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Neelie Kroes

European Commissioner for Competition Policy

State aid for broadcasting

Cologne, 9th June 2008

Ladies and Gentlemen,

It is a pleasure to be here in Köln today – I do apologise 'upfront' that I cannot stay and participate in the wider conference – but I did wish to make a special effort to be here so hopefully we can make the most of my short time here.

Contrary to certain press reports, I have not come here today to present the Commission's views on individual state aid cases. This goes in particular for the ongoing implementation of the Commission's 2007 decision regarding Germany's public broadcasting system. Currently the ball is in Germany's camp and we cannot comment on any rumours. I will also not address the discussion on the public sale of broadcasting licenses.

Rather, I am here to update you on a matter relevant to the entire media industry in Europe: the Commission's review of the 2001 Broadcasting Communication.

This is a very important and delicate subject. There are indeed few sectors of the economy having an equivalent importance for society such as the media.

Media is more than a multi-billion euro business. It is also at the heart of democracy and cultural diversity.

In this environment, the Commission contributes to the Member State's media policies in several manners.

Firstly we enforce EC Treaty provisions on competition with the aim of ensuring markets work better to the benefit of the final consumer.

Secondly, on antitrust, our policy aims at fostering competition for the sale of media rights. The Commission's decisions of January 2005 on the German Bundesliga and of March 2006 on the English Premier League provide a good example in this respect. The outcome from these cases is that sports fans have more choice about how to view games, and the clubs get greater exposure.

The other key strand of Commission policy is State Aid. Here, our contribution is to ensure that well targeted state aid helps achieving public goals without distorting competition to an extent contrary to the common interest.

In this regard, it should be underlined that, while there are strict rules for the targeting and granting of aid, the system still retains a great amount of flexibility.

The Commission does not interfere in programming decisions, for instance. It is for the Member States alone to reasonably decide how to serve the social, democratic and cultural needs of their society.

Member States also have complete discretion over financing mechanisms for their public service broadcasters.

In essence, there are three tests each state aid to a public broadcaster must pass:

  1. First, have the Member States clearly defined the public services which a public broadcaster must perform in order to receive aid (definition)?
  2. Second, are the public service broadcasters officially entrusted by the state to provide these services, and is their delivery verified? (entrustment and control)?
  3. Third, do Member States ensure the aid does not affect the development of cross-border trade to an extent that would be contrary to the interests of the Community (proportionality test)?

This policy is well anchored in the Commission's Broadcasting Communication of 2001 – now the foundation of the Commission's state aid control of public service broadcasters.

But seven years after the adoption of this Communication, European media markets have changed dramatically. Some would call it evolution, others revolution. What is certain is that the changes will not be reversed and that we have to adapt to this new environment.

Technological advances, particularly digitalisation, are driving convergence. Changing consumption patterns have meant new and modified business models for public and commercial broadcasters alike. And new services have emerged across all media platforms – most obviously the internet.

Already in 2005 the Commission's State Aid Action Plan set out that there is a need to critically review our existing state aid instruments. This has lead to an overhaul of several Communications such as the new Guidelines on Risk Capital, the new Framework on Aid to Research, Development & Innovation as well as our new Environmental Guidelines.

The next step in adapting has been the public consultation on the review of the Broadcasting Communication launched by my services in January and February of this year.

I am pleased to tell you that more than 120 entities made contributions. They ranged from independent producers through to the biggest broadcasters and publishers, and 16 Member States.

I should like to thank everyone who replied.

I can announce that today we will publish on the Commission's website the non confidential replies to the consultation as well as a short summary.

Let me now give you a flavour of the consultation outcome:

The 2001 Communication was commended for serving its purpose and providing a useful framework so far. Recognition of the work done so far is all the more important as we faced considerable criticism at the time in adopting the Communication.

Member States have different views about the need to review the Communication. Many Member States oppose a reform because they think the 2001 Broadcasting Communication has worked well. Yet a significant number believe that the right reform would enhance legal certainty for the benefit of all stakeholders.

I have to say that virtually all public broadcasters are opposed to any change to the existing framework. I would be lying to you if I said I found this surprising.....

In that respect, one have also take into account the reality that newspapers and all kinds of media companies have now joined commercial broadcasters in complaining about their unrestrained use of public money on platforms like the Internet. They allege that private initiatives on the internet are "crowded out" and that competition is distorted.

We have already adopted 23 decisions in this sector alone and more cases are pending.

One reason for the heavy contestation of this issue is that the existing rules provide limited guidance on when state aid may be used to fund new media services that are not "programmes" in the traditional sense.

We had to provide clarifications on a case by case approach, which leaves many questions open.

But it certainly isn't obvious to the naked eye or the taxpayer why public broadcasters should be using state money to run on-line video games, dating clubs and calculators amongst other offerings. There is no shortage of these services in the private sector – which must all survive without subsidy.

So the process of adapting the current rules to the prevailing market environment will be interesting indeed.

My services will assess in the coming months the potential areas of improvement for the Broadcasting Communication.

What are the areas for improvement? Clearly, we would be putting the cart before the horse, so to say, to reach conclusions on that now. But let me share with you some of the public feedback so you understand our reference points.

The first key issue is: what is the definition of the public service mission of public broadcasters? The mission must be specified or endless uncertainty will be the result. But everybody agrees that the definition of the public service remit is in principle a matter for the Member States to decide, and not the Commission.

Public service broadcasters enthusiastically expressed their wish to serve the needs of younger generations by expanding new media platforms. Print media, to the contrary, fear that his process will eventually lead to an "electronic press" on the internet which is financed by the state.

The Commission's role will be to find the right balance.

However, Member States should take responsibility and provide a sufficiently clear public service mission that can cope with the realities of the new media environment. In the public consultation it has been argued that this duty could be better enshrined in a revised Broadcasting Communication.

As is in particular apparent from our most recent practice in the German, Belgian and Irish cases, a proper entrustment with new media services must also give full value to the Amsterdam Protocol.

This raises the question whether the entrustment should be preceded by a transparent and open assessment both of the public value of a new audiovisual service, as well as of its market impact.

We will further evaluate the merits of consolidating our recent case practice. Based on the results of our public consultation, we are fully aware that any such consolidation should be "future-proof".

Another important issue in the consultation was the consistency of the Broadcasting Communication with the general framework for services of general economic interest. As you know, the 2005 Framework was adopted four years after the Broadcasting Communication and reflects the Court's Altmark jurisprudence.

We therefore asked in our consultation the following question:

"Should public service broadcasters remain subject to different requirements of transparency and proportionality as those applying for utilities such as electricity companies and public transport companies?"

Public service broadcasters tend to agree with the difference of requirements; while commercial broadcasters and other market players generally support alignment.

It has been argued that there is merit in further reviewing the consistency of the "Altmark" package and the Broadcasting Communication. In practice, the Commission has already started to align certain elements in the broadcasting sector to the SGEI Framework and we must carefully consider the next step.

For instance, under the SGEI Framework utilities may build up reserves of up to 10% of the annual compensation. But at the same time they are also subject to strict transparency safeguards which public broadcasters currently do not need to fulfil (e.g. the need to determine in advance the parameters of compensation; stricter rules on cost allocation etc.).

We therefore may have to assess whether our case by case approach strikes an adequate regulatory balance.

Finally, we will have to see whether the current guidance in the Commission's Broadcasting Communication on the effectiveness of control mechanisms is still sufficient.

While the Broadcasting Communication provides some guidance on the control of the remit, there is little information on the control of proportionality and overcompensation.

Many private broadcasters and other stakeholders made specific efforts to point out this lack of legal certainty.

They would like better and more effective control mechanisms especially when public financing for broadcasting services expands into new media activities.

In conclusion, I would say to you that we still have a long way to go in the review of the Broadcasting Communication.

The publication of the consultation results is an important step in this journey, but it is just one step. We are continuing working to examine whether an adaptation of the Broadcasting Communication would be appropriate.

In any event, I don't think anyone should expect a revolution here - we do take the Amsterdam Protocol seriously and will leave broad discretion to the Member States in defining the public mission of their broadcasters.

But it should also be kept in mind that the Amsterdam Protocol cuts both ways and often stakeholders appear to omit one aspect. The Protocol not only affirms the discretion of Member States to determine the public service mission of a broadcaster. It also requires a certain measure of restraint from each Member State. Distortions of competition that go against the common interest of the Community are not allowed.

But as we continue our work, I hope we will all be working together in a spirit of cooperation – that is what I offer for my part, and I look forward to your additional views.

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