Networks of Influence

The growing power of large cable firms and the hidden extent of political ownership of them

Since the mandatory digitisation of cable distribution began in 2012, it has spurred a series of mergers and acquisitions to the benefit of large, cash-rich cable companies. anindito mukherjee / reuters

IN 2011, DAY AND NIGHT NEWS, a small television channel broadcasting in Punjab and critical of the state government, approached the Competition Commission of India. It alleged that four companies—Hathway Sukhamrit Cable and Datacom, Creative Cable Network, Fastway Transmissions, and Wire and Wireless (India)—had formed a cartel to corner an oligopolistic share of the cable-distribution market in the state, and were refusing to carry its broadcasts on their networks. The CCI accepted that there was a case of market domination, and fined the cable firms R8 crore.

In 2015, a group of owners of small cable firms from Punjab’s Malwa region filed a case in the Punjab and Haryana High Court. They alleged harassment by Fastway in the wake of an earlier legal dispute, where they had accused the company of hindering their work, and said that Gurdeep Singh, Fastway’s managing director and majority shareholder, was a “business front” for Sukhbir Singh Badal, the deputy chief minister of Punjab. They also said Gurdeep Singh, and indirectly Sukhbir—also the son of the state’s chief minister—had control of over 95 percent of Punjab’s cable business through the four cable firms listed above. (Gurdeep Singh is the majority shareholder in Hathway Sukhamrit and Creative Cable Network, and documents from the ministry of corporate affairs and media reports establish his business links with the Badal family.) The petitioners asked the court to direct the Central Bureau of Investigation to conduct a probe, and the court issued a notice asking the agency to state why it should not. The case is still being heard.

Political ownership of cable firms, whether direct or indirect, creates at least three risks to the public interest: filtering of content based on political bias; extra-economic influences on business agreements; and meddling with regulatory mechanisms. It is widely believed that such ownership is rife in India—so much so that, in 2014, the Telecom Regulatory Authority of India recommended that “political bodies” be “barred from entry into broadcasting and TV channel distribution sectors.” The risks, especially of filtering information, are likely to assume new dimensions as many of these companies move into providing internet services too. And, as we discovered through our research, the full extent of political ownership of India’s cable companies is still largely hidden from public view.

The principal entities in the distribution business are multi-system operators, or MSOs, which aggregate signals from numerous broadcasters and relay them across large areas. Some MSOs are regional, operating either within a state or in contiguous states; others may be called “national,” since their operations spread across many, dispersed states. Below the MSOs are small distributors called last-mile operators, or LMOs, that relay signals from MSOs across the proverbial last mile and to our television sets. Many LMOs have close ties with local politicians, but it is MSOs that typically have the more powerful connections, and often use these to arm-twist LMOs when negotiating commercial agreements. The risks resulting from political ownership in the cable sector are gaining greater proportion with the mandatory digitisation of cable distribution, which has led to large MSOs strengthening their position in the value chain of television distribution.

Of the over 1,000 national and regional MSOs licensed in India today, the largest three are Hathway Cable and Datacom, SITI Cable and DEN Networks. These function as parent companies, and through their dozens of subsidiaries and step-down subsidiaries—that is, subsidiaries of subsidiaries—serve between 12 million and 13 million subscriber homes each. Together, these three MSOs reach over 40 percent of India’s cable subscribers—which reflects the oligopolistic nature of the country’s distribution market. Cable remains the dominant medium of television distribution, accounting for 90 million of a total of 130 million television subscribers, despite competition from the rival technology of direct-to-home satellite, or DTH, transmission. According to a recent study in the Economic and Political Weekly (co-authored by one of the writers of this piece) cable has, contrary to some expectations, gained market share against DTH since the digitisation of cable began in 2012, both in tier-1 and in tier-2 cities.

In the summer of 2014, we started an as-yet unpublished study to unravel the complex ownership structures of India’s three largest cable distributors. Simply put, we wanted to cut through the many ownership layers of subsidiaries and step-downs and identify the individuals behind them. We hoped to understand the ownerships of these mega-MSOs in general, and not specifically as it might relate to political interests. Two questions motivated us: first, how do owners exercise shareholding control over dozens of companies in their groups in a geographically dispersed and commercially fragmented business such as cable distribution; and second, to what extent are details of ultimate ownership and promoters’ shareholding clearly disclosed in mandatory regulatory and legal fillings by these parent companies. These are important public concerns not only because MSOs deliver news content, but also because they are increasingly getting publically listed and raising large investments from both domestic and foreign markets.

We realised that neither ownership nor ownership structure could be taken as uniform across these companies’ many subsidiaries and step-down-subsidiaries, and so each had to be investigated individually. From a total of about 300 such entities across the three mega-MSOs, we settled on a sample of 107. Since we were studying ownership patterns, and pinpointing owners who may have vested interests, our sample consisted of companies where the parents had majority shareholding (of above 50 percent) or minority shareholding (of below 50 percent), but where there were other investors who held substantial stakes. We did not try to achieve geographical distribution in our sample, but still ended up looking at firms operating in a dozen states.

We found evidence of political ownership in seven of these 107 companies—three owned to some degree by Hathway Cable and Datacom, two by SITI Cable and two by DEN Networks. We defined political ownership as direct or indirect holding of anything above a 5-percent stake by anyone who has held, or presently holds, elected office at the central or state level, as well their immediate family members or known business associates. That we found political ownership in 6.5 percent of the companies we studied even when our sample was not specifically designed to test for it suggests the significant prevalence of this phenomenon.

With all these seven companies, the political ownership was not apparent in their mandatory disclosures—documents such as annual reports, prospectuses filed with the Securities and Exchange Board of India during initial public offerings, and regular submissions to stock exchanges and the ministry of corporate affairs. Their political connections can only be made clear by combining information from these documents with details from other sources, such as media reports, conversations with local journalists, and interviews with senior figures in the cable industry.

To understand how the present forms of political ownership emerged, it is important to understand something of the history of the cable business in India. Cable distribution grew on the heels of the deregulation and liberalisation of television in the early 1990s. Laying and maintaining connections to subscribers required cooperation from local police and municipal bodies, and politicians were useful in facilitating this. As the business grew and competition increased, turf battles erupted between cable distributors across the country, often escalating into violence. Here again, visible political cushioning became an important asset. In return, cable firms, especially LMOs, offered politicians a way to reach their constituents, often by transmitting local events they patronised or appeared at. Many politicians and political families entered the cable business, perhaps with no more zeal than that with which they entered other, localised commercial ventures.

As the reach of television expanded, the distribution market saw a mushrooming of small entities, and consequently became increasingly fragmented. Into the 2000s, the surest route to growth for ambitious companies was to acquire LMOs and smaller MSOs—many of which had accumulated political stakeholders. With this inorganic growth strategy, in some cases the acquiring MSOs wished to retain partnerships with the original political owners to enhance and expand their business. In others, politicians and their associates wished to retain sizable, though minority, stakes in the LMOs and MSOs they were originally involved in.

This meant many small and medium-sized cable companies sold a majority stake—generally 51 percent of shares—to expanding MSOs, but held on to the rest, sometimes divided among multiple shareholders. In effect, even as national and regional MSOs emerged, politicians retained power over many local entities. For example, when DEN Networks expanded into Kerala, it took over an existing cable operator, owned by PV Ali Mubarak, to form DEN Malabar Cable Vision. According to disclosures from 2013, DEN Networks owned 51 percent of the company, and Mubarak held just over 12 percent of it. Mubarak is the brother of PV Abdul Wahab, a business mogul and a member of the Indian Union Muslim League now serving his second term in the RajyaSabha.

Similarly, in 2013, SITI Cable owned 51 percent of SITI Vision Digital Media, which operates in Andhra Pradesh and Telangana, while two minority stakeholders, the husband-and-wife pair of Satish Kumar Botcha and Parvathi Botcha, owned approximately 7.5 percent each. Satish is the brother of Satyanarayana Botcha (also spelt Botsa), a former head of the Congress in Andhra Pradesh who joined the YSR Congress last year. Also as of 2013, DEN Networks owned 51 percent of DEN Bellary City Cable, which operates in the Bellary region of Karnataka, while B Sriramulu owned 45.5 percent of the company. Sriramulu is a close associate of Karnataka’s controversial Reddy brothers, a former minister in the state government, and currently a LokSabha MP with the Bharatiya Janata Party.

The nexus between large cable firms and politicians and their associates has further concretised since mandatory digitisation began in 2012, as it has spurred a series of mergers and acquisitions to the benefit of cash-rich MSOs. Digitisation has been justified, in part, as a pro-subscriber move to improve quality of service and promote healthy competition between LMOs. But the aforementioned study in Economic and Political Weekly, which examined digital migration in Delhi and Patna, revealed that many subscribers still have no real option but to turn to the single service-provider entrenched in their neighbourhoods, and now have to pay more for the same content. For cable operators, the migration from analogue to digital distribution relays has required a huge infusion of capital to replace outdated infrastructure, especially at the local level. Hundreds of LMOs without the necessary funds have sold all or part of their business to large MSOs, or become their franchisees. Helped by this, some 30 MSOs have emerged as major national and regional players. Some of these—such as Ortel, operating in Odisha and its neighbouring states—have explicit political links.

Increasing consolidation and oligopolistic tendencies have also meant an enhanced ability to interfere in the distribution of content, be it at a city, district, state or regional level. In 2011, CNN-IBN aired an investigative documentary on illegal iron-ore mining in Karnataka’s Bellary district—an enterprise that has been linked to the Reddy brothers. The broadcast was blacked out on local cable networks in seven districts in the state—including in Bellary, where the main distributor was DEN Bellary City Cable, mentioned above. In June 2014, cable firms in Telangana refused to carry the channel ABN Andhra Jyoti to stave off reporting unfavourable to the state’s TelanganaRashtraSamithi regime. In mid 2015, the channel NTV went undistributed to about 70 percent of viewers in Andhra Pradesh after it invoked the ire of the ruling Telugu Desam Party. In discussing that incident on The Hoot, a media watchdog site, the media scholar Padmaja Shaw underscored that “the blacking out of channels has been happening not just in Andhra Pradesh and Telangana but elsewhere in the country wherever the distribution companies are owned by politicians.”

There are also examples of politicians intervening to stop compliance with regulatory processes. The ShivSena leader Anil Parab has said in several interviews that, in the early 2000s, he stalled the implementation of the Conditional Access System in Mumbai on instructions from Bal Thackeray, then his party boss. The CAS was meant, among other things, to end the under-declaration of subscriber numbers by LMOs. At the time, Parab was the president of an association of cable operators in Mumbai, and the owner of Dattatray Cable Network. That company became a subsidiary of Hathway Cable in 2009; as of 2013, Hathway owned 51 percent of the company, with Parab owning the rest.

Though the problem before the country is clear, there does not presently seem to be any regulatory will, let alone any clear solution, to address it. In regulating their media sectors, some countries—Singapore, for one—thought it wise to involve public or semi-public entities in the cable-distribution sector. A similar approach may seem appealing here—Karnataka has in recent years explored the creation of a government-controlled television distributor. But there are many problems with public ownership in the media market, as the experience of the public broadcaster Doordarshan has shown, and there are demonstrated risks to it particularly in the distribution sector.

For example, in 2007, Tamil Nadu’s Dravida Munnetra Kazhagam, or DMK, government created the Arasu Cable Corporation, as a public-sector cable distributor, to counter the monopolistic Sumangali Cable Vision, owned by the family of a member of parliament then ranged against it. Over the years, Arasu began eating into Sumangali’s market share. When the All India Anna DravidaMunnetraKazhagam toppled the DMK in 2011, it used Arasu to impose its own hold over the cable business. In effect, the monopolistic hold over the state’s cable market by a private entity with political ownership, Sumangali, was replaced by that of a government entity, Arasu. Such market dynamics run against the spirit of the Supreme Court’s landmark 1995 judgment on deregulating television in India, which unequivocally warned that a “monopoly over broadcasting, whether by government or by anybody else, is inconsistent with the free speech right of the citizens.”

The current central government has made clear its opposition to public-sector companies entering the distribution game. The ministry of information and broadcasting has held back on granting Arasu a licence to continue its operations. This March, it also refused permission for the state governments of Punjab, West Bengal and Delhi to enter the broadcasting or distribution sectors. Yet the ministry has also done nothing to curb, monitor or bring transparency to the existing political ownership of cable distribution, as also to political ownership in the wider media industry. To date, it has not even accepted, rejected or modified TRAI’s 2014 recommendations on barring political involvement in broadcasting and distribution. Nor has it demonstrated any intent to create mechanisms to measure or monitor the political ownership of our media.

This essay builds on a blog post by the authors on the global media watchdog site Media Power Monitor. The authors thank Anushi Agrawal and Jai Karan Singh for research support.

Vibodh Parthasarathi is a widely published Indian academic in the field of media studies, and maintains a multidisciplinary interest in media policy, creative industries and critical pedagogy. He is a founding member of the Centre for Culture, Media and Governance at Jamia Millia Islamia.
Alam Srinivas has been in journalism for three decades, during which time he has worked with leading newspapers and magazines, and on numerous academic projects. He has written several books, including Storms in the Wind, on the Ambani family.