Decks cleared for phase 3 of FM radio auctions

Monday, Jul 27, 2015

Phase 3 FM radio auctions are slated to begin from Monday, four-and-a-half years after the policy was announced in July 2011, delayed due to policy paralysis. With the Sun Group's troubles with the government out of the way, the decks appear to have been cleared for auction of 135 frequencies in 69 cities, beginning 9.30 am on Monday.

Broadcasters are cheering. Linked to these auctions is the renewal of 245 existing radio licences, of which 21 are currently operating under an "extension", which is set to expire on September 30.The renewal fees for these will be based on prices determined in the auctions.

However, broadcasters fret about several aspects in the FM policy. For example, they are not allowed to broadcast news, unless it's sourced from All India Radio. Industry officials wonder whether the government wants to control the dissemination of free and fair news to the public at large. The ban on news, industry officials say, could be removed soon, as the Supreme Court grapples with the issue in a case filed by NGO Common Cause.

There is also the 15% "national cap" — no broadcaster can operate more than 52 channels. As a result of what most industry officials describe as an artificial and irrational cap, large networks like Sun (47 channels) and Reliance ADAG (45) are severely limited from expanding.

This cap could hurt the government itself, and cause serious loss in revenues — estimated at 30-50% — apart from holding back the expansion of the medium, as many frequencies in smaller towns, which the big networks would have gone after, will possibly go "unsold". High reserve prices will also make many of these unviable, say the people cited.

While bidding is generally expected to be rational, given the notso-great financial returns broadcasters have seen, it could get heated in a few of the bigger metros, where there are few frequencies available for bidding. Delhi, Bangalore, Chennai, Ahmedabad and mini-metros like Jaipur and Nagpur have only one frequency, while Mumbai and Pune have two. With the Telecom Regulatory Authority of India (Trai) having already recommended a simple way to double the number of channels, the government is expected to release more frequencies soon, according to industry sources.

Bidders will also be worried with the rapid advance of digital streaming services (Pandora, Spotify, Gaana, and now Apple music).

Though not immediately, digital could eventually cut into FM revenues.

But despite all the issues, the mood in the FM industry is cheerful. Having established its pre-eminent place in "local" and "reminder" advertising, and in targeting the "youth" and "on-the-move" audiences, FM radio has grown faster than TV, print and outdoor advertising in the past few years. More channels will help retain this pace. FM radio commands 15% of the ad pie in Sri Lanka. In India, it's just 5-6%. If one day Mumbai and Delhi have 25 radio stations each as Colombo has, FM radio should continue to grow faster than its other media siblings.

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