The Perils of Constantly Rethinking

Michael Hedges February 3, 2010 - Follow on Twitter

Financing public broadcasting has become enormously complicated. Chasing a 21st century business model for a big part of the media sector has government planers trying new ideas. Unintended consequences befall those who fail to think things through.

The French governments' new tax to support public broadcasting hit two new snags last week. Two years ago French President Nicolas Sarkozy unveiled a plan to consolidate France Télévisions and Radio France along with a new financing plan. There would be a tax on internet service providers (ISP), among others, that would replace advertising revenue. The plan attracted the admiring attention of the Spanish government, itself in the midst of public broadcasting reorganization.

Advertising on public broadcasting radio and television channels has been an acceptable revenue source, augmenting either license fees or direct State support. Most public broadcasters hold their collective noses and take the money. Advertising, they feel, is so ‘commercial’. But, often, the money is good and it comes with fewer political strings attached.

The French plan, followed by the Spanish plan, started pealing back the ads from public television last year. French ISPs began paying the 0.9% tax last March, screaming and howling all the way to the European Commission. Last Monday (January 25), a special rapporteur to the French Federal Council said it was time to put ads back on public TV  - "cancel the decision" - because costs of everything else in the reorganization plan put public broadcasting at risk. On Wednesday (January 27) President Sarkozy opened the World Economic Forum in Davos, Switzerland with a rousing speech about a new plan for financing everything.

Then Thursday (January 28) EC Info Society and Media Commissioner Viviane Reding, not in Davos, declared the French public broadcasting financing plan fatally flawed. The tax on ISPs, she said, is “an administrative burden incompatible with European law.”  Formal infringement proceedings are now underway and the choice for the French government is clear: change the law or visit the European Court of Justice.

Wary of the French plan to finance public broadcasting by taxing ISPs and broadcasters since it was signed into law, Commissioner Reding just doesn’t like the idea because “it also concerns a sector that is now one of the major drivers of economic growth. Moreover, there is a serious risk that it will be passed on to customers at a time when we are in fact trying to reduce their bills by cutting termination rates and the costs of mobile phone calls, data transfer and text message roaming.”

The French telecom operators association (Fédération française des télécommunications (FFT) urged its members to keep paying the tax as the law gives the government power to cut off licenses. “This is a first step,” said FFT general director Yves Le Mouël to lepoint.fr (January 29). Infringement case proceeding to the European Court of Justice can take as long as three years and, in the end, the French government might have to rebate the taxes collected, perhaps as much as €1 billion. French telecom operators recited to Commissioner Reding Commission Directive (March 7, 2002 Article 12) that prevents taxation from moving money from one business sector to another.  

And if taxing ISPs and broadcasters to finance French public broadcasting fails to meet legal muster there’s likely trouble for a similar plan in Spain.  So far the Spanish government isn’t budging publicly, saying only that the Spanish and French plans are “different models.”

"We have complete confidence that Brussels will agree with Spain and will do so before April,” said a presidential spokesperson to El Mundo (January 30). “We have no (other) plans just because the law is fully consistent with the Lisbon Treaty." In other words, El Mundo observed, there’s no plan B. 

The Spanish plan – modeled on the French plan – needs to kick in by April or more money from the General State Budget will by required for Spanish public broadcaster RTVE, which runs out of money in June. EC DG Competition opened an investigation into the Spanish plan in December and while some in the Spanish government, according to El Mundo, hoped to appeal their case directly to EC Competition Commissioner-designate Joaquín Almunia, who is Spanish, Brussels observers believe the Spanish plan will go the way of the French plan. The EC press release announcing (January 28) the infringement action against France, noted Cinco Dias (January 29), was translated into Spanish and distributed to Spanish media. 

Advertising on Spain’s public TV broadcaster RTV stopped January 1st. France Télévisions will be completely weaned off ad by the end of this year. For RTV it’s a loss of about €100 million a quarter. France public TV is losing €300 to €350 per year from lost ad revenue. Private, commercial television broadcasters in Spain have seen some of that revenue on their plates but French private channels generally have not.

All this gets back to the oft-maligned public broadcasting license fee, which is less complicated and seems to work fairly well. Whether it’s reinventing the wheel or carting favor for cronies, spare us from politicians getting creative.

See also...

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