Tag: monopolies

Video Geographic Monopolies

There is one quirk about video which we don’t face with print – some content is simply impossible to access legally in some parts of the world.

I’m specifically talking about BBC’s Match Of The Day, their end of day highlights package covering the English Premier League. It was one show that I watched unfailingly during my time in London, both for the match highlights, and for the quality of the discussion featuring Gary Lineker, Alan Shearer, Ian Wright et al.

Now I find that the show is simply not available in India – some youtube channels illegally offer the show (before they are taken down, I guess), but without the bits that show pictures of the game (which they are not allowed to show). And that makes for rather painful watching, knowing that you’re watching something substandard.

This is not the case with something like text – as long as I’m willing to pay, I’m able to access content produced anywhere in the world. I can sit here in Bangalore and buy a subscription to the New York Times, and access all its content. Audio is also similar – I can sit here and subscribe to any international podcast, and be able to access the content.

Video doesn’t work that way. The problem is with the way rights are sold – the Star network, for example, has a monopoly on showing pictures from the Premier League in India (having paid a substantial amount for it). And part of their arrangement means that nobody else is allowed to broadcast this material in India. A consequence of this is that we are stuck with whatever (mostly crappy) analysis Star decides to provide around its games. Stuff that is unwatchable.

There is a lot of great sport content online, but the video part is constrained by the inability to show pictures. Check out analysis by Tifo Football, for example – it’s absolutely top class. However, for most games, they have to rely on stock images and block diagrams since they can’t show the pictures which someone has a monopoly on. And that makes the analysis less rich (the Athletic, which I have a subscription to, “solves” this in an interesting way – by using screenshots of the TV footage of the game as part of their text analysis).

I wonder if there is a way out of this. Some leagues such as the NBA have shown some enlightened thinking on this – while they are anal about copyright of their live feed, they don’t care about copyrights on recorded footage. This means that anyone can use footage from historical NBA games as part of their analysis. Better analysis means more people interested in the sport, which means more people watching the live feed, which makes more money for the league (read this excellent interview of NBA Commissioner Adam Silver).

I’m also beginning to think if there is a regulatory antitrust response to this issue. Video distribution (especially of live content) is a natural monopoly, so it doesn’t make sense to have competing broadcasters. However, I wonder if there is any regulation possible for historical feeds that makes them more tradable (with the rights holders getting appropriately compensated without much transaction costs)!

One can only hope..

Government finances versus public interest

In an op-ed in Business Standard (I think) yesterday, Praveen Chakravarti (he’s with Anand Rathi now, used to be with UIDAI when I met him at the Takshashila Conclave last year) argues that fixed price allocation of telecom spectrum wasn’t such a bad thing since it kept prices for customers low and reasonable. As part of his argument, he mentions that due to the auction of 3G spectrum and licenses, prices of 3G services have been really high, way over the reach of the common man. Similarly, after the auction of the 4th telecom license in 2001, mobile telephony prices remained high, and came down only after the backdoor entry of Reliance and Tata Teleservices a couple of years later.

One of the points that the CAG mentioned in his report on Air India a few days back was about the granting of “sixth freedom” rights to international carriers flying from India. For example, twice this year I flew west (once to the US, once to Europe) from Bangalore, stopping over at Dubai. For both trips, Emirates sold me a single ticket (i.e. I purchased a Bangalore-New York ticket, not separate tickets for Bangalore-Dubai and Dubai-New York). The granting of this sixth freedom to carriers such as Emirates, points out the CAG, has resulted in substantial loss to Air India since no one flies Air India for international flights anymore. I didn’t believe it when I read it but one of the recommendations for the CAG was to cancel sixth freedom licenses to carriers such as Emirates. Another report around the same time recommended that “interior markets” (Bangalore, Hyderabad, Ahmedabad, etc.) be made Air India monopolies in order to protect its finances.

Now, there is a fine balance that needs to be achieved between government revenues through grant of licenses, and the economic impact on the general public because of the grant of such licenses. For example, the government (through Air India) may have lost significant amounts of money thanks to the grant of sixth freedom licenses to carriers such as Emirates. That has been counterbalanced with lower fares and easier flying options for travelers from hitherto less connected sources like Bangalore or Hyderabad. The government may have lost significant revenue by granting backdoor entry to Reliance and Tata Teleservices, but that was compensated by sudden drop in charges for mobile telephony, and the subsequent growth of the sector.

Given Air India’s history and performance, the government could have never invested enough to make Bangalore and Hyderabad as well connected with the rest of the world as, say, Bombay or Delhi. In that sense, granting of sixth freedom rights to Emirates was a cheap way for the government to provide international connectivity to these cities. Similarly, it would have been hard for the government to invest in MTNL or BSNL in order to take mobile telephony to the masses. Backdoor entry to two operators was a “cheaper option” to achieve this objective.

So what was the problem with what Raja did, you ask. The problem there was the creation of a playing field that was not level. He blatantly favoured certain players against others, and made hefty kickbacks from the process. That is the real tragedy of a non-auction process – in that there is “consumer surplus” left over with some of the companies after they’ve paid the fixed price for the resource, and some of this consumer surplus can be channeled in the form of kickbacks to government officials. I don’t know the parallel for this in the aviation space so I’m not able to comment on that.