India’s Creative Economy Needs Creative Solutions

It is time to either upgrade Trai’s capacity or to even start thinking again of an independent and separate broadcasting regulator

Sometimes you don’t need to look under rocks to find the objectionable.

The auction for T20 cricket’s Indian Premier League (IPL) broadcast rights, across geographies and media, has amplified the asymmetry in regulatory frameworks operating in the creative economy. The entire issue should also help triangulate a policy conversation between competition law, intellectual property rights and a sectoral regulatory/legislative narrative that has failed to comprehend the dynamics of India’s growing media and entertainment industry.

Star Group’s winning bid for IPL media rights was made via a transparent process. But the voluble protests preceding and following it have their roots in the Indian economy’s enduring legacy of cronyism and government patronage. Even if we move beyond the immediacy of the complaints and try to focus on the larger picture, the state of strife and conflict does underscore the need for regulatory reform in the creative economy. Specifically, it highlights three issues: multiplicity of regulators leading to lack of clarity on regulatory jurisdictions; need to grant supremacy to Indian Copyright Act—which governs creation, broadcasting and monetization of content—over a plethora of other laws and regulations that are stifling legitimate rights of content creators; and, finally, whether the 20th century mode of administered pricing for content produced in the private sector for sale in the open market can still work in the 21st century.

At the heart of the debate is the difference between monopoly over content and content monopoly. Monopoly over content arises when the content creator has the sole right, granted by law, to monetize the intellectual property embedded in the content for a specific period of time. Content monopoly arises when there is only one content producer in the entire industry and can hold distributors and consumers to ransom, which is clearly not the case in the India.

However, the extant regulatory framework seems to be ignoring these nuances and apprehension over content monopoly seems to have engendered systems that grant subordinate status to the Indian Copyright Act for broadcasting organizations, which is in contrast to global norms. Indeed, indications about content’s future were discernible in the IPL auctions: Facebook’s Rs3,900 crore bid for digital rights (for the Indian Subcontinent) trumped Airtel’s Rs3,280 crore and Reliance Jio’s Rs3,075.72 crore bids. Though Facebook eventually lost out to Star’s consolidated bid, the incident demonstrates how digital content is clearly the next battleground and how companies are according supremacy to content. It also brings into sharp relief the question of net neutrality and the role of gatekeepers. This then also begs the question: Is the current regulatory structure, erected to generate societal equity through mandated economic pricing, adequate and symmetrical for content delivered through cable/satellite and through digital pipelines?

The private television industry in India is of fairly recent vintage. Yet, a vice-like grip of regulators and regulations governs its creativity. The key regulatory institutions overseeing the industry are the ministry of information and broadcasting, the ministry of electronics and information technology, the Telecom Regulatory Authority of India (Trai), the Telecom Disputes Settlement and Appellate Tribunal, the Competition Commission of India, the department of industrial policy and promotion in the ministry for commerce and industry, the Intellectual Property Appellate Tribunal and the department of telecommunications in the ministry of communications.

Given the multiplicity of agencies, there is a wide and bewildering assortment of laws, rules and guidelines that govern this sector: Indian Copyright Act, Information Technology Act, Consumer Protection Act, Cable Television Networks (Regulation) Act, plus a labyrinthine web of regulations from Trai.

Historically, all attempts to establish an appropriate regulatory regime for the broadcasting and cable industry fell victim to political fragility of the 1990s, till the Centre reclassified broadcasting and cable services as telecommunication services in 2004 and appointed Trai as the designated regulator. Occasional attempts to create an independent broadcasting regulatory authority suffered pre-mature deaths due to political uncertainty.

With Trai and so many other agencies, acts, rules and guidelines at play—often at cross-purposes to each other—it is only natural that the playing field gets skewed in favour of those with unequal political bargaining power. In the sector’s infancy, the boundaries were stretched by organizations that employed musclemen and were friendly with political parties. Not all companies were born from this violent crucible, but some of the leading names in media and entertainment rose to prominence from this brutal churning. In addition, as various stakeholders have pointed out, the regulator’s lack of capacity has also led to the current regulatory distortions.

According to the KPMG India-Ficci report on Indian media and entertainment industry, 2017, Trai’s March order on inter-connect and pricing of channels may lead to a decline in revenue for broadcasters and might even result in an increased monthly outlay for many subscribers, thereby defeating the very purpose of the pricing model. Clearly, it is time to either upgrade Trai’s capacity or to even start thinking again of an independent and separate broadcasting regulator.

This article was originally published in Mint newspaper and can also be read here 

Pointers To A Future-Ready Payments Policy

Regulation, almost always, lags technology development. But an opportunity to create a future-ready policy framework now seems close at hand

Events over the past few weeks have thrown up numerous pointers to what should be included in a future payments-system policy framework.

The Reserve Bank of India’s (RBI’s) 2017-18 annual report provided the first clue, proving a well-known policy paradigm: competition and freedom of choice are essential tools to avoid distorting markets and the broad economy. An overnight ban on Rs500 and Rs1,000 bank notes—accounting for about 85% of outstanding currency—dealt a body-blow to the economy in terms of jobs, incomes, livelihoods, investment appetite and overall economic growth. The ruinous effects manifested themselves last week: gross domestic product for April-June quarter grew by only 5.7%, the lowest in many quarters.

Demonetisation amounted to suppression of free choice—or freedom to decide how much cash to use, for which transactions—though different reasons were adduced to justify the decision. One of the reasons cited, which has persisted into the post-demonetisation period, is a desire to foster digital payments and to migrate the economy to a less-cash system.

This is a desirable economic objective. However, the policy vectors put in place reveal multiple gaps: lack of a robust competition and innovation policy; uncertainty over the payment regulator’s quasi-legislative powers; an unclear road map for achieving financial inclusion; and, an asymmetric preference hierarchy between different payment systems imposed on the consumer. The last one violates democratic principles by coercing the public to move away from a relatively low-cost payment system (such as cash) to a higher cost platform (such as, mobile wallets which involve connectivity costs).

The Supreme Court’s (SC’s) recent ruling on right to privacy as a fundamental right is likely to complicate the regulatory debate further and might necessitate a systems rethink. The judgement reads: “The balance between data regulation and individual privacy raises complex issues requiring delicate balances to be drawn between the legitimate concerns of the State on one hand and individual interest in the protection of privacy on the other.” The nine-judge bench, while acknowledging that the Centre has already appointed a committee under former SC judge B.N. Srikrishna to study the state of India’s data privacy and to submit a draft bill, hopes that the Union government will take “all necessary and proper steps”.

Still, the right to privacy ruling in itself does set out a future regulatory perimeter for digital financial services. The bench found some pointers in a 2012 report from an expert group on privacy, appointed by the erstwhile Planning Commission. Specifically, the report mentions a five-pillar conceptual scaffolding for drafting legislation to protect privacy: technological neutrality and inter-operability with international standards, which is still lacking; multi-dimensional privacy; horizontal applicability to state and non-state entities to ensure a level-playing field; conformity with privacy principles in line with global best practices; and a co-regulatory enforcement regime which envisages co-existence of independent regulators and self-regulating organizations. Ironically, some of these issues are still being debated in the policy space.

There are multiple views on what to make of SC’s judgement; for example, Chennai’s IFMR Trust, soon after the SC ruling, published a blog advocating stakeholder consultation to determine what kinds of data can and should be collected, the desirable regulatory regime for data mining and algorithmic techniques and a legislative terrain to “ensure that use of personal data is tied to legitimate proportional objectives and interests”.

There is another critical, and slightly obvious, ingredient necessary in the future regulatory mix: trust. This was evident when digital payments spiked during November-December 2016 and then tapered off subsequently; people abhor repression and any attempts to increase the value and volume of digital payments must be achieved through trust, not duress. Regulation must have a consumer bias and should not be designed to favour some service providers.

Lack of trust in paper money issued by sovereigns, and controlled by central banks, is growing as is wider acceptance of crypto-currencies. Already six large global banks—Barclays, Credit Suisse, HSBC, Canadian Imperial Bank of Commerce, State Street and the Mitsubishi UFJ Financial Group—have jointly launched a project to use block-chain for clearing and settling financial transactions, reducing time taken for conventional money transfers.

While bitcoins and other crypto-assets are still in an embryonic state in India, the pace of acceptance is slowly picking up. Many community-based initiatives have been advocating block-chain as an alternative to organized finance, viewed as exploitative. The finance ministry appointed a nine-member inter-disciplinary committee to suggest the way forward with crypto-currencies; the committee has submitted its report, which has not been made public yet. Eventually, though, RBI will have to decide whether it will allow money to also exist as crypto-currency, in addition to its role as a commodity (with or without intrinsic value), a financial claim and/or as an accounting entry.

Regulation, almost always, lags technology development. But an opportunity to create a future-ready policy framework now seems close at hand.

The article originally appeared in Mint newspaper on September 6, 2017, and can also be read here