The first phase of expansion of FM Radio through private participation was launched in the year 1999, by the ministry of Information and Broadcasting, Government of India. The objective behind privatization was to supplement broadcasts of All India Radio (AIR) and attract talent in the private domain not only to innovative content creation but also in packaging it in novel ways to bring back listeners to their radio sets. During this phase 108 FM channels were offered in 40 cities. However, lack of understanding of this new opportunity by the infant radio industry and overestimation of revenues from this business led to many setbacks. Many of the broadcasters who had bid for the channels at exorbitant prices, ultimately shied away and this resulted in operationalisation of only 22 channels in the first phase. However, though not all channels that were offered were operationalised, it rejuvenated radio listening. Encouraged with the response, broadcasters started finding ways and means to remedy the situation. Government was also willing to do a midcourse correction. An expert group led by Amit Mitra was constituted to go in to various aspects of FM broadcasting and recommend to the government, necessary measures for improving the fate of the bleeding FM-industry. While all this was happening, people in cities where the private FM broadcasts were launched, started enjoying the popular music dished out by the Private FM-stations and also started discovering the operational FM stations of AIR, especially in their vehicles, driving to-and-from work.

The Government, considering the experience of the broadcasters and enthusiasm of the public for FM, in July 2005, notified a policy for the introduction of 337 private FM stations in 91 cities. Today, as many as 263 private FM channels are operational in 87 Cities. Most of the demands made by the FM industry were accepted by the Government and it also introduced several new clauses in the policy document and ensured that speculative and non-serious players wee discouraged. Encouraged by the response to the private channels, AIR too spruced-up and steadily improved their content and technical quality of their transmission. Today, some of the AIR FM Channels are quite popular and serving a large group of listeners, including niche listeners. Radio broadcasting, due to its versatility, is still an effective medium of information, entertainment and education. FM radio is now emerging as a strong medium of entertainment, information and education, and private FM stations have played an important role in this development.

The time is now ripe for the introduction of the third phase of private FM stations. The groundwork and experience gained during the first two phases of expansion will help the private FM players in further expanding to smaller cities with population of over one lakh.

Music royalty

Although the expansion of FM had led to general satisfaction among the public, the broadcasters have some genuine and real grievances, which needs to be addressed. Payment of royalty to professional agencies like PPL and IPRS had been a contagious issue right from very beginning. While the broadcasters are complaining of high royalty for music play on the FM stations, the gramophone companies and associations of performing artistes, on the other hand, are clamoring still higher royalties. Even the community radio stations are not being spared.

Due to the excessive royalty paid by the broadcasters combined with the depressed market conditions, the revenue of private FM stations has virtually flattened and the return on investment has almost been reduced to zero. The request for the extension of licensing period of the FM stations from 10 years to 15 years, thus, seems to be most logical step if the industry has to survive and flourish. If the license period is extended by the government, it would help the private FM broadcasting industry in recovering their accumulated losses.

Spectrum

Among the many issues facing the industry, the availability of spectrum for the third phase of private FM expansion a critical one. The quest for the introduction of 3G services in India has encountered many problems, including the non-availability of adequate spectrum. Fortunately, for the third phase of private FM station expansion, spectrum is not going to pose a real hurdle. The following table shows the broad allocation of spectrum among various users.

During phase one and phase two of the Private FM expansion, a separation of 800 KHz between channels was adopted. For most of the broadcasters, a single frequency allocation scheme was adopted. Single frequency allocation to the broadcasters been advantageous to the broadcasters in marketing their radio stations, and has also reduced the demand on spectrum. It has also given an opportunity for the planning of radio stations in medium and small cities, where stations with 400 KHz separation from existing stations could be set up. Cities, which are very close to the existing stations, may not be considered during this phase. Any further expansion of private FM broadcasts would require vacation of spectrum from existing non-broadcast users in the 87-108 MHz band.

Permission to carry news and current affairs

Presently news and current affairs programmes are not allowed to be broadcast on private FM Radio, but the demand for such programme is very high. Most of the FM broadcasters today are forced to broadcast news in one guise or the other, especially in the form of infotainment. It is quite logical for the FM broadcasters to demand that they be permitted to broadcast news and current affairs on their stations. The government has argued that the logic behind disallowing news and current affairs on FM radio was that it news was considered too sensitive a content to left to the whims of the private players as any misinformation or inaccurate information could lead to serious and unfortunate situations, given the reach of radio. While there is an element of truth in the government's anxiety, we must understand that it is only a well-informed society that can withstand and counter the effects of misinformation. More the citizens know, the less likely that they will be misled or influenced by wrong or motivated news. Therefore, there is a very real case to open this gate of information, albeit in a steady and measured manner.

Does it make sense to invest in FM radio?

The growth in telecommunication has resulted in unprecedented changes in FM radio listenership. The largest mobile-phone company has become largest seller of radio sets. The way the telecom revolution is evolving, it is no wonder that a day will come when virtually everyone will carry a FM-receiver within their mobile phone. It is beyond doubt that the FM radio is going to be all pervasive. It is up to the entrepreneurs to exploit this medium optimally through structuring efficient business plans and through a proper understanding of the dynamics of the business. I feel it is an once-in-a-lifetime opportunity to get into private FM business at the present. The entire available spectrum is likely to be allotted during this phase and for any further expansion of private FM shall require vacation of spectrum in the 87-108 MHz band from non-broadcast users, which may not be easy at all. My advice would be would be to ‘bid sensibly' for the license, based on a sensible and dynamic business plan. There is no question that FM will succeed.

Government response in the privatization of FM

The government has been very responsive to private FM Radio. Right from the beginning, the Ministry of Information and Broadcasting has been very accommodative and has been receptive to change the rules and procedures to enable to industry to grow and succeed. From phase one to phase two, the FM expansion has seen many changes and more are expected during phase three. During phase two, a transparent bidding system was adopted by the Government and whole process of granting license was well planned and executed. It is hoped that during phase three also, the Government will adopt similar processes and procedures.

The path ahead

When we discuss the privatization of FM radio, we generally discuss the difficulties the industry is facing, either due to the poor growth in revenues or the issue of excessive royalty on music. We generally tend to forget, the impact on the common listener, whose habits in regard to radio has undergone a sea change - FM radio has become an integral part of their daily life. In my opinion, if we wish to see unhindered growth of private FM in India, the following steps must be taken:

• A neutral agency to be created by the government for the collection and distribution of music royalty among copyright holders. There is a case for renegotiating the music royalty with copyright holders keeping the coverage areas of FM stations in view.
• News and current affair programmes to be permitted, slowly but steadily. Government has to strengthen its monitoring mechanism of private FM stations.
• To cover the accumulated losses by the FM broadcasters of phase two, the licensing period to be increased to 15 years.
• FM broadcasters should work on sound business plans and desist from over bidding. To improve the financial strength of FM broadcasters, salaries of broadcasting professionals to be moderated
• The policies of expansion of phase three FM stations to be announced immediately, so that benefits of FM broadcast reaches people in small and medium cities.