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State aid to PSB in Denmark

State aid to PSB in Denmark. Erik Nordahl Svendsen Mediesekretariatet EPRA, Budapest October 2005. TV 2: History. 1988: Lauched as second national channel Financed 70 % adv. + 30 % license fee Succesfull against DR TV (100 % license fee)

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State aid to PSB in Denmark

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  1. State aid to PSB in Denmark Erik Nordahl Svendsen Mediesekretariatet EPRA, Budapest October 2005

  2. TV 2: History • 1988: Lauched as second national channel • Financed 70 % adv. + 30 % license fee • Succesfull against DR TV (100 % license fee) • 2000: Complaint from TV Danmark (SBS) about illegal state aid to TV 2 • 2003: TV 2 turned into plc (for privatisation) • May 2004: Decision from EU-Commission

  3. State Aid? (Art. 87, 1) • Is license fee state aid? Yes! • Altmark test: • mandate and definition? Yes • ex ante calculation? No • compensation of net cost? ?? • tender or efficiency-test? No • Effect on trade? Yes • EU Conclusion: Yes, new state aid.

  4. ’Service of General Economic Interest’, compatability with Art. 86, 2? [1] 1) Definition of PS (broad, ok) except commercial internet services – manifest error! 2) Entrustment – by Act (and – later - Contract) Monitoring Authority? • National Audit Office (financial and management audit) • Radio and Television Board (approval of yearly report from TV 2 about PS)

  5. ’Service of General Economic Interest’ compatability with Art. 86, 2? [2] 3) Proportionality test: + Programme costs (all programmes) + specified investments (digital tv) • commercial and other income (adv. etc) --------------------------------------------------- = Net cost for PS • license fee funds (1995 – 2002) --------------------------------------------------- = Overcompensation (84,4 mio. EURO plus interests)

  6. Advertising prices?(State Aid-Communication, point 58) • ”Might be tempted to depress prices…” • Prices are low in Denmark (vs. Nordic level) • But relative Cost Per Point is not alarming • EU-Conclusion: No clear evidence that Danish advertising market was depressed due to TV 2’s pricing behaviour

  7. Recapitalisation of TV 2 [1] • Equity capital, based on estimated market value of TV 2 (amount is a business secret) • Recovery leads to technical bankruptcy • Selling with recovery claim less advantagous • A market economy investor would rather recapitalise the TV 2 company • EU accepts the methods

  8. Recapitalisation of TV 2 [2] • Incorporation (plc) reduces the risk for distortion of competetion: • Limits the amount of (state-) equity • Seperates state roles as authority and entrepreneur • Conclusion: EU acccepts the need for recapitalisation against Article 86, 2

  9. Denmark and TV 2: Licensefee is not state aid Surplus is reasonable Crosssubsidising has not taken place in fact MTG/SBS: PS is not defined precisely Crosssubsidising has in fact taken place New aid, not notified (Art. 88, 3) Not sufficent control with PS-performance State aid was not necessary Claims after decision about overcompensation(August 2004)

  10. Claims after EU’s acceptance of recapitalisation(January 2005) MTG/SBS (among other items): • EU omits to state elements of state aid, and to establish netcosts for PS – and PS is not clear • Decision on overcompensation loses its meaning • Art 86, 2 allows compensation for net cost, not for investments to prepare for sale • Should have opened formal investigation (Art. 88, 2), so others could be heard

  11. Denmark postpones the sale of TV 2 (April 2005) • Because of the pending courtcases • It is not possible to guarantee a buyer against eventual recovery • So – two or more years to go……

  12. DR (no case) • 100 % license fee, existing aid, not reported • Indications of overcompensation (only future danger, Art. 88, 1) • Will Altmark apply? • Mandate and definition • Ex ante principles of compensation • Net cost compensation • Efficiency, when neither tender or market

  13. DR: Proposal from professor Frands Mortensen • More precise definition of PS obligations • DR publish Budgets for programmes and (net-) ressources, which should be… • Approved by Board of Radio and TV for efficiency • Accepted by Ministry of Culture in relation to amount of license fee • Radio and Television Board controls performance ex post

  14. Future? • Is the broad definition of PS eternaly safe (online and digital services) ? • Art. 151 on culture is interpreted narrowly (as arts and high culture) • Could culture in a broader sense be a ”common interest” of EU? • Do member states support such an idea?

  15. References State aid to TV 2: C(2004) 1814, 19. May 2004 Recapitalization: C(2004) 3632, 6. October 2004 Altmark: CaseC-280/00, 24. July 2003 Pending cases about TV 2: • T-309/04 by TV 2 • T-317/04 by Denmark • T-329/04 by Viasat • T-336/04 by TV Danmark (SBS) • T-12/05 by TV Danmark (SBS) • T-16/05 by Viasat Frands Mortensen: fmorten@imv.au.dk (Ask for Timeline for state aid cases)

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