Ruling puts Rete 4 in tough spot


ROME -- The European Court of Justice on Thursday issued a ruling that Italy's ten-year-old system of divvying up television frequencies was anti-competitive, a decision that could force Mediaset's Rete 4 network to abandon its terrestrial frequencies.

The ruling from the Luxembourg-based court is tied to a 1999 complaint from Centro Europa 7, a would-be Italian broadcaster that never took to the airwaves.

Mediaset's Rete 4 -- one of the company's three national networks -- was supposed to surrender its terrestrial frequencies and become a satellite broadcaster in order to make room for Centro Europa 7. But Mediaset took advantage of a loophole in Italian law and never made the switch, sparking the complaint from Centro Europa 7.

On Thursday, Europe's highest court ruled that Centro Europa 7 was unfairly blocked from entering the Italian market.

The Italian system "does not comply with the principle of freedom to provide services, and does not meet objective, transparent, non-discriminatory, and proportionate selection criteria," the court said in a statement.

The decision is a blow to Rete 4, which could now eventually be forced to give up its terrestrial frequencies, though Mediaset issued a statement Thursday saying the company was "convinced" it did not break Italian law by not changing Rete 4's broadcast technology.

"The case exclusively regards a request for damages put forth by Centro Europa 7 against the Italian state," Mediaset said. "No damages are sought against Mediaset."

Any action required by the decision is not imminent. With the European court's decision, the case will be sent back to the Italian State Council, which had been investigating Centro Europa 7's complaint and had asked the European Court of Justice for its opinion.

Additionally, Italy's half-finished media reform process would -- under its latest form -- require both Mediaset and state broadcaster RAI to migrate one national network each to digital frequencies by the end of 2009 anyway.

The current government crisis in Italy has stalled the reform process, but if it ends up passing it without major changes it means Rete 4 might have already moved off of its terrestrial frequencies by the time Italy's State Council can officially rule that they should do so.

If that happens, the local media has reported that Mediaset could be required to pay unspecified damages to Centro Europa 7, though it is not clear how they would be calculated.

Centro Europa 7's investors applauded the decision. The group's lawyers released a statement Thursday that called the European courts ruling "an act of justice."

Mediaset investors, meanwhile, shrugged the decision off: Mediaset shares rose 0.4% in a weak overall market Thursday, their first gains this week.

EU media and information society commissioner Viviane Reding welcomed the ruling, saying it confirmed that EU governments could not allocate radio frequencies to freeze or to protect operators.

"The judgment is a clear signal in favor of effective competition, of fair and non-discriminatory access to radio frequencies and of more consumer choice between spectrum-based communication services," she said.

The Commission had itself intervened in the case, arguing that EU law laid down principles of non-discrimination and transparency in frequency allocation. "The Italian regime also prevents the entry of new players into digital TV broadcasting since only incumbent TV operators have been authorized to get into this market during the transitional period," Reding said.

She added that the Court had effectively confirmed the direction of the Commission's telecoms reforms, unveiled last November, which include measures to reallocate spectrum released through the "digital dividend."

"Today's judgment shows that if we want to maximize the social, economic and cultural benefits of spectrum usage, a more efficient system of spectrum management is needed which favors fair competition, consumer choice and media pluralism," she said.

Eric J. Lyman reported from Rome, Leo Cendrowicz from Brussels.