Another shot across the bow of public broadcasting as the EC opens inquiry

Michael Hedges January 14, 2008

Competition Commissioner Neelie Kroes wants to ask some questions. A day after French President Nicolas Sarkozy announced his intention to radically change the way French public broadcasting is funded, the European Commission fires its own shot over that bow.

DG Competition Commissioner Neelie Kroes formally opened a consultation for Member States and stakeholders on the future framework that “will apply to State funding of public service broadcasting.” In short, Mrs. Kroes is looking toward the post-license fee era. The consultation also asks for more concrete definitions of public service broadcasting. Comments should be submitted by March 10th.

Dating back nearly two decades, several EC rules establish, but not govern, the dual public-private broadcasting system. Individual Member States have been fairly well left to their own creativity in organizing financial and legal if not practical frameworks. Market-liberal attempts to scuttle or maim public radio and television systems have always failed.

But the European Commission is obsessed with deriving economic strength from the single market. Success in that endeavor is manifest in the once maligned euro continuing its march toward being the currency of choice for trade. For the single European market to continue its rise, some believe, crusty old national rules, like cartels, must fall by the wayside. Any goods and services that can cross borders must cross those borders equally.

Viewed in total, EC rules on broadcasting enshrine the concept of public service broadcasting and that of a dual public-private broadcasting system. Other EC rules, notably the State Aid Act, enshrine the concept of limiting direct financial support of State institutions that compete with private companies. The Television Without Frontiers Directive, first drafted in the 1980’s and now replaced by the Audiovisual Services Directive, instructed Member States on the value of television signals flying across borders. The Amsterdam Protocol gave further direction on establishing and preserving public broadcasting. The Broadcasting Communication (2001) set guidelines for State Aid to public broadcasters. It’s a quandary.

Commissioner Kroes, in last weeks’ statement (Thursday January 10), said current rules on public broadcasting can “be improved to increase transparency and legal certainty, also as regards the way public service broadcasters fulfill their mission in the new media environment.”

To date, Member States have had broad discretion in defining public service broadcasting and determining how it is financed. The Commission, particularly since the entry of the new Ten-Plus-Two, has come to view ‘discretion’ of Member States as an open invitation to abuse of the single market principle. After ignoring competition issues raised during the Berlusconi reign, the Commission is seriously looking at the murky relationships between the Italian State, the public broadcaster and the nations’ largest broadcaster, Mediaset.

DG Competition under Mrs. Kroes has earned a reputation for toughness, as Microsoft’s Steve Balmer will attest. It has also set the international standard for anti-trust rule making.  Any lawyer worth their salt knows the answer to any question before asking. (note: Mrs. Kroes is an economist, not a lawyer)

What does all this mean to the rest of the world? Nothing, one would presume, to the Americans, the Burmese or the Iranians. The Americans barely attended last October’s ITU diplomatic conference on spectrum allocations saying they’d ignore it anyway.

The reality is that Europe has become the standard bearer for regulation; competition, certainly, but also regulation that defines public services, public spaces and, obviously, public media. Non-Europeans, Americans and Burmese excepted, look toward legal standards and practices arduously negotiated in Brussels (and, to a less obvious extent, Geneva) as the necessary threshold for commercial transactions. Microsoft, Intel and Apple learned to pay to play.

The Commissioners, notably Mrs. Kroes at DG Competition and Mrs. Viviane Reding at DG Info, view the European Union as this beautiful thing in which some Members and institutions need an occasional Facebook ‘pinch’ to get with the program. Opening a consultation on public broadcasting and State aid, Mrs. Kroes is telling the inertia-bound that things change. New media of the on-line and mobile variety were hardly in play and barely noticed when the Broadcasting Communication was first drafted in the late 1990’s.

Both Mrs. Kroes and Mrs. Reding stand together on one particular – and very European – guiding principle. Markets work best in the legal certainty of strong, if limited, rule making. Predatory practices, be they from the private or the public sectors, will not be tolerated.

DG Competition’s consultation on the Broadcasting Communication may or may not lead to revision of current rules. We’ll know late in the year or early in 2009. For the next few weeks, certainly, lobbyists and the legal experts will be scrambling to make their arguments knowing very well what Mrs. Kroes already knows.