# C_2007117EN.01003202.xml

| 26.5.2007 | EN | Official Journal of the European Union | C 117/32 |
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Action brought on 23 March 2007 — Telecom Italia Media v Commission

(Case T-96/07)

(2007/C 117/52)

Language of the case: Italian

Parties

Applicant: Telecom Italia Media S.p.A. (Rome, Italy) (represented by: F. Bassan and S. Venturini, avvocati)

Defendant: Commission of the European Communities

Forms of order sought

The applicant claims that the Court should:

| — | annul the Commission's decision (C(2006) 6634 final) of 24 January 2007 relating to State aid C 52/2005 (ex NN88/2005, ex CP 101/2004), together with all prior, consequent and connected acts; |
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| — | in the alternative, annul the Commission's decision (C(2006) 6634 final) in so far as it imposes on the Italian State a duty to recover the aid in accordance with the detailed rules set out therein; |
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| — | in any case, order the Commission to pay the costs. With all consequences of law. |
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Pleas in law and main arguments

The present application contests the Commission's decision finding that the State aid providing subsidies for the purchase of digital decoders, introduced by the Italian Government for the years 2004 and 2005, is unlawful. It is emphasised in that regard that, by decision of the same date, the subsidies planned for the year 2006 for the purchase of digital decoders with open APIs (application program interfaces) was found to be lawful pursuant to Article 87(c) of the EC Treaty.

According to the applicant, the difference between the lawful aid of the year 2006 and the unlawful aid of the years 2004 and 2005 lies in the fact that the latter expressly exclude financing for satellite TV decoders — which is thus excluded de iuris — whereas in the context of the 2006 aid it is excluded only de facto as a consequence of being the decoder chosen by the ‘closed ’SKY monopolistic platform.

In support of the forms of order sought, the applicant alleges:

| — | Error of assessment by the defendant. On that point it is argued that:
—
the measure was needed in order to accelerate the transition to digital: the deadline fixed by law for the switch off (2006) was not (and, in any case, could not reasonably be regarded as such) peremptory. —
the measure was not designed to take the place of an initiative that the broadcasters would have taken in any event. In fact, the broadcasters — by reason of the particular characteristics of the terrestrial digital market — had no interest in funding purchase of the decoders, because:
(i)
they are not vertically integrated with the producers of software or decoders; (ii)
they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; (iii)
the terrestrial decoder can accept cards from a number of operators, in competition with one another; —
the measure did not discriminate against satellite broadcasters, for two reasons. In the first place, because such broadcasters operate on a different market, mistakenly classed as single by the Commission. Secondly, because those broadcasters were already excluded de facto, since they had already — at the time of SKY (a monopolistic platform in Italy for satellite TV) — opted for a proprietary platform which uses a closed standard, and which does not therefore deserve support, in accordance with the position established by the Commission in the decision relating to the 2006 measure. —
the period taken into consideration for the calculation of the effects of the measure on the market cannot be the full temporal arc spanning the years 2004 and 2005, since TIMedia advertised and marketed the first pay per view offer on the terrestrial digital market on 22 January 2005. As regards the dies ad quem, significance cannot but be attributed to the fact that, with effect from 1 September 2005, the subsidy was accorded to consumers only in the all digital areas or in the regions (Val D'Aosta and Sardinia) for which provision had been made for the transition to be completed ahead of time. The subsidy was limited at both the operational level and the territorial level. TIMedia could refund the aid, in that it has not generated additional profits in the relevant period. The costs are in fact higher than the revenue, as is normally the case during a start up phase. Besides, the Commission requires the quantification of the recovery to be determined on the basis of the additional profits generated by the extra viewers that the measure has attracted to pay per view terrestrial digital TV. Those profits are to be calculated by multiplying the average revenue from users by the estimated number of additional users. In truth, the additional profits are calculated by subtracting the additional costs from the additional revenues (not from the average revenue). The revenue generated by the additional user — who is rarely inclined to purchase pay per view events — is lower than the revenue generated by the user average. | — | the measure was needed in order to accelerate the transition to digital: the deadline fixed by law for the switch off (2006) was not (and, in any case, could not reasonably be regarded as such) peremptory. | — | the measure was not designed to take the place of an initiative that the broadcasters would have taken in any event. In fact, the broadcasters — by reason of the particular characteristics of the terrestrial digital market — had no interest in funding purchase of the decoders, because:
(i)
they are not vertically integrated with the producers of software or decoders; (ii)
they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; (iii)
the terrestrial decoder can accept cards from a number of operators, in competition with one another; | (i) | they are not vertically integrated with the producers of software or decoders; | (ii) | they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; | (iii) | the terrestrial decoder can accept cards from a number of operators, in competition with one another; | — | the measure did not discriminate against satellite broadcasters, for two reasons. In the first place, because such broadcasters operate on a different market, mistakenly classed as single by the Commission. Secondly, because those broadcasters were already excluded de facto, since they had already — at the time of SKY (a monopolistic platform in Italy for satellite TV) — opted for a proprietary platform which uses a closed standard, and which does not therefore deserve support, in accordance with the position established by the Commission in the decision relating to the 2006 measure. | — | the period taken into consideration for the calculation of the effects of the measure on the market cannot be the full temporal arc spanning the years 2004 and 2005, since TIMedia advertised and marketed the first pay per view offer on the terrestrial digital market on 22 January 2005. As regards the dies ad quem, significance cannot but be attributed to the fact that, with effect from 1 September 2005, the subsidy was accorded to consumers only in the all digital areas or in the regions (Val D'Aosta and Sardinia) for which provision had been made for the transition to be completed ahead of time. The subsidy was limited at both the operational level and the territorial level. TIMedia could refund the aid, in that it has not generated additional profits in the relevant period. The costs are in fact higher than the revenue, as is normally the case during a start up phase. Besides, the Commission requires the quantification of the recovery to be determined on the basis of the additional profits generated by the extra viewers that the measure has attracted to pay per view terrestrial digital TV. Those profits are to be calculated by multiplying the average revenue from users by the estimated number of additional users. In truth, the additional profits are calculated by subtracting the additional costs from the additional revenues (not from the average revenue). The revenue generated by the additional user — who is rarely inclined to purchase pay per view events — is lower than the revenue generated by the user average. |
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| — | the measure was needed in order to accelerate the transition to digital: the deadline fixed by law for the switch off (2006) was not (and, in any case, could not reasonably be regarded as such) peremptory. | | | | | | | | | | | | | | |
| — | the measure was not designed to take the place of an initiative that the broadcasters would have taken in any event. In fact, the broadcasters — by reason of the particular characteristics of the terrestrial digital market — had no interest in funding purchase of the decoders, because:
(i)
they are not vertically integrated with the producers of software or decoders; (ii)
they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; (iii)
the terrestrial decoder can accept cards from a number of operators, in competition with one another; | (i) | they are not vertically integrated with the producers of software or decoders; | (ii) | they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; | (iii) | the terrestrial decoder can accept cards from a number of operators, in competition with one another; | | | | | | | | |
| (i) | they are not vertically integrated with the producers of software or decoders; | | | | | | | | | | | | | | |
| (ii) | they do not have a business model based on monthly subscription payments, which enables the funding to be recovered over time; | | | | | | | | | | | | | | |
| (iii) | the terrestrial decoder can accept cards from a number of operators, in competition with one another; | | | | | | | | | | | | | | |
| — | the measure did not discriminate against satellite broadcasters, for two reasons. In the first place, because such broadcasters operate on a different market, mistakenly classed as single by the Commission. Secondly, because those broadcasters were already excluded de facto, since they had already — at the time of SKY (a monopolistic platform in Italy for satellite TV) — opted for a proprietary platform which uses a closed standard, and which does not therefore deserve support, in accordance with the position established by the Commission in the decision relating to the 2006 measure. | | | | | | | | | | | | | | |
| — | the period taken into consideration for the calculation of the effects of the measure on the market cannot be the full temporal arc spanning the years 2004 and 2005, since TIMedia advertised and marketed the first pay per view offer on the terrestrial digital market on 22 January 2005. As regards the dies ad quem, significance cannot but be attributed to the fact that, with effect from 1 September 2005, the subsidy was accorded to consumers only in the all digital areas or in the regions (Val D'Aosta and Sardinia) for which provision had been made for the transition to be completed ahead of time. The subsidy was limited at both the operational level and the territorial level. TIMedia could refund the aid, in that it has not generated additional profits in the relevant period. The costs are in fact higher than the revenue, as is normally the case during a start up phase. Besides, the Commission requires the quantification of the recovery to be determined on the basis of the additional profits generated by the extra viewers that the measure has attracted to pay per view terrestrial digital TV. Those profits are to be calculated by multiplying the average revenue from users by the estimated number of additional users. In truth, the additional profits are calculated by subtracting the additional costs from the additional revenues (not from the average revenue). The revenue generated by the additional user — who is rarely inclined to purchase pay per view events — is lower than the revenue generated by the user average. | | | | | | | | | | | | | | |

| — | Infringement and misapplication of Articles 87(1) and 87(3)(c) of the EC Treaty in so far as the Commission has not shown that the measure distorts or threatens to distort competition, and accordingly constitutes State aid for the purposes of Article 87(1). Nor has the Commission shown how it can be possible that the exemption provided for in Article 87(3) applies to producers of decoders, but not also to television broadcasting networks, the latter being also, indirectly, beneficiaries which make use of those decoders. |
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| — | Internal inconsistency and inherent irrationality of the contested decision. On that point, it is emphasised that in the view of the Commission the measure is selective, referring only to certain indirect beneficiaries (the television broadcasting networks) and not to others (the decoder producers). |
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