Frequency Allocation- A Grand Corruption?
Understanding the State capture by Kleptocrats does not require a dedicated study; it is easily recognizable. For the benefit of keen students of governance, let me begin this article with the definition of Kleptocracy: “A form of political and government corruption where the government exists to increase the personal wealth and political power of its ruling class at the expense of the wider population”.
Kleptocracies are mostly associated with authoritarian or nepotistic regimes. In this article, I endeavor to examine some governance aspects of Sri Lankan style of frequency allocation with specific reference to TV rights.
Television licenses and the right to own television rights for sports are turning to be one of the most abused resources. Why? Firstly, an average person does not understand the mechanics or value of transactions and therefore it is often abused by those who control them. Secondly, secrecy of broadcasting is generally maintained at the highest level of the political elite. Thirdly, in a State where regulatory framework is subject to interference, no challenge is possible against abuses. Finally, unlike other properties, radio frequency is not tangible and any contracts arising out of them cannot be measured by an average person.
Corruption in frequency allocation is rampant in several parts of the world. Let me take one example to demonstrate the financial losses that can cause to a State in such cases. One of the all-time biggest acts of corruption relating to the allocation of frequencies was reported from India. Known as the 2G Scam it was about the allocation of frequencies to mobile service providers for second generation mobile phones where 122 licenses were granted to 8 companies. The estimated loss to the State was US$ 34.5 Billion! The Minister in charge of Telecommunication (A. Raja – DMK Tamil Nadu) was in the centre of the controversy. He and his secretary along with a group of executives of companies resorted to corrupt methods to secure frequency allocation licenses for the identified 8 companies. Among the methods used was to advance the cutoff date of applications for licenses from 1st October to 25th September 2007. There was no rule in India to publicly auction frequencies but the price at which the allocations were done was, however, set for the rates as at 2001, which was the initial (formative) age of telecommunication industry in India. To quote an example, it was revealed that Swan Telecom which secured some contracts for frequencies for US$ 306 Million sold 40% of its stake to Etisalat for US$839 Million within a few months. Exposure of these deals led to investigations by the Auditor General and many other probes. The Centre of Public Interest Litigation and Subramaniam Swamy moved Supreme Court of India, resulting in cancelling all the 122 illegally entered contracts. The Central Bureau of Investigation (CBI) has taken over the investigations and the Minister, his secretary and many other VVIPs including the daughter of Karunanidhi were arrested and are now facing prosecution. Not to mention, the CEOs of several companies are also being prosecuted for their corrupt conduct. Though corruption took place, they were virtually caught and are being prosecuted. Can it ever happen here?
I gave this example for the reader to figure out the financial stakes in any corruption involving airwaves, here or abroad. The 2G Scam also gives the reader an idea of the available opportunities for corruption in the allocation of frequencies. The matter does not end there. With the development of electronic media, Television Right to broadcast sporting events has become, probably, the most lucrative and expensive rights in many countries. National Football League games (NFL), for example, are the most lucrative rights of any American Sport – and no other game has ever fetched such huge bid amounts. It is no secret that the financial fortunes of many television networks in America have rested on securing the broadcasting rights of NFL games. According to available information, several networks (Fox, CBS and NBC) are paying a combined total of US$ 20.4 Billion to broadcast NFL games under the current contracts. NFL is the national football association, consisting of 32 teams in the USA. Though comparatively less in terms of revenue, most of the sporting events including Olympics fetch billions of dollars for the sports associations. For example, the 2011 Cricket World Cup television rights were given to well recognize TV networks, ESPN Star Sports and Star Cricket for US$ 2 Billion. Simple analysis of available material on the allocation of TV rights on games the world over will demonstrate that these rights are given at a highly completive price, to well established and credible television networks, and are subject to rigorous external scrutiny.
Regulating Frequency Through TRC
In almost all the countries with democratic and accountable traditions, there is an independent regulatory mechanism to decide on the allocation of frequencies. Mainly, the frequencies are used by radio stations, TV stations and mobile service providers. There are well established schemes and criteria in allocating frequencies and it is no secret that this is one of the trendy modes of revenue for the State. Since the allocation of frequencies can be abused, many countries have evolved transparent accountability models to prevent such abuses. However, these new methods of accountability have not completely replaced the well tested orthodox mechanisms such as the Auditor General’s investigations and judicial review.
Although the functions of a Regulatory Authority in electronic media can be analyzed from various angles I will confine myself to (i) the required level of independence and (ii) its relevance to civil liberties. It is well accepted in national and international law that airwaves/frequencies are public property and being limited they have to be used in the best interest of society. Following the rationale of leading cases of Secretary, Ministry of Information and Broadcasting v. Cricket Association of Bengal & Red Lion Broadcasting Co. vs. FCC, Sri Lankan Supreme Court, in the Broadcasting Authorities Bill determination, in the year 1997, summarized the legal position as follows:
“The body that allocates licenses must be independent of government. The ultimate guarantor that the limited airwaves/frequencies shall be utilized for the benefit of the public is the State. This does not mean that the regulation and control of airwaves/frequencies should be placed in the hands of a government in office for the time being. The airwaves/frequencies, as we have seen, are universally regarded as public property. In this area, a government is a trustee for the public …..”
To be realistic on the ground situation here today, I am reminded of the famous quote from Edmond Burke “Among a people generally corrupt, liberty cannot long exist.”
In Sri Lanka, there is no specific and independent broadcasting regulatory authority. Function of an independent regulator of frequency/airwaves is “handled” by the Telecommunication Regulatory Commission (TRC). TRC has been established under Act No. 25 of 1991 amended by Act No. 27 of 1997. It consists of the following members; all are either ex-officio members or appointees of the Minister:
(a) the Secretary to the Ministry, who shall be the Chairman of the Commission
(b) the person for the time being holding office as the Director-General; and
(c) three members appointed by the Minister from among persons who possess any recognized qualifications and have distinguished themselves in the field of law, finance and management respectively (hereinafter referred to as “appointed members”).
The TRC was also involved in direct political activities. The best known activity was the “free of charge New Year’s day SMS from presidential candidate – the President, its own Minister. We also know that, though lacked legal authority, on the instructions of the Media ministry, it blocked several websites, critical of the regime. Probably we do not know whether the regulator is engaged in business and for whose benefit. For example, there is not much of information available in the public domain on how billions of rupees (or more) has been justified to build the proposed Lotus Tower. Was there at least a frank discussion within the Board? Presently the TRC is assigned to the President and the Secretary to the President is the TRC Chairman. Another interesting feature is that the Director-General of the TRC, the paid CEO, is also a member of the Board, “who shall also preside over the meetings in the absence of the Chairman”. It is also no secret that for many years, when individuals are appointed to the boards of the public institutions, the selection is not made on merit. Therefore, the legislative requirement to appoint professionals or to appoint “fit and proper persons” is ignored by the appointing authorities. Are we complacent with the legal provisions on appointments and underlying rationale? The myth is exposed when we realize today that every profession has a set of mediocre henchmen to suit any appointing authority.
The TRC is the sole authority to manage radio frequency spectrum (section 10 of the Act). TRC issues frequency licenses to those who obtain TV or Radio licenses by the Media Ministry (which is by and large the propaganda arm of the state). There is no clarity or transparency in how these licenses are issued. In 1992, when the government permitted private television networks, Maharaja Television Network was launched in collaboration with Singapore Telecommunications Limited. Unfortunately, we do not have the data in the public domain to ascertain how each of the present TV and Radio networks received their respective licenses. Sri Lanka has 24 licensed TV networks and 12 channels received licenses after President Rajapakse assumed office on 19th November 2005. Among them is Carlton Sports Network (CSN), which commenced operations on 7th March 2011. For the purpose of this article let me only deal with CSN.
CSN – the Masterpiece of Frequency Grab and Eating into Public Revenue
It was reported in media recently that CSN has secured from Sri Lanka Cricket (SLC) the television rights for cricket for three years for a meager sum of Rs.125 Million. First of all there is no material in the public domain as to how CSN secured a television channel. According to its own website, operations of CSN have commenced on 7th March 2011, and this is the date on which CSN has submitted the application for registration as a company. The names of the directors are not on their website, except its CEO. One cannot justifiably challenge the right of any individual to form a private company of this nature but what happened beyond the registrations is a matter of public concern.
Let us briefly understand the operations of the CSN before dealing with the Television rights contracts for Sri Lanka Cricket. CSN is not merely a television network. It has wider objectives. Articles 3 of its Articles of Association sets out, inter alia, the following objectives:
- To carry out on the business of television network to telecast and broadcast pictures and sounds for entertainment, education, knowledge, news or any other television and radio programme
- To organize sports events, entertainment events etc, to form sports associations.
In a fascinating investigative article published in Sunday Leader, journalist Ranjith Jayasundara has traced the profile of CSN (www.thesundayleader.lk/2011/07/24/carlton-sports-network-and-somerset-entertainment). This is what Jayasundara says about the Board of Directors:
“S. K. Dissanayaka 7/2 Vaidya Road, Mount Lavinia, A. R. Fernando 29/3 Samudra Mawatha, Panadura, S. Karunajeewa 31/3 Horton Place, Colombo 7, R. Welivita 33 Hospital Road, Homagama. Mr Karunajeewa has rather a well connected father: Chairman, People’s Bank. Rohan Welivita is a Presidential Adviser on Electronic Media and the force behind a broadcasting licence issued in the name of Sri Lakvahini. Sri Lakvahini is currently in the market according to industry sources, looking for a suitable partner to commence operations. Rohan Welivita is married to Anoma Welivita, who is a PA to First Lady, Shiranthi Rajapaksa. Anoma Welivita’s father is the former MP for Kalawana, Lionel Gunasekera. Her brother Wasantha is a long-standing associate of Minister S. B. Dissanayaka.”
Of these directors, Dissanayaka was just 22 years and Fernando was 23 years of age at the time of incorporation of the company. Welivita however ceased to be a director on 6-3-2011, Dinesh Jayawardana of 24, Cambridge Place, Colombo 7 was appointed w.e.f. 1-3-2011.
Though the registered address was subsequently changed, Jayasundara in his article brings out the following interesting exposure on the initial registered address of the CSN:
“The house at 260/12 Torrington Avenue, Colombo 5 which is listed as the registered address of Carlton Sports Network (Pvt) Limited had an extremely famous occupant some years ago. In the run-up to the parliamentary elections in 2004, the house was used by none other than Mahinda Percy Rajapaksa – who went on to become the 13th Prime Minister of Sri Lanka and then in 2005 – the 6th President of Sri Lanka.”
This information coupled with the TRC structure is sufficient for us to come to a reasonable conclusion on how CSN had received the TV license and frequency licence. In all these deals, the beneficial owners are concealed!
Media further reported that the CSN was the sole bidder for the TV cricket rights of the Sri Lanka Cricket (SLC) for the next three years. The national sports body SLC is a statutorily created entity and a public institution belonging to the public, and not to the politicians and their families. Its revenue belongs to the public. Its Secretary is Nishantha Ranatunga, who is also the Chief Executive Officer of the CSN. When the bids are called, the SLC was expected to objectively evaluate and fetch the highest possible price; and if not they should have gone for fresh bids. In evaluating any bid of this nature, the evaluating committee has to consider at least (i) the past record of the bidders, (ii) performance of the bidders and (iii) financial viability and past audited accounts of bidders. To be transparent, the entire process should be devoid of possible conflicts of interest and insider dealings. Applying any reasonable standards, CSN, which has been formed just last year (2011), could not have been considered a competent suitable bidder. Apart from the suitability, the bid is also suspicious for many reasons. The amount is far less than one could ever imagine. There was an obvious conflict of interest of the CEO of CSN who is also the Secretary to the SLC.
Consider the advertising income in live cricket matches. For CSN this will undoubtedly be colossal. In addition to the private companies, there appears to be a competition among public institutions, such as the Insurance Corporation. This exploitation of public funds becomes effortless because the governing bodies consist of appointees with vested interests and political connections to the political masters. Thus I would estimate the advertising income alone of CSN to be over Rs.3000 Million during the contract period. How can the SLC therefore give the TV rights to CSN for just 125 million?
Why did the major state-owned TV stations such as Rupavahini and ITN not bid? Any reasons why MTV/Sirasa did not bid? Do the governing bodies of state-owned stations not have the courage to submit a bid, when CSN indicates its intention to secure the contract? Can private channels ignore the present day realities and face further challenges as a result of competing with CSN? Who is robbing whose money when everyone is silent? We have heard of patriotism again and again, but it is time that we remind ourselves of the words of Edward Griffin, a film producer, author, lecturer in politics; “To oppose corruption in government is the highest obligation of patriotism”.
Ailing Sports Law – a Contributory Factor
This article will not be complete unless we examine how the SLC operates within the legal framework. National sports and sporting bodies, including SLC and National Olympic Committee, are governed by Law No.25 of 1973. Like majority of laws introduced during 1970-77 period, the Minister is vested with “super power” over all sports associations. Minister of Sports has dictatorial powers viz: to appoint the Director of Sports & the National Sports Council, to serve as the appellant body, to make interim arrangements for sports bodies, to dissolve national sports bodies, to regulate and control participation in sports either in Sri Lanka or abroad of individual participants or teams representing Sri Lanka. In short, SLC is yet another public body which is under the thumb of the Minister. This means in effect the political arm has full control over any sport in Sri Lanka and cricket is just another victim.
Official website of the SLC asserts that it is “a major source of national income and has always been in the public eye and of interest”. It states further, among others, as follows:
“As Sri Lankans have a passion for cricket being its most popular sport with international recognition, Sri Lanka Cricket is on course with multifaceted objectives in ensuring overall development of the sport from grass root level to international level. Due to relentless efforts by Sri Lanka Cricket, Sri Lanka cricket has become one of our super brand names most known all over the world today. Sri Lanka Cricket has been vested with a scope of responsibilities as indicated below.
- Construction, development and maintenance of cricket grounds and stadiums
- Finalizing TV Telecast contracts..etc
- Allocation and handling of finances
- Media Handling in event of major developments
- Safeguarding of legal interests of Sri Lanka Cricket”
All these responsibilities are, however, subject to the inarticulate decisions of political masters. Just to make the point clear, the construction of Suriyaweva Stadium has resulted in colossal waste of public resources and no regulatory body could prevent it because the political masters wanted it; and others kept silent. Similarly, all evidence point to the fact that the contract being given to CSN for TV rights has a similar objective.
In my view meaningful answers to the questions raised in this article can only be found by introducing systemic changes in governance structure in the country, backed by transparency and constant public vigilance. It is now well recognized that Civil liberties are closely connected to governance and public finance. Regulatory framework of Sports bodies or regulatory institutions themselves does not operate in a vacuum; they too suffer from the mis-governance in a country. World over, the Kleptocrats first create a comfortable environment for themselves and therefore they do not often use violence to suppress liberties. I conclude this article inviting the readers to reflect on the words of James Madison, one of the great visionary politicians of all times:
“I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.”