EUROPEAN COMMISSION. Brussels, C(2010)3916 final

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1 EUROPEAN COMMISSION Brussels, C(2010)3916 final PUBLIC VERSION WORKING LANGUAGE This document is made available for information purposes only. Subject: State aid N 719/2009 Fonds destiné à certains foyers résidant dans des zones non couvertes par la télévision par voie hertzienne terrestre en mode numérique Sir, I. SUMMARY (1) I am pleased to be able to inform you that the European Commission has assessed the measure "Fonds destiné à certains foyers résidant dans des zones non couvertes par la télévision par voie hertzienne terrestre en mode numérique" and decided not to raise objections as the state aid contained therein is compatible with Article 107(3)(c) Treaty on the Functioning of the European Union (TFEU). II. PROCEDURE (2) With a letter notified on 23 December 2009, pursuant to Art. 108(3) of the TFEU, the French Government informed the Commission of its intention to adopt a national plan to finance access to digital technology by households excluded by digital terrestrial television (DTT) coverage. A request for information was sent on 16 February 2010 and the French authorities sent their reply on 11 March This information was complemented by other clarifications provided during an ad hoc meeting between the French authorities and the Commission services. A final set of information was submitted on 4 May Son Excellence Monsieur Bernard KOUCHNER Ministre des Affaires étrangères 37, Quai d'orsay F PARIS Commission européenne, B-1049 Bruxelles Belgique Europese Commissie, B-1049 Brussel België Téléphone: (0)

2 III. DESCRIPTION OF THE MEASURE Factual background (3) The notified measure would apply in the context of the transition from analogue to digital television. (4) In the year 2006, the Republic of France notified an aid measure of a social character aimed at households with low income which could only access analogue terrestrial television, in order to ensure transmission continuity upon the switching to digital broadcasting. (5) On 6 December 2006 (decision in case N 546/2006), the Commission declared the measure compatible with the internal market pursuant to Art. 107(2) lett. a of the TFEU. Objectives of the measure (6) The notified measure is addressed to households which will not be reached by DTT after the digital switchover. Such households fall out of the statutory coverage obligation which imposes on free-to-air (hereinafter FTA) broadcasters operating in digital mode to cover at least 95% of the French population. In particular, their exclusion is due to the fact that they are located in scarcely populated areas or in areas where the deployment of the DTT network is particularly difficult. Therefore, the French authorities have decided that such households be entitled to a financial contribution for the purchase of equipment which will enable them to access to alternative platforms, regardless of the broadcasting technology used, and to receive all FTA channels that are available on the Digital Terrestrial Platform. The contribution may also be used to pay the subscription fees necessary to receive these channels on the alternative platforms.. The French government explained that the measure is based on the principle of equal treatment of different geographic areas of the French Republic with regard to the possibility to have access to TV offer. (7) The aid consists of a financial amount such to cover part or all of the expenses necessary to purchase and install any device and to cover subscription expenses to allow for the reception of digital television channels in areas not covered by the DTT. In compliance with the principle of technological neutrality, such financial amount can be used to enable access to FTA channels regardless of the technologies used to broadcast such channels (e.g. broadcast by cable, satellite, ADSL or optical fibre). Amount and duration (8) The aid amounts to up to EUR 250 per each eligible household. The measure is not cumulative with previous aid. Therefore, users who have possibly benefitted from the aid declared compatible in the abovementioned decision N 546/2006 will not be eligible for the subsidy envisaged by the current measure. (9) The total budget for the measure is EUR 96 million and the subsidy will be administered by France Télé Numérique, a public interest body. 2

3 (10) The aid will be granted from the approval of the measure by the Commission until the first quarter of the year 2012 (the switch off of analogue television is scheduled on 30 November 2011). IV. STATE AID ASSESSMENT OF THE MEASURE: PRESENCE OF AID (11) According to Article 107(1) of the TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market. It follows that in order to be qualified as State aid, the following cumulative conditions have to be met: 1) the measure has to be granted out of State resources, 2) it has to confer an economic advantage to undertakings, 3) the advantage has to be selective and distort or threaten to distort competition, 4) the measure has to affect intra-community trade. Existence of state aid (12) The notified measure involves a transfer of public resources to households. Such transfer will confer an indirect economic advantage to the digital television sector: digital platform operators and broadcasters will see their viewers' base increase and producers of digital decoders and other receiving devices will also benefit from an increase in their turnover. (13) As this measure supports the digital television sector only (with the exclusion of other media), it can be considered to be sectoral aid. Indeed, it allows the platform operators and broadcasters to forego the costs necessary to expand their viewer's basis and thus gives them a significant competitive advantage over competitors which need to cover such costs themselves. (14) It could also affect trade between Member States, as the sector is open to competition. The French markets for broadcasting and platform operators also host foreign players and the beneficiaries may also be active on international markets. Furthermore, the ownership structure of the beneficiaries may extend to more than one Member States. (15) It can therefore be concluded that the measure constitutes State aid in the meaning of Article 107(1) TFEU. V. COMPATIBILITY ASSESSMENT Lack of social character (16) Compared with the aid scheme approved in 2006, the notified measure lacks any social character, as the grants are not merely intended for low-income users. The notification does not refer to any social objective pursued by the measure. (17) The notified measure, therefore, cannot be considered compatible with the internal market in virtue of its social character (Art. 107(2) lett. a of the TFEU). Indeed, the measure approved in 2006 and the one notified now are complementary to each other The French authorities have designed the notified aid in a way that it does not overlap with the previous regime. 3

4 Compatibility pursuant to Art. 107(3) lett. c (18) In assessing whether an aid measure can be deemed compatible with the internal market, the Commission balances the positive impact of the aid measure in reaching an objective of common interest against its potential negative side effects, such as distortions of trade and competition. (19) In applying this balancing test, the Commission will assess the following questions: a. Is the aid measure aimed at a well-defined objective of common interest (i.e. does the proposed aid address a market failure or other objective)? b. Is the aid well designed to deliver the objective of common interest? In particular: 1. Is the aid measure an appropriate instrument, i.e. are there other, better placed instruments? 2. Is there an incentive effect, i.e. does the aid change the behaviour of firms? 3. Is the aid measure proportional, i.e. could the same change in behaviour be obtained with less aid? c. Are the distortions of competition and the effect on trade limited, so that the overall balance is positive? (20) In relation to the compatibility assessment, it is worth noting that the Commission has already addressed the issue of subsidizing the digital switchover in a number of cases. Indeed, in Digital Decoders Italy (Case C 52/2005), the Commission assessed the compatibility of two measures adopted by the Italian Government and subsidizing final users for the purchase of set-top boxes. One of the measures only subsidized the purchase of DTT decoders, with the exclusion of the satellite technology (DTH), while the other measure funded the purchase of both DTT and DTH decoders. The Commission established that only the latter measure was compatible with the internal market pursuant to Art. 107(3)(c) TFEU, as the other one was not technologically neutral and discriminated against the satellite platform. In the decision Berlin-Brandebourg DVB-T (2006/513/CE) (recently upheld by the General Court in Case T-21/06), the Commission declared incompatible a State aid measure to private broadcasters for the introduction of digital terrestrial broadcasting in the area of Berlin and in the region of Brandebourg, because the measure was only addressed to terrestrial broadcasters and excluded all alternative technologies, in breach of the technological neutrality principle. Objective of Community interest (21) The French Government argues that the measure addresses a market failure arising in connection with the switching from the analogue to the digital technology, namely the fact that a number of households will be deprived of terrestrial FTA broadcasting services. 4

5 (22) The Commission considers that a smooth transition from analogue to digital television responds to a precise Community interest. As stated in its decision on another aid scheme notified by France (case N 111/2006), the Commission encourages the transition to digital technology. The reason is that the digital technology allows a more efficient use of the radio spectrum, makes available frequencies for additional channels and, in doing so, enhances the quality of the television signal. (23) In this context, the Commission notes that in a number of Member States the transition to the digital technologies faces technical and economic hurdles. This is also the case of France, where, despite the steps adopted by the government, economic reasons make unviable for platform operators to extend the coverage of the DTT platform to the entirety of the population. (24) In France, indeed, DTT was launched in March 2005 by initially reaching 35% of the French population. Further to subsequent coverage extensions, the DTT technology currently reaches 89% of the metropolitan population. The law 309/2007 on the modernisation of the broadcasting services mandates that both public and private free-toair (FTA) broadcasters active in analogue technology have to ensure, at their expenses, a minimum digital coverage extension of 95% of the population by the end of Other broadcasters, falling out of the scope of the law, have been given incentives and have committed to extend their coverage to the same percentage. (25) It remains however the problem of extending DTT coverage beyond the 95% minimum coverage obligation threshold. In this respect, as rural and scarcely populated areas are involved, some broadcasters have argued that the costs of extending the DTT network would not be compensated by the additional audience that this investment might generate. (26) French law also allows local administrative entities to negotiate with platform operators incentives for the extension of the service, but it seems that the local entities have not availed themselves of this option at the moment (although one project has been prenotified to the Commission). In addition, in areas where it is particularly difficult to bring the DTT technology, the French law provides for must carry obligations, mandating FTA broadcasters to licence their channels to at least one satellite platform. At the moment, two satellite platforms (Astra and Eutelsat) provide FTA channels. (27) Therefore, in spite of the initiatives already adopted, the French authorities have identified a market failure which still prevents the extension of the DTT platform (and related FTA channels) beyond the mandatory 95% coverage. In order to address the negative effects for the concerned households of this market failure, the French government has conceived the notified measure. (28) In the light of the above circumstances, the Commission considers that the notified measure pursues an objective of Community interest, in that it allows a further extension of the coverage of digital television (through technologies alternative to the terrestrial platform) to the benefit of the consumers. 5

6 The measure is a well-designed instrument (29) In the above respect, the Commission accepts the French authorities' argument that the notified measure, inspired to the principle of equal treatment of different geographic areas of the French territory, is a well-designed instrument to address the market failure detected and would thus result to be a compatible aid pursuant to Art. 107(3) lett. c). In particular: Appropriate instrument. The measure provides financial support to final users to enable them to access FTA channels on alternative platforms that are located in areas where, due to geographic conditions and/or to low-density population, private investment into terrestrial distribution platforms is economically unviable. In so doing, it ensures a smooth transition to the digital technology, without interruptions of the access to television broadcasting services. Therefore, the measure can be considered to be appropriate to address the identified market failure. Incentive effect. FTA broadcasters operating in DTT technology will probably not find it convenient to invest in extending their coverage beyond the 95% threshold, although in view of the must carry obligation they have a legal obligation to make their channels available on satellite. Under such circumstances, it is therefore on final users to take the initiative to connect to the satellite platform or to other platforms alternative to the terrestrial one in order to have access to digital television. In this respect, in making the granting of the aid conditional on the purchase of goods and services for the connectivity to broadcasting platforms other than the terrestrial, the measure incentivizes final users to use platforms alternative to the DTT Proportionality. The measure is proportional, as it only covers part of the estimated costs of households for the purchase of devices to access alternative platforms and the purchase of the necessary subscriptions enabling them to view FTA channels (EUR 250 on an estimated total of EUR 300/350). The measure only indirectly favours the whole digital television sector without discriminating between transmission technologies. Therefore, the measure can be considered proportionate. Distortion of competition. The measure is technologically neutral, as it takes into consideration all technologies. Therefore, it does not distort competition between operators offering different broadcasting technologies. Furthermore, as the measure relieves households of costs instead of providing direct aid to individual companies, it only provides an indirect advantage to the whole digital television sector without discriminating between the companies active in that sector. As a consequence, it has limited impact on competition and the trade between Member States, so that it can be concluded that the overall balance is positive. 6

7 CONCLUSION (30) In the light of the above, the Commission considers that the balance of the positive and negative effects of the notified measure is positive, because it ensures that all citizens have access to digital television, whilst the distortive effects are limited.. (31) The Commission, therefore, concludes that the aid involved in the notified measure is compatible with Article 107(3)(c) of the TFEU. VI. DECISION (32) On the basis of the foregoing assessment, the Commission has accordingly decided that the aid measure "Fonds destiné à certains foyers résidant dans des zones non couvertes par la télévision par voie hertzienne terrestre en mode numérique" is compatible with Article 107(3)(c) of the TFEU. (33) The French authorities are reminded that, pursuant to Article 108(3) of the TFEU, they are obliged to inform the Commission of any plan to extend or amend the measure. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the internet site: Your request should be sent by encrypted to stateaidgreffe@ec.europa.eu or, alternatively, by registered letter or fax to: European Commission Directorate-General for Competition State Aid Greffe Rue Joseph II 70 B-1049 Brussels Fax No: Yours faithfully, Joaquin ALMUNIA Vice-President of the Commission 7