New Rules Welcomed By All, With Fingers Crossed Behind Them

Michael Hedges July 6, 2009 Follow on Twitter

The latest round of the pitched battle between private and public sector media rang to a close as the European Commission issued revised rules on State funding. It’s all in the spirit of reducing uncertainty. But uncertainty remains.

The Broadcasting Communication, as revised and revealed last week (July 2), sets a higher hurdle for public broadcasters’ entry into new media ventures. Before venturing forth into mobile and internet projects public broadcasters must show how State aid financing meets public service criteria. These “ex-ante tests” will determine if new media ventures by public broadcasters distort market competition and meet social and cultural needs.  Ex-ante is a legal term meaning before the event.

Private sector broadcasters joined by publishers have pleaded with the EC to keep public funds – and public broadcasting – out of potentially profit-making new media projects. Public broadcasters, noting the rise in new media usage, argue that to be effective in reaching both general and minority populations, new media access is essential.

The Commission issued a draft (November 2008) that startled public broadcasters with the suggestion that the Commission itself might take on the job of determining what, exactly, is and is not public service broadcasting.

DG Competition, headed by Commissioner Neelie Kroes, has brought twenty judgments on State aid and public broadcasting, the cumulative effect being the need to update the Broadcasting Communication, the 2001 policy statement meant to bring broader EC State aid rules in line with commitments to public broadcasting.  Commissioner Kroes and Info Society and Media Commissioner Viviane Reding proceeded jointly with the revision based on a need for new terms for new media.

"The new Communication strikes the right balance between the interests of public and private media to ensure healthy competition in the very rapidly evolving media environment, to the benefit of Europe's citizens,” said Commissioner Kroes in a statement. “Public broadcasters will be able to take advantage of the development of digital technology and Internet-based services to offer high quality services on all platforms, without unduly distorting competition at the expense of other media operators."

European Commission directives and rulings have shown, arguably, a bias favoring the former State broadcasters. The Amsterdam Protocol firmly established public broadcasting and directed Member States to fund the institutions adequately. Left ambiguous, to public broadcasters advantage, was any sort of definition of “public service” broadcasting beyond saying it is not like other public services but“ in the general economic interest.” 

Private sector broadcasters have accused their publicly funded adversaries of a variety of sins. The worst of those sins were being big, rich and politically enabled.  Public broadcasters successfully countered every charge by simply presenting large photos of Rupert Murdoch and other fearsome Americans. Democracy would be endangered without protection from the un-civil and anti-cultural.

Private sector broadcasters made little headway within the European Parliament or national legislatures. That changed when the gigantic European publishers got into the fray. They, too, wanted a few restraints on publicly funded broadcasters getting into potentially moneymaking ventures. As falling advertising revenues started to pinch private sector media the pictured ogres became less fearsome. However, a poll of EU 27 Member States showed two-thirds opposed to more Brussels intervention.

“The ongoing economic crisis puts into stark relief the ever greater need to provide rules for fair competition between commercial and publicly-funded players in the media business,” said European Publisher Council Executive Director Angela Mills Wade on the new documents’ release. “For the private media companies the introduction of ex-ante scrutiny for new ventures which can play havoc with our online and mobile services and the need for an independent control body are the most important milestones, which will help to prevent future distortion of competition in the market. To be truly effective though, and in line with the Amsterdam Protocol control bodies should be independent from the management of the public service broadcaster.”

As the new text was released (July 2) DG Competition launched a State aid infringement investigation of Danish television TV2, a State owned commercial channel that received a government bail-out.

The new Broadcasting Communication takes great pains to reassure public sector broadcasters that any definition of “public service” broadcasting and the ex-ante appraisal of public broadcasters new media services are up to the Member States. The Commission, and Commissioner Reding in particular, has been skeptical of national authorities’ ability to override incumbent factors and bring fiefdoms of political interest – i.e. telecoms and telecom regulators – to embrace common market principles.

"The adoption of this Communication will give additional legal certainty to the media sector in Europe and ensure a fair competition between public broadcasting and private media,” said Commissioner Reding in the joint statement. “One of the Commission's main objectives is to preserve a vibrant media landscape in the online environment, notably by ensuring that online offers of public broadcasters do not distort competition to the detriment of offers from online services and print media. The Communication… responds to this objective in a clear and efficient way."

When the new European Commission is formed and convenes this fall, Commissioner Reding is expected to take on more media competition issues.

The new document mentions, as an example of potential abuse of market dominance, the touchy area of advertising. Many public broadcasters augment tax levies or direct State funding with advertising revenue. The Commission has long taken the position that funding mechanisms for public broadcasters isn’t something they want to mess with. Private sector broadcasters have long suspected the potential for abuse of market position by public broadcasters who sell advertising space. The Commission has not investigated suspected cases of advertising price dumping but the mere mention in the text opens the possibility that the next round of State aid actions against public broadcasters might include advertising practices.

After a draft of the Broadcasting Communication was circulated last November and the end of a negotiated settlement between DG Competition and the German government over State aid and new services public broadcasters feared the Commission would do truly horrible things; write a definition for public service broadcasting and cut off State aid to their new media ventures. In the tortured agreement with the German government the State Treaty on Broadcasting was revised to include a “three-step” process for determining the legality of new media services for German public broadcasting. The die was cast for some sort of ex-ante evaluation of public broadcasting projects in new media. The only question remaining on that issue is the degree to which the authority evaluating such projects is truly independent of the public broadcaster. The Commission insists that public consultations be part of the ex-ante tests.

The Commission, consistent with other positions on public broadcasting funding, allows in the Broadcasting Communication that public broadcaster may engage in pay-for-services. Proportionality and transparency considerations will apply, but the door is opened further for public broadcasters to monitize expensive content production. At the same time, the new text questions sponsorship deals, merchandising and tele-shopping.

But compromise is the nature of the European Commission, particularly as the current Commission draw to a close. From the private sector media side, political winds away from Brussels and toward the Member States mean a new vector in lobbying.

“After strong resistance against the text in particular from national cultural ministries, we congratulate the Commission for having come up with a balanced and workable text,” said Association of Commercial Television Europe (ACT) Director General Ross Biggam. “It would have been helpful if further details had been maintained, but we understand that in line with the Brussels policy-making process a compromise had to be found. However, the real work will now begin with the implementation of the new obligations contained in this text by the Member States.”

Responding to the new text, public broadcasters continued to play their strong cards: culture and national autonomy.

“We have stressed throughout the consultations that the regulation of public service media is predominantly a  national matter,” said European Broadcasting Union (EBU) President Jean-Paul Philippot, “to reflect the diverse social, cultural and democratic features of the various Member States. It would have been preferable to leave the choice of the mechanism to Member States. In this respect the EBU regrets the introduction of a single mechanism for the assessment of new services.”

“We hope that the Commission will leave Member States enough flexibility when they introduce ex ante mechanisms in their country,” he continued. “The EBU also calls on Member States to adapt such a mechanism to their national specificities.”

Media mogul and Viacom Chairman Sumner Redstone once said something to the effect of “you know a good deal when both sides think the other guy got screwed.” Throwing the ball for oversight to the Member States, the Commission has left uncertainty to the most uncertain. If the raging debate in Germany over changing the State Treaty on Broadcasting is any indication, national legislatures will find themselves embroiled in painful battles with the people who write the headlines.