EC to probe U.K. Channel 4 digital grant

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BRUSSELS -- A 14 million pound ($27.7 million) U.K. government grant to help Channel 4 switch to digital broadcasts is being investigated by the European Commission after complaints from a rival station.

The Commission -- the EU's antitrust authority -- said it had "serious doubts" that the television station would run up costs from offering a public service to justify receiving public money. "The Commission is firmly committed to encouraging the digital switchover process, which has many advantages for consumers and innovation," Competition Commissioner Neelie Kroes said. "However, it needs to make sure that any state support does not distort competition unduly."

The Commission said another -- unnamed -- British commercial broadcaster complained to regulators, saying Channel 4 has "ample and sufficient cash reserves" and no need for public support to pay for the digital switchover.

Channel 4 pays its own way by generating revenue from advertising. The Commission must approve large government payments to private companies to make sure that they do not favor one business over others.

The British government told the Commission last October 2007 that it planned to grant the aid to help Channel 4 switch to digital. But the Commission said it had received a complaint as early as August 2006.

To secure the grant, Channel 4 has to meet the criteria of the Commission's 2001 Broadcasting Communication that says any government aid must be necessary and proportional and does not overcompensate. At first glance, the Commission could not say if Channel 4 would have a net public service cost in the short-term that would allow it to receive state aid.

The probe is the latest of a number of investigations into national and regional aid to help the switchover process. Last October, the Commission blocked plans by German state authorities to subsidize digital television broadcasts, saying they discriminated against satellite and cable. And in January 2007, the Commission said that Italian government subsidies for digital TV decoders broke EU rules and it ordered broadcasters including Mediaset and RAI to repay over 200 million euros ($312 million) in aid.
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