1. "We interrupt this broadcast": India relaxes broadcasting sector foreign direct investment limits

India is estimated to have about 106 million households with cable and satellite televisions. New limits, and changes to which routes for approvals apply, in various areas of broadcasting may afford additional opportunities for foreign broadcasting companies, new entrants, investors and lenders, and assist the development of the sector in India.

The current foreign direct investment regime in India enables non-residents to make investments in the equity shares as well as fully, compulsorily and mandatorily convertible debentures and preference shares, of an Indian company through one of two routes: the Automatic Route, whereby a non-resident investor does not require any approval from the Government of India for the investment, or the Government Route, whereby the prior approval of the Government of India is required.

On 20 September 2012, the Department of Industrial Policy and Promotion issued Press note No. 7 (2012 Series), relating to the review of the policy on foreign investment in companies operating in the broadcasting sector.

The limits and routes in respect of companies engaged in providing broadcasting carriage services have been revised, with immediate effect, to increase the limits on foreign direct investments, or change which routes for approvals apply, for the following:

  • Direct to home
    • new limit of 74% - up from 49% (for foreign direct investment, non-resident Indians and persons of Indian origin) with the foreign direct investment component not exceeding 20%
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously
  • Cable Networks (Multiple Systems Operators operating at national, state or district level and upgrading networks towards digitalisations and addressability)
    • new limit of 74% - up from 49% (for foreign direct investment, non-resident Indians and persons of Indian origin)
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously
  • Cable Networks (other Multiple Systems Operators not upgrading networks towards digitalisation and addressability and local cable operators)
    • no change to the previous 49% level
    • but now permitted under the Automatic Route rather than the Government Route
  • Mobile TV
    • 74% limit – previously mobile TV was not expressly permitted
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route
  • Teleports (setting up up-linking hubs/teleports)
    • new limit of 74% - up from 49% (for foreign direct investment and foreign institutional investors)
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously

The revised foreign investment limits including foreign direct investment, foreign institutional investors, non-resident Indians, foreign current convertible bonds, American depository receipts, global depository receipts and convertible preference shares held by foreign entities.

There are no substantial changes (other than in respect of categorisation of investment types as mentioned in the preceding paragraph) in relation to:

  • head in the sky broadcasting services
  • up-linking a news and current affairs TV channel
  • up-linking a non-news and current affairs TV channel
  • terrestrial broadcasting FM (FM radio)
  • print media

A number of conditions, regulations and terms and conditions may also apply, including in relation to positions to be held by Indian citizens, security, infrastructure, monitoring, inspection and disclosure, national security and safety.

Tuning In

India is currently undertaking switchover from analogue to digital television. The Cable Television Networks (Regulation) Amendment Act of 2011 makes digitisation mandatory by December 2014 across the country in four phases.

The additional liberalisation in the broadcast sector, by virtue of Press Note No. 7, is likely to attract foreign capital which may support ongoing digitisation, where capital expenditure on digital head-ends, back-end infrastructure and processes and set-top box (STB) installation is required. This will also help the introduction of a digital addressable system to better identify subscribers where permitted.

The switchover to digital broadcasting, which requires much less spectrum, will also allow valuable spectrum to be made available for other commercial use – digital dividend.

Why watch?

As well as aligning certain sub-sectors within the broadcasting carriage sector, the changes to the foreign direct investment regime also help to further align the broadcasting and telecoms regimes. Both regimes are applicable to certain content carriers (such as cable providers offering broadband services).

The liberalisation measures are designed to attract additional investment by foreign broadcasting companies, new entrants, investors and lenders into the broadcasting sector in India.

In July 2012, the Telecom Regulatory Authority of India also suggested that it would be initiating a consultation on the ownership of media (e.g. existing cross-holding restrictions) to ensure plurality and diversity of views in the country.

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If you require more information, we have regional and international technology, media and telecommunications experts on-the-ground in South and South East Asia. Please contact Mark.Robinson@hsf.com, a Senior Consultant based in our Singapore office, or your usual Herbert Smith Freehills contact for further information.  

  1. Enforcing the cookie monster: ICO to publish progress report

The Information Commissioners Office ("ICO") has been tasked with enforcing the new cookie legislation in the UK since the expiry of the so-called "grace period" in May this year. It has now provided an update on the progress that it has made in relation to enforcement, responding directly to criticism that it has not been strict enough.

The new cookie law, introduced under the EU's Privacy and Electronic Communications Directive, requires companies to warn website users and obtain their consent before utilising cookies. Whilst many corporations are still taking steps to comply with the new cookie law, the ICO has been granted regulatory powers to ensure such steps towards compliance progress swiftly. However, the ICO has received criticism for its perceived reluctance to utilise its powers to take action against companies that have not properly implemented the legislation that has been enforceable for months.

The ICO has now responded to such criticism by stating that it is important to strike a balance between censure and education. The ICO has issued guidance, held conferences and workshops, and written to the 75 most visited websites in the UK in a bid to push through the new policy. The ICO argues that an enforcement policy must be carefully constructed around an education programme to properly inform the industry and that it has a duty to make people aware of the law, as well as to enforce it.

So far, the ICO has received fewer than 400 complaints through its online cookie concern reporting tool. The ICO has assured its critics that it is working to review the websites that have been reported and that it will take a stricter approach with companies that have completely failed to engage with the industry regulator. The ICO will publish a full progress report update on the ICO website in November 2012.

It seems likely that we will see the first enforcement cases being brought by the ICO before much longer. Top of the list is likely to be companies which have deliberately flouted or completely failed to engage with compliance in this area.

A copy of the ICO's statement is available here.  

  1. Can't you all just share? Commission pushes spectrum sharing

European Commission shares it proposals for spectrum sharing, plans to encourage wireless innovation and recognises that with an increasing number of the spectrum sharing possibilities how National Regulatory Authorities ("NRAs") approach authorising spectrum sharing will be a key challenge.

Radio spectrum is an extremely valuable, finite resource. With global mobile data traffic alone set to increase around 25% annually by 2015, lack of vacant spectrum to meet these needs is a real challenge for operators, governments and regulators alike. In addition, reallocation of spectrum to new uses can be extremely costly. In recognition of this, stakeholders are increasingly turning to spectrum sharing possibilities and the European Commission is keen to encourage this.

Spectrum sharing enables different users to use a given frequency band in a variety of ways. There are a number of spectrum sharing possibilities, such as collective use which allows an unlimited number of users and/or devices to access spectrum (e.g. use of WiFi networks) and dynamic spectrum access , a concept which enables users to dynamically access required spectrum (e.g. the proposed use of TV "white spaces").

Spectrum sharing is not without its issues though. A major concern of industry is the potential impact of sharing on service quality due to harmful interference caused by different applications in the same range of frequencies.

In its Communication, the Commission has sought to tackle this problem through the use of sharing arrangements based on clear, effective sharing rules and conditions, and the enforcement of agreed levels of interference mitigation. The Commission recognises that NRAs will play a key role in developing the spectrum sharing environment and suggests that ultimately, spectrum sharing could be delivered through legally-binding spectrum sharing agreements, with NRAs acting as impartial technical advisers and also registering the terms of such agreements.

These initiatives are intended to be developed alongside on-going support from the Commission for the development of innovative technologies (e.g. the development of dynamic spectrum sharing to allow sharing with radars) and the issuance of a standardised mandate to harmonise access to location-based information through geo-location databases. Development of such databases will enable the use of location-based information to determine unused spectrum in and between broadcasting frequency bands ("white space"), ultimately minimising the risk of harmful interference.

As a first measure of the EU's new radio spectrum policy programme established earlier this year, the Commission is therefore calling for:

  • NRAs to support wireless innovation by monitoring and potentially extending the harmonised licence-exempt bands through appropriate measures under the Radio Spectrum Decision; and
  • fostering consistent regulatory approaches across the EU for shared rights of use that give incentives and legal certainty to all users (current and new) who can share valuable spectrum resources.

A copy of the Commission's communication can be accessed here.  

  1. Media Plurality: Ofcom Awaits Parliamentary Intervention

Ofcom publishes supplementary advice on the timescale of media plurality reviews, their operation alongside merger reviews, whether and how the 20/20 rule on cross-media ownership should be removed and other issues brings much needed guidance.

In October 2011, the Secretary of State for Culture, Media and Sport asked Ofcom to answer five questions relating to media plurality. Ofcom provided its response in June this year, after which, the Secretary of State asked for further advice.

Ofcom provided that advice in early October. One of the most sensitive aspects of the further guidance sought was the timescale for reviews of media plurality, their effect on the industry and whether a fixed timescale of no longer than 12 months would be appropriate. Ofcom appreciated the need for time efficiency, given the concern that reviews could cause the market to stagnate and revealed its support for a fixed statutory time period for reviews. Alongside this call for Parliament to produce a time period for reviews, Ofcom stated that it is for Parliament to determine the most appropriate decision makers for reviews of plurality, but that some degree of discretion was also necessary for public interest merger reviews. Ofcom did however recognise the fine balance to be achieved by Parliament between politicising decisions on media plurality and ensuring that the high degree of judgement required on such decisions is exercised by those most appropriate to do so (i.e. democratically-elected decision-makers as opposed to an independent regulatory body).

Ofcom was also asked for further advice on the criteria Ofcom recommends should be used to assess which online news providers should be included in any plurality review. Ofcom stated that it believes that the framework should capture online companies that have material influence over the news presented to the public, for example, because they control the titles which are made available to the public. To maintain flexibility in a dynamic and converging market, Ofcom has recommended that no definition of "media enterprise" for periodic or plurality merger tests be attempted as it is unlikely to be workable in practice. Instead, Ofcom suggests that regularly updated guidance is likely to be more effective in providing certainty about which online entities would be relevant to any plurality review.

Ofcom also considered a number of other aspects in its advice, including potential remedies to address plurality concerns, the "sufficiency" of plurality, market exit and the 20/20 rule. In relation to the 20/20 rule, the Secretary of State sought further advice as to whether circumstances exist in which the periodic reviews could provide sufficient certainty to remove the 20/20 rule. Ofcom recommends that it will be necessary for Government and Parliament to consider whether the underlying concern of an unacceptable concentration of influence is still relevant, and if it is, whether the 20/20 rule still the most effective way of addressing that concern. However, Ofcom notes that in both cases, this can only be decided when the first periodic review is complete and there is greater certainty on these issues.

Ofcom's further guidance provides an insight into Ofcom's views on this area and how reviews are likely to be conducted. However, the report ultimately makes clear that Ofcom desires to defer substantive opinion upwards.

A copy of Ofcom's supplementary advice can be accessed here.

  1. European Commission reviews what's relevant and new

The European Commission has launched a public consultation with a view to updating the list of wholesale and retail telecoms markets which are in principle susceptible to ex ante regulation.

Nearly five years after the current Recommendation of 17 December 2007 on relevant product and service markets which are in principle susceptible to ex ante regulation was adopted, the Commission has launched a public consultation on the review of the list of the relevant markets. Currently there are 7 markets on the list reduced, following the previous review, from the original 18 identified when the Recommendation was first adopted in 2003. These are, for all but one, wholesale markets.

A market listed in the Recommendation is subject to the "Article 7" procedure which requires national telecoms regulators ("NRAs") to inform the Commission, the Body of European Regulators for Electronic Communications ("BEREC") and NRAs in other EU countries in advance about measures they plan to introduce to address competition-related and other issues in the market, in particular new markets. In this way, the Commission seeks to ensure that implementation of the EU electronic communications regulatory regime is harmonised across member states in relation to the treatment of operators with significant market power.

The public consultation will review major market and technological developments, such as internet-based applications and services, the convergence between different types of networks and services, and the development of very fast internet networks and services. Based on the results of this public consultation and following consultation with BEREC and the Communications Committee (an advisory committee composed of Member State representatives), the Commission will adopt a revised Recommendation.

Although the previous review in 2007 resulted in a substantially reduced number of relevant markets, the tone of the public consultation suggests that the European Commission remains open to the possibility of now adding new markets to the list to reflect trends in the telecoms sector and other changes in the market.

By way of example, the Commission has openly remarked that there are a number of markets not currently included on the list but which are regulated by certain NRAs at a national level (e.g. SMS termination). The Commission is now seeking opinion on whether these markets should now be added to the list. Interestingly, one such nationally regulated market is broadcasting transmission services (currently regulated in France, Estonia, Austria, Finland and Sweden). This market was previously included in the original list of 18 markets in 2003, but removed from the list in 2007. However, it appears that the Commission now is open to the possibility of putting it back on the list for all Member States.

The deadline for responding to the consultation is 8 January 2013. Contributions, along with the identity of the contributor, will be published on the website of the DG Communications Networks, Content and Technology.

A copy of the European Commission's public consultation can be accessed here.