EC orders Mediaset, RAI to repay gov't aid

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BRUSSELS -- The European Commission on Wednesday said that Italian government subsidies for digital TV decoders broke European Union rules and it ordered broadcasters, including Mediaset and RAI, to repay more than €200 million ($259.3 million) in aid.

The aid, which dates to 2004-05, "created an undue distortion of competition by excluding satellite technology," the EC -- the EU's antitrust authority -- said in a statement.

"The commission is not ready to accept state support that creates unnecessary distortions of competition between transmission platforms," EU Competition Commissioner Neelie Kroes said.

The Italian government paid the grants to consumers, who could then buy or rent digital decoders, but the subsidy was provided for interactive decoders capable of receiving programs in digital terrestrial technology or retransmitted via cable.

The EC investigation was prompted by a complaint from Sky Italia, News Corp.'s Italian pay TV satellite division, which argued that the subsidy penalized satellite television, as the set-top boxes needed to decode satellite television were not included in the government subsidies program.

In May, Italy's antitrust authority ruled that former Prime Minister and media mogul Silvio Berlusconi did not violate conflict-of-interest rules when his government approved some of the subsidies. Italy's free broadcast television market is dominated by Berlusconi's Mediaset and RAI state television.

However, the EC cleared separate Italian decoder subsidies granted last year, saying that the latter aid did not distort competition as it applied to all decoders regardless of the transmission platform.

The 2006 aid was for consumers in Sardinia and Valle d'Aosta who bought interactive decoders with an open application programming interface. This time, it was "technology-neutral" and complied with the EU's aim of promoting the transition to digital TV, the EC said.

In 2005, the EC ruled that government intervention can help in the process of switchover from analog to digital broadcasting, but it must show that aid is the most appropriate instrument, is limited to the minimum necessary and does not unduly distort competition.

Approved public aid plans include subsidies for decoders for low-income households; funding for the roll-out of a transmission network in areas where there would be insufficient TV coverage otherwise; and compensation to broadcasters required to end analog transmission before the expiration of their licenses.
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