Editorial: Indian Statement on Satellite TV Ownership Falls Well Short of a Breakthrough

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The recent endorsement by Indian regulators of relaxed foreign ownership restrictions on domestic satellite television providers is a welcome development that should help nurture the nation’s fast-growing market. But that market will never reach its considerable full potential as long as the Indian government continues to control and limit its industry’s access to foreign satellite capacity.

In a June 30 announcement, the Telecom Regulatory Authority of India (TRAI) backed raising the ceiling on foreign investment in Indian direct-to-home satellite television providers from 49 percent to 74 percent. TRAI also said the same limit should apply to mobile television services, which generally are satellite dependent.

This certainly is encouraging; TRAI clearly recognizes that liberalizing foreign investment rules is the best way to bring growth and variety to India’s burgeoning satellite television market. According to TRAI, the number of households subscribing to cable or satellite television grew by 10 percent, to 95 million, in the last year; direct-to-home satellite television subscriptions, meanwhile, rose from 11.1 million at the end of 2008 to 21.8 million as of this past March.

But TRAI’s announcement, while positive, needs to be qualified for two reasons. First, it isn’t clear how much clout the organization has with the Indian Ministry of Information and Broadcasting, the nation’s telecom licensing authority. TRAI characterized its findings as recommendations, which is noteworthy; it remains to be seen whether direct-to-home television operators that are majority owned by foreign investors will actually win operating licenses in India.

A bigger problem is the fact that satellite operators like Eutelsat and Intelsat still have limited access to the Indian market, a longstanding issue that in April drew a rebuke from the U.S. government. In its annual review of the effectiveness of U.S. telecommunications trade agreements, the Office of the U.S. Trade Representative singled out India, China and Mexico for not living up to their commitments to open their domestic satellite markets to international competition.

In recent years, India has slowly allowed more foreign satellite operators to sell transponder capacity for communications within the country, but this is primarily because the government-owned Insat system has not expanded quickly enough to keep up with rising domestic demand. The Insat satellites are built and operated by the Indian Space Research Organisation (ISRO), part of the Department of Space.

According to the Satellite Industry Association (SIA), a trade group that represents companies both in and outside the United States, direct-to-home service providers in India cannot contract directly with foreign satellite operators for capacity. Instead, they must go through ISRO, which permits the use of foreign transponders only if the required capacity is not available via the Insat system, the SIA said in comments submitted to the Office of the U.S. Trade Representative for its review. If non-Indian capacity is the only viable option, ISRO then contracts with the operator and resells the capacity to the customer, “creating a middleman scenario where (i) additional costs are created for the consumer through markups by ISRO; (ii) ISRO may structure contracts with the goal (explicitly stated at times) of moving the service to one of ISRO’s satellites once capacity is available; and (iii) ISRO determines the rate at which the market grows,” the SIA said.

The main beneficiary of this protectionist regulatory scheme is, of course, ISRO. India’s direct-to-home television providers, along with their customers, would be far better served if there were true competition in satellite services in the country.