Commission to public broadcasters: This is going to hurt

Michael Hedges November 6, 2008

For a decade the European Commission has stepped carefully. Little, if anything, must harm public broadcasting. Competition Commissioner Neelie Kroes has explained how the rules are going to be played. There will be a test. Answers will not be provided in advance.

Great pains were taken by DG Competition in the consultation document released this week on State aid and public broadcasting to insure certainty. Member States can operate public service broadcasting (PSB) organizations, fund them however they choose and make decisions on their content. ”Wide discretion,” Commissioner Kroes said. PSBs must be allowed, encouraged to adapt to new media platforms.

However, there will be a test and DG Competition will be monitoring. This isn’t, strictly, a new idea. Public value tests are used by DG Competition to monitor other “public service” functions funded by taxpayers. The idea is resonating – like a Chinese gong – with media regulators in Germany and the UK.

The European Commission (EC), DG Competition in particular, has shown great respect for the idea of self-regulation. EC President Barroso, hearing the Member States, has recognized sensitivity toward rules from Brussels. Commissioner Kroes, however, has investigated over twenty cases of abuse of State aid rules by public broadcasters. Case after case, the question has been what, exactly, is public service broadcasting.

The consultation document allows that “public service broadcasting, although having a clear economic relevance, is not comparable to a public service in any other economic sector.” The reason is its pervasiveness and power to influence. The Amsterdam Protocol annex to the EC Treaty says “the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism.” Those principles in hand, PSBs have – in several cases – conducted business as they like, competing hard, following their own rules.

But, Commissioner Kroes wants everybody to be healthy and happy; for broadcasters “to meet the challenges of the new media environment, allowing a high quality and modern public service, while at the same time maintaining a fair level playing field between the different actors.”

Maintaining that “fair level playing field” means, among other things, controlling State aid. The EU Treaty (Article 87(1)) states: “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market.”

The Commission considers advertising, program rights and media ownership as “intra-Community trade.” Thus, rules can be imposed. Many PSBs offer time on channels and space on websites to advertisers. Nearly all bid for program rights, particularly sports.

Member States cannot, says the consultation document, hide State aid to public broadcasters under the often used cultural exclusion, which ”may be applied in those cases where the cultural product is clearly identified or identifiable. Moreover, the Commission takes the view that the notion of culture must be applied to the content and nature of the product in question, and not to the medium or its distribution per se.”  PSBs cannot claim cultural, educational and social benefit simply because they are the PSB.

And therein lies Commissioner Kroes big test, not just for PSBs but for the Member States. The public service mandate must be clearly defined. They’ll be no more “we’ll know it when we see it.”

Not to confuse the Commission’s general unwillingness to interfere with Member States’ decisions about PSB funding, “the definition of the public service remit would, however, be in manifest error if it included activities that could not reasonably be considered to meet - in the wording of the Protocol - the ‘democratic, social and cultural needs of each society’.”  Advertising, teleshopping and e-commerce are not to be considered part of that public service remit. Hence, don’t try to convince Commissioner Kroes that a dating website or premium service call-in contest is public service.

The relationship between PSBs and new media is – realistically - unquestioned by the Commission. For public service broadcasters to comply with their mandate they must not be left to an analogue ghetto. But, equally, PSBs must not create for themselves a digital advantage over private sector media, broadcasters and publishers.

Commissioner Kroes accepts that PSBs need to look toward a ‘post-license fee’ time. Commercial activities – sales of programs, for example – are not simply acceptable, they could be desirable. Careful accounting, not all that difficult, keeps State aid away from commercial activities. The not so subtle warning: the Commission wants to look at the books.

Again, the Commission is arguing for more and independent oversight and, painfully, transparency. “Member States should consider the existence of similar or substitutable offers in the market, potential for commercial exploitation, market structure, market position of the public service broadcaster, level of private competition, potential crowding-out of private initiatives, potential effect on neighboring markets, potential effect on other Member State markets,” says the consultation document. “In the interest of transparency and of obtaining all relevant information necessary to arrive at a balanced decision, interested parties shall have the right to give their views on the envisaged new service prior to its authorization. The outcome of the assessment as well as the grounds for the decision shall be made publicly available.”

Member States would be cordially required to organize and maintain, with the Commission’s guidance, supervisory bodies independent of the PSB with teeth. No more buddy deals with friendly regulators or parliaments would be allowed. To wit: “The supervisory body shall have the necessary powers to impose appropriate remedies and proportionate sanctions in case anti-competitive behavior is demonstrated.”

Although nothing in the consultation document comes as a complete surprise, considering recent DG Competition rulings, the blunt tone – as well as the implications – drew quick wrath from public broadcasters.

"If this extremely detailed version of the Broadcasting Communication were adopted, it could seriously reduce the scope for Member States to grant public service broadcasters a significant role in the information society," said European Broadcasting Union General Director Jean Reveillon.

“ARD supports Member States in their resistance against the Broadcasting Communication with the intention creeping expansion of the rights of the Commission when it comes to defining, organizing, financing and monitoring of public service broadcasting in Europe,” said ARD Chairman Fritz Raff. “This is and remains a matter for individual Member States. That the Commission attempts to harmonize, de facto, public broadcasting regimes in the European Union, we will not tolerate.”

While the EBU’s position can be taken as that of most if not all public broadcasters it may also have resonance with regulators and national politicians. The Commission has proposed oversight over national telecom regulators, meeting the expected howling and screaming and finally pulling back under political pressure. Invoking ‘States rights’ is popular and, with public broadcasting in mind, it could be a successful argument. After all, politicians appreciate compliant State broadcasters.

The period of consultation continues until January 15th 2009. Commissioner Kroes appreciates your comments.