Brussels, 24th January 2007
State aid: Commission endorses subsidies for digital decoders in Italy, but only where technology-neutral
The European Commission has decided that subsidies for digital decoders granted by Italy in 2006 do not violate EC Treaty state aid rules (Article 87(1)) as they are offered for all decoders, regardless of the transmission platforms, are therefore technology-neutral and proportionate to the objective of promoting the transition to digital TV and to interoperability. However, the Commission has also decided that subsidies provided in 2004 and 2005 are incompatible under the state aid rules as they were not technology-neutral and created an undue distortion of competition by excluding satellite technology (see IP/05/1657). Finally, the Commission has decided that the broadcasters who have benefited the most from the subsidies should reimburse the state aid. The Commission therefore continues supporting the transition to digital broadcasting in line with its 2003 and 2005 Communications (see IP/03/1276 and IP/05/595) as long as the design of state support measures is compatible with state aid rules.
Competition Commissioner Neelie Kroes said: “These two decisions show once again that the Commission is committed to help the transition to digital TV and to interoperability. State support for these goals can be provided in line with the state aid rules. But the Commission is not ready to accept state support that creates unnecessary distortions of competition between transmission platforms”.
In 2004 and 2005, Italy paid out grants to consumers worth over €200 million in order to buy or rent digital decoders, without notifying the measure to the Commission. The subsidy was provided for interactive decoders capable of receiving programmes in digital terrestrial technology or the same programmes retransmitted via cable. In 2006 Italy notified a new measure which subsidised the purchase - by consumers in Sardinia and Valle d'Aosta - of interactive decoders with an open application programming interface (API).
Following complaints from terrestrial and satellite television operators, the Commission opened a formal state aid investigation into the 2004-2005 subsidies. At the same time, the Commission analysed the 2006 subsidies, on which it had also received complaints from satellite television operators.
After consulting market operators, the Commission concluded that both the 2004-2005 and the 2006 subsidies provide an indirect advantage to the incumbent terrestrial television broadcasters and to the cable operators insofar as they allow them to develop their digital audience, a crucial part of the business for a pay-TV or for a broadcaster wanting to develop pay-TV services. In line with the analysis of the subsidy for digital terrestrial TV in Berlin-Brandenburg (see IP/05/1394), the Commission recognised that state intervention can be beneficial in the process of switchover to digital technology and in facilitating the adoption of interactive decoders with an open API, providing it does not skew consumers’ choice towards a particular technological platform.
The Commission recognises that the switchover to digital television may be delayed if left entirely to market forces and that public intervention can be beneficial, through - for example - regulation, financial support to consumers, information campaigns or subsidies to overcome a specific market failure or to ensure social or regional cohesion. The onus is on Member States to demonstrate that aid is the most appropriate instrument, is limited to the minimum necessary and does not unduly distort competition. In the case of Berlin-Brandenburg the Commission gave specific indications of acceptable forms of public support for the digital switchover:
• financial compensation to broadcasters which are required to discontinue analogue transmission before the expiry of their licences, provided this takes account of granted digital transmission capacity.
These measures respect the principles of transparency, necessity, proportionality and technological neutrality.
The above guidance is intended to enhance legal certainty for possible public policy interventions in the forthcoming EU-wide transition to digital TV. Member States remain, of course, obliged to notify to the Commission all state aid measures before they put them into effect.