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Hot potato to couch potato

Tuesday 19 December 2006, by DEBROY*Bibek

Trial runs for introducing the conditional access system (CAS) has started; CAS will be in place at the end of this month - 2003’s hot potato has become 2006’s couch potato. If there is a favourite expression in Indian economic policy-making, it is ?public interest’. It is probably a favourite expression because it is deliciously vague and can be interpreted to mean anything. Consumers need to be protected in the public interest. Producers and service-providers, even if they are inefficient, need to be protected in the public interest. Brandish the red flag of security and terrorism and everything becomes in the public interest, even if no one bothers to ask the public about where their interests really lie.

Consider a case for banning all vehicles, motorised or otherwise, from Delhi’s roads. People will then have to walk. Greater exercise will lead to lower risk from cardio-vascular diseases and obesity-related problems. Shoes and slippers will wear off faster, good for manufacturers of such items and even for cobblers. Cops will make more discretionary rents deciding what is a ?vehicle’ and what is not. Even if one doesn’t bring in the cause of the environment, and there can be any number of PILs on that score, banning vehicles is in the public interest.

Here is a quote from ministry of information and broadcasting’s recent notification. “Now, therefore, in exercise of the powers conferred by sub-section (1) of section 4A, read with section 9 of the Cable Television Networks (Regulation) Act, 1995 (7 of 1995), the Central Government, having been satisfied that it is necessary in the public interest so to do, and having regard to the aforesaid order dated the 20th July, 2006 of the Hon’ble High Court of Delhi hereby notifies 31st December, 2006 as the date from which it shall be mandatory for every cable operator to transmit or re-transmit programmes of every pay channel through an addressable system in the areas notified by the Government of India in the Ministry of Information and Broadcasting vide number S.O. 792(E) dated the 10th July, 2003.”

You have every right to be thoroughly confused. In 1995, the Cable Television Networks (Regulation) Act thought CAS was in the public interest. So did the I&B ministry’s notifications of January and July 2003, at least for Chennai, Kolkata, Mumbai and Delhi. But in February 2004 the government thought CAS wasn’t in the public interest and needed to be suspended. Finally, after Delhi high court’s order in July, the government goes back to realising that CAS is in the public interest.

Every issue about CAS has been debated ad nauseam, the relationship between local cable operators (LCOs), multi-system operators (MSOs) and broadcasters, consumer choice in terms of subscribers paying for what they watch, the segregation between pay channels and free-to-air (FTA) ones, transparent subscriber bases that can be appropriately taxed without revenue leakage, price and availability of set-top boxes (analogue versus digital issues), and pricing of FTA channels vis-a-vis pay bouquets.

Yet, there are some questions that defy explanation. First, why are our attitudes towards manufacturing different from our attitudes towards services? Arguably, the first flush of economic liberalisation was about manufacturing, and supply-side adjustments have led to lower real prices, better quality and broader choice. Most debates about liberalisation now concern services, be it education, health, legal and accountancy services or TV viewing. Why are we so reluctant to accept that the manufacturing lesson can also apply to services? Why must one assume ceteris paribus conditions and argue that the nirvana of 100 channels at Rs 150-200 per month will yield to junk FTAs and premium pay channels at Rs 250 per month? After all, not more than 20 per cent of cable households pay today and as under-reporting is eliminated, prices should drop.

Second, why do we jump to the conclusion that the only way to protect consumers is through fixing prices? No one argues that BICP (Bureau of Industrial Costs and Prices) or CCI (Controller of Capital Issues) be brought back. There is a role for regulation and TRAI (Telecom Regulation Authority of India) already has standard forms of inter-connect agreements between broadcasters and MSOs and between MSOs and local cable operators, specifying revenue-sharing arrangements. Perfect competition is a figment of the imagination, and the world is one of monopolies, local if not global. Just as I can’t change my newspaper vendor if I have unsatisfactory service (because they have carved up the area geographically), I can’t change my local cable operator either. I can still exercise choice by re-locating to a different geographical location, but such choice involves significant transaction costs. CAS certainly offers me greater choice and why are we reluctant to accept that choice and competition are the best antidotes to the spectre of a price rise? Regulation doesn’t have to become price control, be it for pharmaceuticals, higher education or cable television.

The lesson of the telecom revolution is no different. Indeed, attempts to control also backfire because no controller anywhere is in a position to anticipate or understand changes in technology. Third, and this is an intriguing social phenomenon, why has a burning issue of 2003 become a non-issue in 2006? CAS is now creeping in without any of the fire and brimstone we witnessed in 2003. Admittedly, it is only creeping into three metros (Chennai is different), but once it is successfully introduced there, it will no doubt be replicated in other urban areas.

This is probably a reflection of the grasshopper mentality that characterises India’s urban middle class. Today’s fad becomes stale tomorrow. The debate over privatising distribution of power is also partly symptomatic. In a perverse kind of way this should make us more optimistic about the future of reforms. Privatisation of water (it is already privatised for the poor) and the opening up of retail will inevitably happen. To paraphrase what the PM said when he was FM, there is no holding back an idea whose time has come.

See online : The Indian Express

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