The Indian Economy Blog

August 13, 2007

The Merits Of State-Provided Cable Television

Filed under: Miscellaneous,Politics — Nitin @ 2:26 pm

The DMK came to power in Tamil Nadu state promising a free colour television for every household, regardless of income or the number of television sets already owned. And now it is setting up a company to provide cable television. Bad? Not quite. As Badri Sheshadri writes, it is probably the only way to inject competition into a market that has been cornered by SCV—a company that those free televisions were originally meant to benefit, and now out of favour with the ruling faction of the ruling family.

Now, Karunanidhi could not attempt to do the same that Jayalalitha tried. So he decided to launch a Government controlled cable television distribution network. This is fairly legal and no one can protest against this move. All licensing conditions will be quickly worked out, as DMK controls the corresponding ministry at the centre. Given that Kalainjar TV is to be launched in September, the distribution company will be launched well before. The Tamil Nadu Cabinet approved the move yesterday (11th August 2007).

Is this move good for the people of the state?

The answer is yes. Though the entire move is driven by political compulsions, it is bound to do good for the people in the medium term. In the long term though, the company floated by the government will lose money, will be corrupt to the core and will eventually be shutdown. But yet, this is required now…

In the end, the government service will fail, but would have paved the road for three to four new players who will be fighting in a level playing field.[Nothing Frivolous. Only Serious]

Badri has a point: citizens of Tamil Nadu may have to take this tortuous path before they see a competitive cable television market. But there’s a catch. It’s likely that the money-losing government-owned cable company won’t be allowed to close down. Instead it could well become an vehicle to dispense patronage. Governments might be tempted to either rob private companies or levy additional taxes or both.


  1. In 1994, the govt could have permitted DTH ; all this mess with
    monopoly operators, cable cutting goonda wars, extrotion,etc would not have arisen, as the consumers would have adjusted to DTH ; and market
    depth and width growing correspondingly…

    Comment by K.R.Athiyaman — August 13, 2007 @ 3:49 pm

  2. Athiyaman,

    And which of the UPA’s coalition partners has been sitting—as if it’s a political fiefdom—at the ministry that oversees DTH policy?

    Comment by Nitin — August 13, 2007 @ 4:22 pm

  3. such minsitries become fiefdoms, indeed. the entire ministry could be abloished and a joint secratary of fin.mins can oversee the auctioning of the spectrum in batches ; same with telecom licensing.
    let the market determine the rates..

    but the politicians and bureacrats will not let go their power and
    ‘rents’ they can seek…

    Comment by K.R.Athiyaman — August 13, 2007 @ 6:01 pm

  4. Is it not possible to break a monopoly’s stranglehold purely through regulation and monitoring? Should the government directly enter every business where there is a threat of monopoly? If there’s profit to be made in cable services, and there’s no (legal or illegal) barriers to entry, other players – big and small – are bound to try their hand at it.

    Of course tendency to over-regulate is another Indian bureaucratic menace by itself. See CAS pricing for instance.

    Comment by Krishna — August 14, 2007 @ 8:28 am

  5. Krishna,

    It is not a good idea for the government to enter every field to break the monopoly. That is not the aim of the Tamil Nadu government either. I am merely speculating that the government move will have the effect of breaking the monopoly in this area.

    The speed at which things are moving is amazing. The cabinet approved the setting up of a company last week. Now a government order has been passed yesterday for setting up the company. Before the end of this week, the company will be formed, capitalised, CEO hired by next week, employees hired immediately, and mostly the Electricity Board will be contracted to lay the cable.

    Much of Chennai could be connected by cables (of this Govt. corporation) in two to three months time. The DMK controlled Chennai corporation will issue all the licenses for digging the roads in no time.

    Not even the biggest of the corporations can move this fast. And in any case, they will not get their approvals and licenses this fast either.

    Comment by Badri Seshadri — August 14, 2007 @ 8:54 am

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