Commission backs Murdoch in Italian TV access row
Sky Italia allowed to applyfor digital frequency as decision goes against Silvio Berlusconi.
The European Commission this week decided to back Rupert Murdoch in his battle on the Italian market for pay-television with Prime Minister Silvio Berlusconi.
On Tuesday (20 July), the Commission decided to allow Sky Italia, a satellite television subsidiary of Murdoch’s News Corporation, to apply for a frequency to provide digital terrestrial television (DTT). The Commission had previously barred Sky Italia from holding DTT frequencies until the end of 2011, as a condition of approving, in 2003, Sky’s purchase and merger of two pay-TV companies – Stream and Telepiù.
In November last year, Sky Italia asked the Commission to relax this condition to allow it to seek frequencies for DTT that are about to be allocated. Sixteen frequencies out of a total of 21 have already been allocated to operators by AGCom, the Italian telecoms regulator.
Despite strong lobbying by the Italian government, the Commission agreed to end Sky Italia’s exclusion early, though it said the company could apply for only one of the five remaining frequencies.
Berlusconi dominates Italy’s media market. The prime minister has a 38.6% stake in Mediaset, which owns three of Italy’s seven national television channels and a film production company, Medusa, as well as the country’s biggest advertising company, Publitalia. Berlusconi also has indirect political control over the public broadcaster RAI, which has three terrestrial television channels.
Paolo Romani, Italy’s telecoms minister, criticised the Commission’s decision, saying on Tuesday that the decision was “serious and unjustified” and would hurt competition in the Italian market.
Appeal process
Mediaset, which owns some of the 16 DTT frequencies that have already been allocated, said it would appeal against the Commission’s decision, saying that Sky Italia was a “monopolist” in satellite and pay television and that the decision gave “free rein” to the company to acquire frequency assets that were “already insufficient for existing operators”.
Tom Mockridge, Sky Italia’s chief executive officer, said the Commission’s decision “confirmed the Italian TV market has undergone significant changes in the last few years”. He said that if Sky Italia was successful in its bid to win the DTT licence, it would benefit Italian consumers and potential advertisers.
The Commission justified its decision, saying that its analysis had shown that there was competition on the Italian pay-TV market. It pointed out that Mediaset and Telecom Italia had entered the market for DTT services, and that there is a new competitor to Sky Italia in the satellite television market, TIVU Sat, set up by RAI, Mediaset’s RTI and Telecom Italia.
Illegal state aid
This is not the only case in which the Commission has battled with Mediaset’s grip on the television market. In 2007, the Commission ruled that the Italian government was providing illegal state aid to Mediaset by offering a €150 cash payment to buyers of digital terrestrial set-top boxes. The Commission said that the scheme discriminated against other pay-television service providers such as satellite television companies. Mediaset appealed against the Commission’s decision but the appeal was thrown out by the EU’s General Court in June this year.
The Commission’s dilemma is that, with the upcoming allocation of licences likely to be the last for several years, as a regulator it had to choose whether to back Newscorp’s Sky, which has a very strong position in the pay-television market because of the strength of its satellite operations, or the incumbents, including Berlusconi’s companies.
The Commission has had its own battles with Murdoch, notably over the sale of football broadcasting rights. In the end, the Commission appears to have decided that only Sky is in a position to compete with the incumbents and chip away at their dominant market position. The choice was an unenviable one.