NEW DELHI: The majority of FM Radio broadcasters (89 per cent) oppose the ascending e-auction proposed by the Government for the 839 stations of Phase III on the ground that this will lead to licence fee rates increasing by an additional 20 to 30 per cent.
Furthermore, the Ernst and Young Report ‘Poised for Growth: FM radio in India’ prepared for the Confederation of Indian Industry says a one-stop auction or e-tender is suitable for the radio industry.
The objective of the FM radio Phase III license auction is to ensure that a natural resource (airwaves) is used to maximize the common good of the country. According to a recent ruling of the Supreme Court, auctions can be only one among several methods for distribution of natural resources and it is for the government to choose the mode that best serves the ‘common good’.
Related Post
The report says Phase III auctions should be conducted in a manner that ensures the spread of FM radios across the country. To achieve this, it will need to ensure the profitability and growth of the industry, which is not feasible at current license fee rates, or the suggested licensing methodology (ascending auctions).
If the final licence fee rates are very high, this could deter radio companies from experimenting with programming, since they would look for ways to break even at the earliest with more popular and mass content, rather than experiment with new genres.
In Phase II only those players who paid relatively lesser license fees under the single-step tendering method have experimented with music formats. This ultimately is a loss for listeners, since they would not be offered variety, which is the ultimate objective of so many radio stations.
The report says ascending e-auctions are typically used for collector’s items such as art or for acquisition of of sporting talent. .This is best suited for objects in which the seller has no interest once sold. The seller’s objective is to get the best price, which is achieved, based on bidders being able to out-bid each other.
One-step or closed e-auctions are used for natural resources. This method is used when the objective is to achieve a rational price based on market discovery. Not permitting bidders to increase bid amounts reduces the possibility of irrational bidding, the report says.
The Information and Broadcasting Ministry has proposed that the ascending e-auction method be used to bid for licenses during Phase III. An e-auction is meant to create transparency and meets this objective. However, the report says the recent 3G telecom auctions that have used this method showed that the ascending e-auction system tends to result in over-bidding, as compared to closed bid systems, and this has stretched the balance sheets of the participants.
