Questionnaire - Revision of the Communication from the Commission on the application of State aid rules to public service broadcasting

• 1.
• GENERAL

1.1. A number of significant legal developments have taken place in the public broadcasting area since 2001, namely the adoption of the Audiovisual Media Services Directive, the adoption of the Decision and Framework on compensation payments as well as Commission decision-making practice. Do you think that the Broadcasting Communication should be up-dated in light of these developments? Alternatively, do you consider that these developments do not justify the adoption of a new text?

There is no need for revision or change of the Communication at the moment. The Communication on the application of State aid rules to public service broadcasting (OJ 2001/C 320/4) lays down flexible principles which have made it possible to resolve a number of cases by taking due account of the specificity of the public service broadcasting sector. The Audiovisual Media Services Directive (OJ 2007/C 332/27) takes into account the emergence of new media and recalls the importance of the coexistence of public and private providers of audiovisual media services and the firm need for the public service broadcasting remit to continue to benefit from technological progress (Recital 9).

Public service broadcasters consider that there is no particular pressing need to revise the current Communication. Any updating which may take place needs to ensure stability for public service broadcasters while maintaining the flexibility of the current system, a system which makes it possible to offer legal solutions to organizations of various sizes and operating on various markets which have a remit to offer public service output responding to the needs and choices of their respective societies.

1.2. How would you describe the current competitive situation of the various players in the audiovisual media sector? Where available, please provide the relevant data on for instance leading players, market shares, market share evolution in the broadcasting/advertising/other relevant markets.

For public service broadcasters with mixed funding, advertising revenue represents generally on average 14% of their total budget. They have about 20% of the advertising market. This low average figure is explained in part by legal provisions which restrict their activities on that market. Moreover, public funding does not influence the revenue of private operators.

The share of the viewers of the Czech public television on the television market compared to private broadcasters is about 30 %. The share of financing the public television represents in the latest years on average 20 % income from the advertising and others commercial activities, the rest from the television fees paid by the viewers. The market share (in terms of audience) of radio public channels in the Czech Republic represents 21,3 %. For Czech public radio with mixed funding, advertising and sponsorship revenues represent on average 6,6 % of its total budget. Czech Radio is diversifying its activities in specific ways. For example, the multimedia the

Revealed project :

Czech radio is the author of the special, non profit multimedia project which was running on public TV and Radio since 7th November 2005 until the 15th January 2006 as a “Slightly different reality show”, where the contestants were not human beings but gorillas.

The actors were endangered animal species, lowland gorillas. Observing them in the nature would be preferable, but technically unbearable, therefore the gorillas were observed in a new and modern pavilion of Prague Zoo, in the same way people are in human reality-shows. Sixteen TV cameras were placed around the pavilion and the multimedia broadcast started.

The main goal of the project is to contribute to protect lowland gorillas in wild nature.

"The Revealed" was realised on Czech radio webside (www.rozhlas.cz/revealed), on public Czech radio and television. The project raised considerable attention both in the Czech Republic and abroad.

1.3. In your view, what are the likely developments and where do you see the major challenges for the sector in the future? Do you consider that the current rules will remain valid in the light of the developments or do you believe that adaptations will be necessary?

As European countries approach the mandated analogue switch-off date of 2015, the proliferation of new-entrant channels and the fragmentation of audiences will accelerate, and especially in those markets with a high reliance on free-to-air television. Online consumption of professional audiovisual output will expand dramatically, driven by aggregators like Google and iTunes, and to an increasing degree traditional media companies. The rise of peerto-peer networks will accelerate the trend. Advertisers will move more and more of their budgets online. Online advertising is expected to exceed radio advertising expenditure in 2008 in major global markets. High-definition broadcast channels will increasingly become prevalent. PVR (personal video recorder) penetration will significantly expand and become the principal means of time-shifted, non-linear viewing.

New technology has resulted in a great increase in the means of distribution, as well as the content available on the market, and especially content generated by users. In the face of this evolution, users' habits have changed; there is a trend away from traditional broadcasting, which was conveyed towards users (pushed services) to online services which are requested by users themselves (pulled services). Today users have access to news and other information and entertainment through such non-traditional means as cable and satellite distribution, the Internet, digital transmissions and mobile telephones. These new means of distribution have segregated demand on the part of users. There is increased use of new technology by young people, which has resulted in an erosion of the audience of public broadcasters for that category of viewers. The audience of public service broadcasters is becoming older year by year.

Consequently, one of the major challenges for public service broadcasters is to maintain, or be more attractive to, the young audience. The strategy for broadcasters involves diversifying their programmes and improving their presence with regard to new forms of distribution. They are striving for online presence so that their output reaches a wider section of the population. Given rapid technological developments, a need for flexible rules exists. Moreover, there is less risk of market distortion as a result of a decrease in the market power of public service broadcasters.

• 2.
• COMPATIBILITY ASSESSMENT UNDER ARTICLE 86 (2) EC TREATY, IN

COMBINATION WITH THE BROADCASTING COMMUNICATION

2.1. Coherence with the Commission Decision and Framework on public service compensation¹

2.1.1. Do you consider that (at least some of) the requirements laid down in the Decision and Framework on public service compensation should be included in the revised Broadcasting Communication or not? Please explain why.

The Amsterdam Protocol stressed the particular nature of public service broadcasting, as well as its important role in ensuring democracy, pluralism, social cohesion and cultural and linguistic diversity, which are principles also reaffirmed in the Resolution of the Council and of Government representatives of 25 January 1999. Moreover, the very nature of the economic activity, as well as the manner in which broadcasting organizations are structured, requires different treatment.

Public service broadcasters constitute services of general economic interest within the meaning of Community Law. The application of competition rules should not make it difficult for this mission to be accomplished; nor should such organizations be treated less favourably than other organizations offering services of general economic interest. Consequently, the obligations laid down in the framework can be included if they take into account the specificity of public service broadcasting.

2.1.2. In the affirmative, please specify which requirements should be included and explain what adaptations, if any, would be appropriate for the broadcasting sector (see also the questions below, in particular those on overcompensation; point 2.6).

The Czech Republic does not hold the position for the updating of the Communication. However, in the case of its revision the suggestions for the updating could be the following.

Firstly, the provisions regarding the amount of the compensation could be included in the Communication on public service broadcasting, and this concerns in particular the rule that public service broadcasters must not exceed the costs borne by the undertaking in executing public service obligations, taking into account the relative revenue, including a reasonable profit.

Secondly, the rules for calculating costs are likely also to apply to public service broadcasters' activities. The present Broadcasting Communication takes due account of the specific characteristics of public service broadcasters. It acknowledges, for example, that costs which are entirely attributable to public service activities, while also benefiting commercial activities, need not be apportioned between these two kinds of activity and may be entirely allocated to public service (paragraph 56 of the Communication). Consequently, this rule should remain unchanged.

As regards the Framework requirement on separate accounting for each general interest service of a different kind (paragraph 19), it should be stressed that public service broadcasters normally have a unique public mission. Setting out the remit entrusted to public service broadcasters is usually undertaken by a single authority, whether central or regional, and the mission covers only broadcasting services or services of the same kind. Consequently, such a separation of accounts would not be justified with regard to public service broadcasters. Similarly, the 10% rule regarding the constitution of reserves is inappropriate for public service broadcasters.

2.2. Definition of the public service remit 2.2.1. You are invited to provide information on the definition of the public service remit in your country, in particular as regards new media activities.

The Act No. 483/1991 Coll. on the Czech Television provides the following.

Article 2

(1) Czech Television shall provide a service to the public by creating and distributing television channels or other multimedia content and accessory services on the whole territory of the Czech Republic (hereinafter referred to as "public service remit in the field of television broadcasting").

(2) The main public service tasks in the field of television broadcasting include in particular: a) providing objective, verified and diverse information, balanced as a whole, to enable free formation of opinion;

b) fostering general legal awareness among the population of the Czech Republic; c) creating and distributing television channels and providing a balanced offer of programmes that is targeted at all groups of the population and takes into account their freedom of religious faith and conviction as well as culture, ethnic or national origin, national identity, social background, age and sex, to ensure that the aforementioned channels and programmes reflect diversity of opinion as well as of political, religious, philosophical and artistic trends, and thus enhance mutual understanding and tolerance and foster the cohesion of a pluralistic society; d) developing the cultural identity of people living in the Czech Republic, including the members of national or ethnic minorities;

e) producing and broadcasting programmes, especially news, current affairs, documentaries, art programmes, drama, sports, entertainment and educational programmes as well as programmes for children and youth.

The Act No. 484/1991 Coll. on the Czech Radio provides:
§ 2

(1) The Czech Radio shall provide a public service through creation and transmission of radio programmes, or through other multi-media broadcasting and additional services in the whole territory of the Czech Republic and abroad (hereinafter referred to as the “Public service in the field of radio broadcasting”).

(2) The mains tasks of the Public service in the field of radio broadcasting shall include in particular: a) provision of objective, verified, generally balanced and comprehensive information for free creation of opinions,

b) contribution to legal knowledge of the population in the Czech Republic, c) creation and transmission of broadcasting and provision of a balanced offer of programmes for all population groups with regard to the freedom of their religious belief and conviction, culture, ethnic or national origin, national identity, social origin, age or sex so that the broadcasting and programmes reflect the variety of opinions and political, religious, philosophical and artistic styles, namely with the aim to strengthen the mutual understanding and tolerance and to promote cohesion of the pluralist society,

d) development of cultural identity of the population of the Czech Republic including members of national or ethnic minorities,

e) production and broadcasting of news, publicistic, documentary, artistic, dramatic, sport, entertaining and educational programmes and programmes for children and young people above all.

§ 3
(1) The Czech Radio fulfils the Public service in the field of radio broadcasting above all by the following:

a) it operates analogue radio broadcasting with use of a part of the frequency spectrum enabling to cover the territory of the Czech Republic with three nationwide radio programmes in FM and with radio programmes of regional studios broadcasted in FM, namely through terrestrial broadcasting radio devices or through other technical devices; the Czech Radio may also broadcast in AM,

b) it operates the terrestrial digital radio broadcasting through transmission of 3 nationwide radio programmes specified in point a), through the public service multiplex; 1a) in addition to these radio programmes the Czech Radio is entitled to transmit other radio programmes, other multi-media content and additional services through the public service multiplex; the Czech Radio may also transmit radio programmes, other multi-media content and additional services digitally through satellites and cable networks,

c) it operates the terrestrial digital radio broadcasting so that it ensures fulfilment of tasks of the Public service in the field of radio broadcasting, which corresponds to the level of development of broadcasting technologies and services. At the same time it makes use of the part of the frequency spectrum enabling to cover the Czech Republic territory with radio programmes and other content in the band reserved according to the national frequency table for terrestrial digital radio broadcasting, namely above all in the third television band,

d) it creates the network of its own reporters, e) it creates archive funds, maintains them and participates in their use as a part of the national cultural wealth,

f) it broadcasts works from domestic and foreign production, g) it provides a twenty-four-hour programme service at least within one programme broadcasting, including current news reports,

h) it is active in development of new broadcasting technologies and services.
(2) The Czech Radio operates the radio broadcasting for foreign countries on one radio programme in the short wave band through radio broadcasting devices on land or through other technical devices. Broadcasting for foreign countries shall comply with the conditions of § 2 (2) (a) and (c) and shall assist in promoting the good position of the Czech Republic.

(3) The state authority that administers the frequency spectrum according to a special legal regulation, 1b) shall reserve frequencies for the Czech Radio, after the prior consent granted by the Council for Radio and TV Broadcasting, enabling the operation of the analogue radio broadcasting in the scope stipulated in paragraph 1 (a) and in paragraph 2. The frequencies in AM shall only be reserved if the Czech Radio requests so.

(4) For the purposes of this Act, the nationwide radio programme shall mean a radio programme the broadcasting of which may be received at least by 95 % of the Czech Republic population counted according to the data resulting from the last census. 1c)

2.2.2. Do you consider that the distinction between public service and other activities should be further clarified? In the affirmative, which measures could provide such clarification (e.g. establishment by the Member State of an illustrative list of commercial activities not covered by the public service remit?)?

Laws or regulations which set out the mission of a broadcasting organization can thus adopt a broad definition of the public service remit, and particularly since these acts must respect the organization's editorial independence. In accordance with the different national legal traditions, it is for each Member State to define the general and specific objectives, as well as the means available to public service broadcasting organizations to carry out their mission. Czech TV and Radio have considerable latitude for defining the scope of the public service broadcasting remit.

The creation of a positive indicative list increases legal security for the points listed but may have hardly any general impact, given the increased pace of technological evolution and innovation.

Member States are free to adopt a negative list, corresponding to the commercial activities. This list can be updated if the Commission or the Courts consider that a particular type of service is not covered by the public service remit in accordance with the concept of manifest error. Such a list would include purely commercial activities, such as advertising, sponsorship, merchandising and e-shopping.

2.2.3. In the current Broadcasting Communication, activities other than TV programmes in the traditional sense can be part of the public service remit provided that they serve the same democratic, social and cultural needs of society. Does this provision sufficiently clarify the permissible scope of such public service activities? Why? In the negative, do you consider that further clarifications should be provided in a revised Broadcasting Communication?

Services or activities of Czech Television and Czech Radio other than television and radio programmes in the traditional sense of the term must be part of the public service remit when they satisfy the democratic, social and cultural needs of society, as well as the necessity of preserving media pluralism. Consequently, there is no reason to apply additional criteria to activities other than television or radio programmes. It should be stressed that the means of distribution are not relevant for classifying a public service activity; it is sufficient that the content responds to the democratic, social and cultural needs of society.

Public service broadcasting organizations will need to adapt to the new technological environment and to citizens' new habits and requirements. In the Resolution of 25 January 1999 concerning public service broadcasting (OJ 1999 C30/1) the European Council and the Government representatives reaffirmed that "the fulfilment of the public service broadcasting mission must continue to benefit from technological progress" (point 3). Moreover, they noted that public service broadcasting "has an important role in bringing to the public the benefits of the new audiovisual and information services and the new technologies". Point 6 states: "The ability of public service broadcasting to offer quality programming and services to the public must be maintained and enhanced, including the development and diversification of activities in the digital age."

2.2.4. Do you consider that the general approach in the recent decision-making practice of the Commission (i.e. determination of the public service remit based on an ex ante evaluation for new media activities) could be incorporated into a revised Broadcasting Communication?

We wonder about the legal basis of such an initiative by the Commission. It should be recalled that, in accordance with consistent case-law, Member States have broad discretionary powers to define what they regard as services of general economic interest (hereafter SGEI) and that the definition of these services by a Member State cannot be called into question by the Commission except in case of a manifest error. The public service broadcasting remit comprises objectives linked to the democratic and social needs of society, and to culture and education, and for these the European Community has no competence. The European Union's action can only support the action of the Member States, and cannot replace it. Consequently, the Commission needs to have even more respect for the principle of subsidiarity with regard to the definition of the public service broadcasting remit.

It should also be recalled that, in accordance with both the letter and the spirit of the Amsterdam Protocol, it is the Member States which confer, define and organize the public service broadcasting remit. In its Resolution of 25 January 1999 (OJ 1999 C30/1) the Council of the European Union affirmed the Member States' competence with respect to the remit and funding of public service broadcasting. It thereby recognized that, from one State to another, public service broadcasting can be conferred and defined differently.

Firstly, it is for the Member States to entrust an organization with the task of fulfilling a public service broadcasting remit, in accordance with the methods and procedures which respect the legal traditions and the institutional organization of the country in question. The form of the legal act and the choice of procedure is for the country to decide. There is also the principle of Member States' procedural and institutional autonomy, and all the more so in domains or sectors which do not fall within the competence of the European Communities. Consequently, it is not appropriate to incorporate into a Commission Communication principles regarding the manner in which a public service broadcasting remit is conferred (i.e.