed.

"HITS would require investment in hiring of satellite space and transponders and setting up of earth stations. The platform has to rely on the extensive cable network for reaching the consumer homes.

Further the transmission in addressable form would require huge investment in set top boxes (though recoverable). Finally, HITS would require substantial funds for acquiring content and distributing the same.

The Trai paper says that proponents of higher FDI feel that there is a huge interest of foreign investors in the cable industry in India and a higher cap would invite investment and increase competition.

However, it says also the this logic is disputed by those opposing a higher cap or HITS as foreign interest in the sector is meagre due to the chaotic scenario prevailing.

It observes, however, in one of the two revenue models for HITS, the operator is an MSO with the headend in the sky and not on earth. So if the fee is introduced, the HITS player would be disadvantaged vis-à-vis the MSOs.

On uplinking restrictions, Trai has asked whether the HITS operator can uplink from an earth station from outside the country.

"Clause 13.1 and clause 7.5 of the licensing conditions of DTH indicate that the uplinking has to be done from an earth station situated in India and all the content has to pass through the conditional access system and subscriber management system located in India," the paper says.

The location of the uplinking earth station in India has its advantage in terms of easier and effective monitoring by the licensor and would also be preferable from the security aspect.

"On the other hand it can be argued that the existing downlinking guidelines permit channels to be uplinked from earth stations situated abroad, and the control over such uplinked channels is exercised by necessitating permission cum registration under the down linking guidelines," the paper adds.

Trai observes that one contention favouring the foreign earth stations being used is that it is the content and not the carrier that needs monitoring and says, "As it is, there is content regulation in place by Ministry of Information and Broadcasting.

"Hence the need for uplinking from India for monitoring HITS as a carrier appears less than justified, when uplinking content from outside is permitted."

On this issue, the paper poses the question that if this is allowed, what are the checks and balances that would need to be put in place to address the concerns of a HITS operator who is uplinking from India.

On Interconnection issues, the paper poses the problem: "The question that is being discussed in subsequent paragraphs is whether there is any issue of interconnection that needs to be addressed in the context of policy guidelines and licensing framework for HITS operation.

"Secondly, whether interconnection issues, if any, can be handled by providing appropriate changes in existing regulatory framework instead of addressing in the policy guidelines and licensing framework.

One of the key issues in the cable industry has been revenue sharing, and looking at the nature of HITS, Trai has raised this question: "It is possible for HITS operator to send signals in non-CAS area in addressable mode.

"In this context, an issue arises as to whether the existing revenue share model made applicable to CAS area should be extended to this platform also.

"There is a possibility of a MSO availing service of a HITS operator, in this situation a relevant issue that would need to be consider is whether the inter se share between the MSO and the HITS operator be determined or be left for mutual negotiations."

Trai has also asked that since a HITS operation requires heavy investment, should there be a networth condition for a company wishing to enter the HITS arena to keep non-serious players away.

Trai has been more or less guided by the principles of level playing field across the sectors and is interested in pushing for competition across all the delivery technologies so that the consumer benefits in the end.

To sum up, the paper lists the following issues for consultation:

• What should be the scope of the HITS operations? Whether the scope of the HITS operator should include both the models as stated under heading "scope of HITS operation" in paras 4.5 and 4.6?
  
  
• Whether HITS operations should be allowed in C-Band or in Ku band or in both?
  
  
• Whether a HITS operator should be restricted to offer services only to the cable operator? Alternatively, should HITS operator be allowed to serve the end customer also directly? If yes, then whether the restriction on DTH to service end customer only needs any review?
  
  
• What should be the limit of Foreign Direct Investment (FDI) for HITS licenses? Should there be any restriction on the maximum limit on the composite figure of FDI and FII?
  
  
• What should be the entry fee and the annual license fee for HITS?
  
  
• Whether HITS operator should be allowed to uplink from outside India also?
  
  
• If yes, what are the safeguards needed for monitoring the system? What are the checks and balances required to be put in place to address the level playing field issue with the operators uplinking form India?
  
  
• Should any interconnection issues be addressed in licensing conditions?
  
  
• Should spectrum charges be recommended to be done away with for HITS service provider?
  
  
• Should there be any cross holding restriction? If yes, please suggest the nature and quantum of restrictions.
• Should HITS operator be allowed to offer value added services?
  
  
• Whether "must carry/must provide" conditions be imposed on HITS operation?
  
  
• Whether a stipulated networth of specified amount be made as an eligibility criteria to avoid any non-serious applicant.