Regulation of media concentrations and pluralism Sebastiano Sortino Prague, 17 May 2007 The experience of Italy

Regulation of media concentrations and

pluralism

Sebastiano Sortino

Prague, 17 May 2007

The experience of Italy

2

1. General context

2. Italian rules on media concentrations

3. Practical implementation

Summary

1. General context

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Protect media pluralism Declarations of the Council of Europe Communication of European Commission

Ensure a balanced media market A look at the whole as communicating vessels Growth in one sector must not impoverish other

Foster culture and consumers’ interests More sources of information Independence of the media

Aims of regulation

1. General context

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Media concentrations between: Pluralism: the establishment of a dominant

position is forbidden per se Competition: only the abuse of a dominant

position is forbidden

Regulatory approaches between: Ex ante regulation: thresholds are established

in advance for the specific market Ex post sanctioning: specific remedies are

adopted according to the need of the market

1. General context

Main features

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Mono-media media concentration rules Avoid excessive strength within any single

media

Multi-media media concentration rules Avoid that market powers in one media extend

excessively to other media and dangerous synergies between different media dangerous

Specific thresholds

1. General context

2. Italian rules on media concentration

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1981: The press as the first sector where a specific interest in concentrations arised the first public register for transparency purposes and

thresholds based on circulation (max 20% of all printed copies)

1990: the example of the press is followed in the broadcasting sector according to the Constitutional case-law: Broadcasting Act fixes a threshold of 25% of

frequencies (= 3 channels out of 12) per subject, of 20% of the resources of the massmedia sector and cross-ownership limits: >16% circulation = no TV 8%-16% circulation = one TV < 8% circulation = two TV

2. Rules on media concentrations

Evolution of the rules (1/2)

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1997: General prohibition of dominant positions in the communications sector and sectorial limits:

thresholds of 20% of frequencies (= 2 channels out of 11) per subject and 30% of the resources of television / radio / cable and satellite / advertising agencies sectors;

Cross-ownership rules between telecoms and broadcasting (prohibition to hold licenses in both sectors) and additional rules for press and broadcasting (max 20% of both sectors);

Institution of AGCOM in order to monitor the existence of dominant positions in the communications sector.


Evolution of the rules (2/2)

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Dominant operators in 2002-2003

By broadcaster2002 2003 chg%

03/022002 2003

Rai 2.385 2.394 0,4 43,0 40,7Mediaset 1.851 1.973 6,6 33,4 33,6Telepiù/Sky 928 1.098 18,3 16,7 18,7MTV/La7 70 95 35,7 1,3 1,6Other broadcasters 316 319 0,9 5,7 5,4Totale 5.550 5.879 5,9 100,0 100,0

By source2002 2003 chg%

03/022002 2003

Advertising (1) 3.240 3.367 3,9 58,4 57,3Public fee 1.383 1.423 2,9 24,9 24,2Subcription 887 1.049 18,3 16,0 17,8Other 40 40 0,0 0,7 0,7Total 5.550 5.879 5,9 100,0 100,0 (1) - Net revenues

Comp. %

Comp. %Million €

Million €

According to the 30% limit both RAI and Mediaset are in dominant positions:

RAI – 43% in 2002

40% in 2003

RTI – 33% in 2002

33% in 2003

Source: Agcom Annual Report 2003-2004

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2004: Radio and television broadcasting (1/2)

Technical threshold: Number of concessions (Art. 43, para. 7-8, Act no. 177/2005)

a single subject may hold max 20% of: analogue and digital television or radio programmes,

according to the national digital terrestrial frequency plan.

The law confirms the existing threshold of 20% of the frequencies, but reference is made to the DTT frequency plan.


Horizontal media concentration

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2004: Radio and television broadcasting (2/2)

Economical threshold: Revenue shares (Art. 43, para. 9-10, Act no. 177/2005)

a single subject may collect: max 20% of resources of the integrated communications

system (SIC) as determined by technological developments and the converging process between different sectors;

the existing threshold is lowered from 30% to 20%, while the terms of reference for the calculation is the SIC and no longer relate to the traditional broadcasting sector;

the single markets composing the SIC will be analysed according to competition law.


Horizontal media concentration

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2004: Broadcasting and telecoms (Art. 43, para 11, Act no. 177/2005): Telecoms operators collecting more than 40% of the

revenues of the telecommunications services market may not collect more than 10% of the revenues of the integrated communications system.

2004: Broadcasting and press (Art. 43, para 12, Act no. 177/2005): Publishing companies may freely enter the

broadcasting market, while television broadcasters may not have any share in newspapers companies until 2010.


Cross-media concentration

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______________________________________________________

Radio TV Newspapers Periodicals Books Cinema Music Electr. publishing Sponsoring

22.144 MiO € in 200521.567 MiO € in 2004

The integrated communications system (SIC)

Source: Agcom deliberation no. 341/06/CONS


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Italian “integrated communications system” in 2005


<Total income = €22,144 Mio>

RADIO&TV 35,0%

CINEMA6,5%

DAILY PRESS AND MAGAZINES

29,9%

YEARBOOK AND ELECTRONIC PUBLISHING

9,1%

ADVERTISING ON 'NON TRADITIONAL'

MEDIA19,5%

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Dominant operators in 2004-2005

According to the 20% limit RAI and Mediaset are not in dominant positions:RAI – 11.8% in 2004

11.2% in 2005RTI – 10% in 2004 10.2% in 2005They would have been dominant under the 30% of the old law:RAI – 40% in 2004 37.5% in 2005RTI – 33.9% in 2004 33% in 2005

Revenues Market share 2004 2005 2004 2005

Broacasters

Law 1997

Law 2004

Law 1997

Law 2004

Rai 2.545 2.570 40.0 11.8 37.5 11.6 Mediaset 2.157 2.264 33.9 10.0 33.0 10.2 Sky Italia 1.125 1.450 17.7 5.2 21.2 6.5 Telecom Italia 113 137 1.8 0.5 2.0 0.6 Fastweb 27 27 0.4 0.1 0.4 0.1 Others 392 392 6.2 1.8 5.9 1.7

Total law 1997 6.359 6.851 Total law 2004 21.567 22.144

Source: Agcom Annual Report 2005 - 2006 and deliberation no. 341/06/CONS

3. Practical implementation of the rules

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Deliberation no. 136/05/CONS of 02/03/2005 AGCOM adopts seven remedies to balance the

oligopolistic position of Rai and RTI on the market: RAI and RTI: 1) speed up the digitisation of their terrestrial

television broadcasting networks; 2) maintain the obligation to reserve 40% of their digital capacity to independent content providers until the complete switchover;

RTI: 3) employ an advertising agency different from Publitalia on dtt broadcasts; 4) hourly advertising limits reduced to 12% on dtt broadcasts;

RAI: 5) launch a new generalistic program capable of attracting audience without advertising advertising on dtt networks

Publitalia: 6) introduce a separate accounting between analogue and digital advertising revenues until separate companies; 7) ensure transparent, fair and non discriminatory conditions in the sale of advertising time.


Adopted remedies

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Thresholds may ensure certainty on the existence of dominant positions once exceeded, but should not as such exclude a case-by-case market analysis

Competition law criteria are a useful tool for NRAs to combine with pre-defined limits to adapt to the peculiarities of each market

Towards an integration of ex ante thresholds and ex post competition law remedies?

Thresholds vs market analysis


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Regulation of media concentrations and pluralism Sebastiano Sortino Prague, 17 May 2007 The experience of Italy