2006/513/EC: Commission Decision of  9 November 2005  on the State Aid which the Federal Republic of Germany has implemented for the introduction of digital terrestrial television (DVB-T) in Berlin-Brandenburg  (notified under document number C(2005) 3903)   (Text with EEA relevance)
Date: 2005-11-09
Institutions: European Commission
Subjects: Germany, State aid, broadcasting, control of State aid, high-definition television

L 200/14

EN

Official Journal of the European Union

22.7.2006

COMMISSION

COMMISSION DECISION

of 9 November 2005

on the State Aid which the Federal Republic of Germany has implemented for the introduction of
digital terrestrial television (DVB-T) in Berlin-Brandenburg

(notified under document number C(2005) 3903)

(Only the German version is authentic)

(Text with EEA relevance)

(2006/513/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

Having regard to the Treaty
Community, and in particular Article 88(2) thereof,

establishing the European

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to those provisions (1),

in

of DVB-T

Berlin-Brandenburg.

By letter of 23 December 2003, Kabel Baden-Würt-
temberg GmbH & Co. KG (‘Kabel BW’) announced that
it too would be submitting a complaint regarding the
financing
The
complaint was submitted on 8 March 2004. However,
the Commission decided that this complaint would not
be examined as part of the present formal investigation
procedure. Since the complaint deals with the prices set
by public service broadcasters (PSBs) for rental of their
terrestrial broadcasting capacities to commercial service
broadcasters (CSBs), it was included in the general inves-
tigation into the financing of PSBs in Germany (3).

(4)

(5)

Having regard to those comments,

Whereas:

I. PROCEDURE

(1)

(2)

e.V., hereinafter

By fax of 16 December 2002, the Association of Private
Cable Network Operators (Verband Privater Kabelnetzbe-
complaint
treiber
concerning the financing of digital terrestrial television
in Berlin-Brandenburg (2). By letter of 26
(DVB-T)
March 2003,
it urged the Commission to initiate the
procedure and to suspend the granting of the aid.

‘ANGA’)

filed a

By letter of 2 May 2003, the Commission submitted a
request for information from Germany. The information
was provided on 30 June 2003 following an extension of
the deadline. On 1 October 2003 a meeting took place
between the Commission departments and the alleged
provider of the aid, the Media Authority for Berlin-Bran-
‘Mabb’). Mabb
denburg (Medienanstalt Berlin-Brandenburg,
supplied further information on 23 October 2003 and
4 February 2004.

By letter of 14 July 2004, the Commission informed
Germany that it had decided to initiate the formal inves-
tigation procedure laid down in Article 88(2) of the EC
Treaty in respect of the measure at issue (‘decision to
initiate the procedure’). The Commission decision to
initiate the procedure was published in the Official
the European Union on 28 August 2004 (4).
Journal of
The Commission called on interested parties to submit
their comments on the measure.

interested

extension of

parties: Nordic

Following the
the deadline, Germany
responded by letter of 4 October 2004 to the request
for comments in the decision to initiate the procedure.
from the
The Commission also received comments
following
Satellite AB
(‘NSAB’) (5), ProSiebenSat.1 Media AG (‘ProSiebenSat.1’)
and the European Cable Communications Association
(‘ECCA’) and Deutsche Telekom AG (‘DTAG’) (6), and
Association
the
(‘ESOA’) (7). By letter of 17 November 2004,
the
Commission forwarded those observations to Germany,
which commented on them by letter of 16 December
2004.

Operators

European

Satellite

(1) OJ C 216, 28.8.2004, p. 5: state aid C 25/2004 (ex NN 36/04) —
Introduction of digital terrestrial television (DVB-T) in Berlin-Bran-
denburg.
(2) DVB-T stands

for digital video broadcasting over a terrestrial
network. Other forms of digital video broadcasting are DVB-S (by
satellite) and DVB-C (by cable).

(3) Case E 3/2005 (ex CP 43/2003).
(4) See footnote 1.
(5) By letters of 29 September 2004 and 22 October 2004.
(6) By letter of 30 September 2004 in each case.
(7) By letter of 25 October 2004.

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L 200/15

(6)

(7)

(8)

from Deutscher

from DTAG (11)

Kabelverband (9),
and

information from
The Commission received further
Mabb (8),
from
ANGA (10),
from European
Economic & Marketing Consultants GmbH (‘EE&MC’),
acting on behalf of Kabel BW (12).
the
Commission Departments met with ECCA, Mabb,
EE&MC and DTAG (13). The Commission notified
Germany of this information by letters of 14 June and
14 July 2005, to which it replied by letter of 15 August
2005.

In addition,

(9)

II. DETAILED DESCRIPTION OF THE AID

A. BACKGROUND

The present procedure is to be viewed against the back-
the digitisation of broadcasting, which is
ground of
affecting all
the currently commonly available trans-
mission platforms, i.e. cable, satellite and terrestrial.

The aid in question is for terrestrial transmission, which,
in analogue mode, can normally accommodate fewer
than 10 television channels.
the
special circumstances that existed before the Wall came

In Berlin, however,

down meant that up to 13 channels could be broadcast
terrestrially in analogue mode. After digitisation, some 30
channels will be able to be broadcast terrestrially.

that

even lower,

Since the emergence of cable and satellite in the 1980s,
the use of terrestrial broadcasting has fallen sharply in
Germany. According to data collected by AGF/GfK, the
household reception figures for primary television sets in
Germany were on 1 January 2005: 5,2 % terrestrial,
55,9 % cable and 38,9 % satellite (14). According to data
by ASTRA/Infratest, the share of terrestrial households in
Germany was
is 3,8 % (end of
2004) (15).
Berlin-Brandenburg, ASTRA/Infratest
For
gives
following breakdown of household TV
the
reception (end of 2004): 2,8 % terrestrial, 67,5 % cable
and 29,7 % satellite. Data collected by institutions related
to Mabb indicate for Berlin-Brandenburg a share of
households with terrestrial reception for their primary
television set of 5,3 % in 2004 (16). By 2005, the share
of households in the urban areas (50 % of all households
‘DVB-T core area’) was however at
in the DVB-T area,
11,4 % which demonstrates the importance of DVB-T
reception in the areas with the best reception.

Figure 1

Market share of terrestrial platform country-wide and in Berlin-Brandenburg

(8) By letters of 25 April 2005, 4 May 2005, 1 June 2005 and

4 August 2005.

(9) By letters of 6 December 2004, 26 January 2005 and 11 February

2005.

(14) Arbeitsgemeinschaft Fernsehforschung (AGF) is a co-operation of
the main German broadcasters to gauge TV viewing behaviour.

(10) By letters of 21 January 2005, 26 January 2005, 29 April 2005

(15) SES/ASTRA is

the largest

and 10 June 2005.

(11) By letters of 6 May 2005, 24 May 2005 and 4 August 2005.
(12) By letter of 31 May 2005.
(13) On 22 November 2004, 2 March 2005, 12 April 2005 and 28

April 2005 respectively.

publishes, every year,
importance of the different TV transmission platforms.

satellite operator

in Germany and
the German Satellite Monitor on the

(16) See Media Perspektiven, 12/2003, p. 560; Media Perspektiven,
7/2004, p. 299 and ALM/GSDZ Digitalisierungsbericht 2005,
p. 65.

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(10)

(11)

In order to promote the digitisation of broadcasting
transmission, the Digital Broadcasting Initiative (Initiative
‘IDR’) was launched at the end of
Digitaler Rundfunk,
1997 by decision of Germany, following a decision by
the Minister-Presidents of the Länder. Under this initiative,
Germany,
the Länder and various market participants
drew up recommendations on digitisation. An initial
IDR report was approved by Germany in August 1998
and then worked on as part of the IDR to produce a
plan, the Startszenario 2000 (17). Among other things, the
plan stated that the digitisation of cable, satellite and
terrestrial broadcasting would be completed by 2010 at
the latest.

allocation of frequencies to be used for transmission. The
following paragraphs describe the procedures that the
German authorities have followed in awarding licences
to network operators and to broadcasters.

Award of network licences

joint preparations

for
terrestrial

In the case of terrestrial broadcasting, the Länder of Berlin
and Brandenburg were the first region in Germany to
make
from
switch-over
the
television (‘switch-over’).
analogue to digital
The relevant Land legislation was first made possible
following the amendment to the State Treaty on co-
operation between the two Länder in the field of broad-
casting (‘State Media Treaty’) in November 1998 (18). On
17 December 2001 the Media Council of Mabb decided
to provide financial assistance for the switch-over. In an
agreement concluded on 13 February 2002 (‘Switch-over
Agreement’), Mabb, the public service broadcasters ARD,
ZDF and RBB (‘Rundfunk Berlin-Brandenburg’) (19) and
commercial broadcasters RTL Television (‘RTL
the
Group’)
and ProSiebenSat.1 decided on the basic
including in particular a
features of
the switch-over,
schedule for the individual phases of
the switch-over
and the allocation of a multiplex to each of the five
operators (20).

an

that

arose

launched

frequency

from the

(13) On 7 May 2002 Mabb notified the Telecommunications
and Postal Regulatory Authority (‘RegTP’) of the need for
frequencies
Switch-over
Agreement (21). The overall need was broken down into
eight service areas (Berlin 1-5 and Brandenburg 1-3).
allocation
open
RegTP
procedure on 10 July 2002 (22). The relevant legislative
there was an additional, country-wide
act noted that
service requirement (23). DTAG's
subsidiary T-Systems
applied for the frequencies for the service areas Berlin
1-5 and Brandenburg 3, and RBB for the frequencies
for the service areas Brandenburg 1 and 2. Since there
was only one application for each of the eight service
areas, RegTP allocated the frequencies on 14 October
2002 as part of the so-called application procedure and
did not need to launch the second stage of the frequency
allocation procedure, i.e. the tender procedure (24). Since
T-Systems and RBB were already operators of
the
analogue terrestrial network and thus possessed a tele-
communications licence, this requirement for allocating
the frequencies through the application procedure was
also met. The two network operators subsequently paid
the necessary frequency allocation fees as specified in the
procedural
the DVB-T
network are limited until the end of 2025 (25).

regulation. The

licences

for

(12)

In general, digital terrestrial broadcasting concerns two
types of operators which may or may not be integrated:
network operators, which take care of the transmission
of broadcasting signals, and broadcasters, which package
content. The development of digital TV requires updating
of transmission equipment by the network operator and

(14)

(17) Federal Ministry of Economic and Technological Affairs (2000):
Einführung des digitalen Rundfunks in Deutschland, ‘Startszenario’, Sach-
standsbericht und Empfehlungen der Initiative ‘Digitaler Rundfunk’ zur
Digitalisierung von Hörfunk und Fernsehen unter Berücksichtigung der
Verbreitung über Kabel, Satellit und TV-Sender.

(18) Staatsvertrag über die Zusammenarbeit zwischen Berlin und Brandenburg
im Bereich des Rundfunks of 29 February 1992 (State Media Treaty —
MStV),
in the version of 1 January 1999 (Federal Government
Gazette, p. 130), as last amended by the Law of 15 June 2001
(Federal Gazette, p. 185).

(19) RBB is member of

the ARD group. On 1 May 2003, ORB
(‘Ostdeutscher Rundfunk Brandenburg’) and SFB (‘Sender Freies
Berlin’) merged to become RBB.

(20) A multiplex is a block of digital frequencies used for broadcasting

and, in the case of Berlin-Brandenburg, has four channels.

takes over
letting and operation of the technical

the two multiplexes
In practice, T-Systems operates
allocated to RBB. The two companies have concluded
the
an agreement whereby T-Systems
provision,
infra-
structure for the transmission of DVB-T on behalf of
RBB. The agreement entered into force on 28 February
2003 (start of the second phase of the switch-over) and
will run for ten years. Moreover, T-Systems and all
broadcasters of
the ARD group have concluded a
‘Framework Agreement for the provision of DVB-T in
Germany’ which charges T-Systems with the technical
operation of the DVB-T networks.

(21) Since 13 July 2005, the Telecommunications and Postal Regulatory
Authority has been renamed Federal Network Agency (‘Bundes-
netzagentur’).

(22) Official Gazette RegTP No 13/2002, Act No 22/2002, p. 1010.
(23) See paragraph 15.
(24) On account of coordination problems with Poland, RegTP did not

in the end allocate service area Berlin 4 (Kanal 47).

(25) Official Gazette RegTP No 6/2002, Act No 6/2002, point 1.6.

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(15) Apart from the regional frequency allocation procedure
for eight multiplexes for Berlin-Brandenburg, all
the
Länder agreed on a national
service area for one
multiplex to be allocated to the broadcaster ZDF.
RegTP launched the frequency allocation procedure for
this multiplex on 27 November 2002 (26). The relevant
legislative act noted that
the procedure would be
launched even though sufficient frequency capacity for
the Federal Republic was not yet
the territory of
to be
the areas
available and that
allocated frequencies were not yet known (27).
It also
pointed out that the national need had to be met by
one and the same network operator. In other words, it
was not possible for a bidder to apply to operate this
multiplex only in certain regions. The only company to
submit a bid for the operation of this multiplex was
T-Systems.

the details of

Award of broadcasting licences

(16)

The allocation of the multiplexes to network operators
under telecommunications legislation, which is described

In accordance with Section 52a(1) of

is to be distinguished from the allocation of
above,
programme channels to broadcasters under media legis-
lation. Mabb is responsible for allocating programme
channels. The relevant procedure was laid down in the
DVB-T statutes (DVB-T Satzung) adopted on 9 July
2001 (28).
the
State Broadcasting Treaty (Rundfunkstaatsvertrag) (29) and
with Section 6a(1) of the State Media Treaty (Medien-
staatsvertrag), the statutes state in particular that, for the
first allocation of digital terrestrial broadcasting capacity
in Berlin and Brandenburg, consideration must be given,
as a matter of priority, to the programme channels which
are already broadcast in analogue form. The technical
transmission capacities for these programmes have to
be equivalent relative to the other transmission capacities.
In the case of commercial broadcasting groups that
transmit more than one analogue terrestrial channel,
the statutes envisage the allocation not of
individual
programme channels but of entire multiplexes.

Programme coverage and network operators during digital switch-over

Table 1

Channel

Analogue TV

Service area

Coverage as of 11/2002

Coverage as of 3/2003

Coverage as of 8/2003

(TV Berlin)

Berlin 1

ARD/ZDF/ORB/SFB

TV-Bouquet

BBC World/FAB/WDR/SWR

Das Erste

Brandenburg 1

Das Erste

ARD Bouquet

ARD Bouquet

Berlin 2

FAB

SAT.1

FAB

RTL Bouquet

RTL Bouquet

Brandenburg 2

ORB

RBB Bouquet

RBB Bouquet

X

X

country-wide

VOX

ZDF

SFB/B1

Berlin 3

SFB/B1

BBC World

Erste — Simulcast

ZDF Bouquet

ZDF Bouquet

SFB/B1

BBC World

Other media services

X

FAB

SAT.1

ORB

VOX

ZDF

BBC World

Pro7

RTL II

Brandenburg 3

Pro7/Sat.1/RTL/RTLII

Pro7Sat.1 Bouquet

Pro7Sat.1 Bouquet

Berlin 4

RTLII → Pro7 Simulcast

ZDF — Simulcast

X (not allocated)

RTLII — Simulcast

ORB — Simulcast

X

RTL

Berlin 5

RTL

TV — Bouquet

Eurosport/Viva/DSF/9Live

Explanation: Channels K 05, K 25, K 33, K 39, K 44 and K 56 are provided by T-Systems, while Channels K 07 and K 27 were allocated to RBB but are also provided by
T-Systems. On account of coordination problems with Poland, Channel K 47 has not yet been allocated by RegTP. Analogue transmissions are in italics.

(26) Official Gazette RegTP No 23/2002, Act No 36/2002, p. 1695. As
a minimum service requirement within the national requirement,
Channel 33 was established for the Berlin-Potsdam area with a
starting date of 28 February 2003.

(27) Official Gazette RegTP No 23/2002, Act No 36/2002, p. 1695, II.

General.

(28) Berlin Official Gazette, p. 3538; Brandenburg Official Gazette/

Annex., p. 1099.

(29) Staatsvertrag über den Rundfunk im vereinten Deutschland of 31 August
1991 (State Broadcasting Treaty — RStV), in the version of 1 July
2002, Official Gazette, p. 162.

K 05

K 07

K 22

K 25

K 27

K 29

K 33

K 39

K 41

K 44

K 47

K 51

K 56

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(17)

for

total

capacity

transmission

broadcasting
The
consisted in seven multiplexes.
It was finally allocated
as follows: three entire multiplexes (K 07, K 27 and
K 33) and one programme channel on a fourth
to the PSBs (ARD and ZDF). Two
multiplex (K 05)
programme channels on the fourth multiplex were
allocated to FAB (Fernsehen aus Berlin) and BBC World,
which were already present on the analogue network. An
entire multiplex was allocated to each of the commercial
broadcasting groups, RTL Group (K 25) and ProSie-
benSat.1 (K 44). All these channels were allocated by
decision of Mabb without an open procedure. The
remaining capacity was opened up to tender individually
by decision of 8 May 2002 (30). However, for want of
channels were
suitable
initially allocated for a one-year period to the following
broadcasters (31): Eurosport, Viva Plus, Deutsches Sport-
fernsehen (DSF)
companies
mentioned had taken part in a second tender procedure
published on 16 April 2004 (32),
the corresponding
licences were extended to five years. The remaining trans-
mission capacity (K 39) was earmarked for providers of
other forms of broadcasting, with mobile television trans-
mission (DVB-H) in particular to be tried out.

these programme

SWR. After

tenderers,

and

the

with promoting, among other things, development of the
technical infrastructure for broadcasting and projects for
new broadcasting techniques out of their share of the
licence fee. On the basis of
these legal provisions,
Mabb, as mentioned above, adopted the DVB-T statutes
and concluded the Switch-over Agreement with the PSBs
and the commercial broadcasting groups ProSiebenSat.1
and RTL Group.

(20) According to Germany, the assistance is designed essen-
tially
in an
to ensure pluralistic media diversity
increasingly converging field, to safeguard infrastructure
competition for digital modes of transmission, to use
frequencies efficiently and to develop new services and
uses.

(21) Mabb concluded with the

ProSiebenSat.1 and RTL Group

groups
containing the following key points as
assistance to be granted (33):

commercial broadcasting
contracts
the

regards

Phases of switch-over process

the first phase of

(18) As regards the practical arrangements for the switch-over,
mention should be made of
the DVB-T pilot project
which had been operational as of August 1997 and in
which DTAG, together with Mabb and SFB, operated a
DVB-T network in Berlin-Brandenburg on a trial basis.
On 1 November 2002, which saw the start of normal
operations,
the switch-over was
launched,
involving two digital multiplexes (K 05 and
K 44) operated by T-Systems. On 28 February 2003,
analogue broadcasting of
commercial
channels came to an end and DVB-T transmission was
significantly expanded (second phase of the switch-over).
As a result, these channels were completely switched to
digital
terrestrial broadcasting after a simulcast period
lasting only four months. On 4 August 2003 analogue
terrestrial broadcasts by all other broadcasters were
halted.

the national

(a) Mabb allocated to each of

the two broadcasting
groups for a period of seven years a multiplex with
four programme channels.

(b) The broadcasting groups undertook to broadcast
their main television channels via DVB-T for five
years as of 1 March 2003, irrespective of the actual
coverage.

amounts

EUR 265 000 a

(c) Mabb made available to the two broadcasting groups
grants towards the broadcasting costs of the digital
terrestrial transmission. In the case of RTL Group, the
year,
grant
or
to
EUR 66 250 per programme channel.
In the case
it amounts to EUR 330 000 a
of ProSiebenSat.1,
year, or EUR 82 500 per programme channel. The
grants are payable as of 1 March 2003 for a period
of five years. If the transmission costs calculated for
the broadcasters by the network operator increase or
the
decrease, Mabb will normally bear half of
difference,
the increase or decrease in
costs.

i.e. half of

B. DESCRIPTION OF THE AID

(19)

The subject-matter of the formal investigation procedure
is the financial assistance provided by Mabb for the
switch-over from analogue to digital terrestrial television.
The legal bases for this assistance are Section 40(1)(2) of
the State Broadcasting Treaty and Section 8(1)(8) of the
State Media Treaty, pursuant to which the Land media
in the present case, Mabb are charged
authorities and,

(d) In the negotiations with ProSiebenSat.1, a coverage-
related factor was also taken into consideration (34).
After the first two years, the annual assistance of
EUR 330 000 will be reduced to EUR 250 000 for
terrestrial
the remaining three years if
coverage in the reception area exceeds 200 000
households.

the digital

(30) Berlin Official Gazette, No 25 of 24 May 2002, p. 1875.
(31) The procedure is specified in Section 28(5) of the State Media
Treaty. See, for example, the agreement between DSF and Mabb.
The transmission of 9Live within the same multiplex (K 56)
is
solely on a trial basis at the initiative of the network operator T-
Systems.

(32) Berlin Official Gazette of 16 April 2004.

(33) The agreement with RTL Group was signed on 3 June 2003, the

agreement with ProSiebenSat.1 on 4 December 2003.

(34) Germany has maintained that the transmission costs of ProSie-
benSat.1 are higher than for the RTL Group. Data submitted by
T-Systems on 24 May 2005 show however that in 2003 and 2004
the transmission costs of ProSiebenSat.1's multiplex were lower
than those of RTL's multiplex.

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(22) According to Germany, the grant amounts to around one
third of the fees payable by the broadcasting groups to
the network operator. It is calculated in such a way that
the two broadcasting groups have to pay the same fee to
the network operator for a multiplex as they previously
did for an analogue channel. Assistance equivalent to one
third of the digital transmission costs thus reflects the
fact that the transmission of a multiplex is some 50 %
more expensive than that of an analogue channel.
However, the Commission notes already at this stage
that it must be borne in mind here that a multiplex
has four times the transmission capacity of an analogue
channel,
i.e. four programme channels instead of only
one.

the

switch-over, were

(23) Mabb concluded similar agreements with FAB and BBC
also
World, which, before
transmission (‘ATT’)
broadcast via analogue terrestrial
and thus had a claim to a programme channel on the
DVB-T network (35). For these broadcasters too, Mabb
provides a grant
for a
period of five years. The grant is equal to one third of
the fees payable by the network operator. Calculation of
the amount of assistance is based on the operator's
invoice. However, the level of assistance amounts to at
most EUR 68 167 per year.

transmission costs

towards

(24) As for the broadcasters that were not broadcast terrest-
rially before the switch-over, i.e. Eurosport, Viva Plus and
DSF, Mabb concluded a third type of agreement (36).
Programme channels were allocated to these broadcasters
for a period of only one year beginning on 1 August
2003. During that period Mabb provided them with a
grant of EUR 65 000 each. If the broadcasting costs of
the network operator and thus the costs payable by the
broadcasters to the operator fall, the amount of funding
is reduced accordingly. There is no provision for the
grant to be increased. Following a second invitation to
tender by Mabb on 16 April 2004, the DVB-T broad-
casting licences and the public funding have been
extended to five years.

(25)

the programme channels of

In its response to the decision to initiate the procedure,
the
Germany stated that
commercial
were
abovementioned
currently
some
annual
EUR 60 000 each. In the case of RTL Group and ProSie-
benSat.1, this represents total public funding per year of

broadcasters
of
funding

receiving

(35) The Agreements with FAB were signed on 2 June and 22 August
2003, and the Agreement with BBC World on 2 December 2003.
(36) On the initiative of the network operator T-Systems and with the
approval of Mabb, 9Live is transmitted within the same multiplex
only on a trial basis. As yet, 9Live has not benefited from any
formal capacity allocation or from any assistance from Mabb.

for

to the

in fact

amounts

full year of

to a
In response
some EUR 240 000 per group.
subsequent
information, Germany has
request
corrected this information. The public funding corre-
sponds
specified in the
Agreements with the individual broadcasters. In 2004,
the first
funding, Mabb provided the
following amounts: EUR 330 000 for ProSiebenSat.1,
EUR 265 000 for RTL Group, EUR 68 167 each for
FAB and BBC World, and EUR 65 000 each for DSF,
this infor-
Eurosport and Viva Plus. On the basis of
funding for
mation,
commercial
EUR 4
million. To date, Mabb has already granted about half
of this amount.

amount of Mabb's
comes

total
broadcasters

some

the

to

for

operator

channels

supposed to be

broadcasting
the DVB-T

regulated by RegTP (37).

(26) As can be seen from the Agreements between Mabb and
the individual broadcasters, the latter pay a fee to the
network
their
the
of
network.
over
programme
According to the original invitations to tender (A.6) for
the programme channels launched by Mabb, these fees
In
were
accordance with the Federal Telecommunications Law
(‘TKG’) of 22 June 2004, the network operator must,
however, be found to possess significant market power
before measures
regulating the fee payable can be
imposed by RegTP (Sections 10 to 13 TKG). As far as
the DVB-T network is concerned, RegTP has not yet,
however, defined the relevant markets, with the result
that the existence of significant market power, which is
necessary for the fees to be regulated, has still not been
established.

(27)

If the existence of significant market power on the part
of a network operator is established in accordance with
the fees would have to be
Sections 30 to 33 TKG,
the costs of
regulated according to the principle of
service provision. T-Systems has maintained
efficient
that
it applies this principle to the fees it sets even
though there is as yet no legal obligation to do so.

(28) Mabb finances the grants towards commercial broad-
casters’ transmission costs from its own budget, which
essentially receives 2 % of the licence fee income accruing
to Berlin and Brandenburg (in accordance with Section
40 of the State Broadcasting Treaty and Section 15 of the
State Media Treaty).

(37) Berlin Official Gazette, No 25, 24 May 2002, p. 1875, and Berlin

Official Gazette of 16 April 2004.

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(29) Mabb grants the funding described above only to the
commercial broadcasters. The PSBs finance the costs of
DVB-T transmission out of
the licence fee income
accruing to them. According to KEF reports, ARD paid
a total of EUR 43,9 million country-wide for DVB-T in
the period 2001-04, the corresponding figure for ZDF
being EUR 35,6 million (38). The KEF reports do not
provide any regional breakdown. It must, however, be
assumed that a substantial amount of these resources
have been available for DVB-T transmission in Berlin-
Brandenburg since this was the first and the longest-
running DVB-T project in Germany during the period
concerned. The
launch of DVB-T transmission in
Berlin-Brandenburg on 1 November 2002 was followed
by the launch in North Rhine-Westphalia (but not until
24 May 2004) and then in the Rhine-Maine area and in
Northern Germany in the second half of 2004.

(30)

(31)

C. REASONS FOR INITIATING THE FORMAL INVESTIGATION
PROCEDURE

In the decision to initiate the procedure, the Commission
noted first that the measure described seemed to meet all
therefore, be
the criteria of Article 87(1) and could,
regarded as State Aid.
it differentiated
between two types of potential beneficiary, namely the
commercial broadcasters as direct beneficiaries and the
network operator T-Systems as the indirect beneficiary.

In particular,

The Commission also expressed doubts as to the compat-
ibility of the aid with the EC Treaty. Neither the dero-
gations from the general prohibition on Aid listed in
Article 87(2) nor
the derogation in Article 87(3)(c)
seemed to be met. What was particularly problematic
according to the Commission was the fact that the aid
appeared to infringe the requirement of
technological
neutrality.
the Commission wondered
whether the aid could be regarded as compensation for
a service of general economic interest.

In addition,

(32)

Lastly, the Commission initiated the formal investigation
to give Germany and interested
procedure in order
parties the opportunity to submit their comments on
its provisional assessment of the measure described and
to make available to the Commission any relevant infor-
mation.

III. COMMENTS FROM INTERESTED PARTIES

(34)

(35)

(36)

(37)

supported

(33) NSAB submitted two sets of comments in which it
generally
the
the
Commission in the decision to initiate the procedure.
In practice, it took the view that the measure constituted
State Aid for which, moreover, no exemption could be
claimed. In particular, it stressed the non-technologically
neutral nature of the measure and the adverse compe-

expressed

views

by

(38) Fourteenth Report of the Commission to determine the financial

requirements of broadcasters (KEF), pp. 99 and 107.

titive effects of the indirect funding for T-Systems on
operators of cable and satellite networks.

ProSiebenSat.1 stressed the importance of the funding,
for the success of the
from a commercial viewpoint,
digital switch-over. Without any assistance,
it would
have considered switching off terrestrial transmission in
Berlin-Brandenburg without any replacement. There was
also the risk with the switch-over that terrestrial coverage
would suddenly cease, with the financing of commercial
broadcasters out of advertising revenue being adversely
the
affected. ProSiebenSat.1 also made the point
participation of
commercial broadcasting
in the switch-over alongside the PSBs was
groups
to secure a sufficient degree of
necessary in order
consumer acceptance. Furthermore,
it claimed that the
benefit conferred by the assistance was passed on
through payment of
to the
network operator T-Systems. Lastly,
it stated that the
assistance provided by Mabb reduced the competitive
advantage enjoyed by the PSBs, which had access to a
level of fee income for the introduction of
substantial
DVB-T.

transmission fees

large

that

the

the

The comments by ECCA generally supported the views
expressed by the Commission in its decision to initiate
the procedure. ECCA points out in particular that the
the
measure
operators of other transmission platforms, which relied
exclusively on capital markets to obtain finance.

described placed

disadvantage

at

a

Similarly, the comments by ESOA supported the view
expressed by the Commission in the decision to initiate
the procedure to the effect that the measure described
constituted state aid that was incompatible with the EC
Treaty. ESOA also pointed out that,
in many respects,
satellites were a cheaper and more market-oriented form
of transmission than digital terrestrial transmission.

In its comments, DTAG doubted that
the assistance
granted by Mabb constituted State resources and thus
It went on to say that T-Systems could not be
Aid.
regarded as an indirect beneficiary. T-Systems received
appropriate market remuneration for the DVB-T trans-
mission and had also been allocated the frequencies in
an open and transparent tender procedure. In addition,
the assistance had to be seen as compensation for the
provision of public-interest services by the commercial
broadcasters, which had decided to dispense with
analogue terrestrial
transmission and had switched to
DVB-T transmission. This also ruled out the existence
of
for T-Systems. Lastly, DTAG
disputed that there had been any distortion of compe-
tition between terrestrial, cable and satellite transmission
since the three modes of transmission were not substi-
tutable from the point of view of the consumer.

assistance

indirect

22.7.2006

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Official Journal of the European Union

L 200/21

(38)

(39)

The Commission notes that the other comments were
received after the planned one month deadline and that
the interested parties had not asked for any extension.
Since these comments have helped, however, to provide
a full picture of the form and effect of the measure, they
are reproduced below with a view to ensuring a
maximum degree of
all
comments and information have been passed on to
Germany so that
it has had the opportunity to
comment on them in turn.

transparency.

In addition,

the

that

In its comments, the German Cable Association stated
the measure constituted unilateral assistance for
that
seriously distorted
DVB-T from public monies
competition among
competing network infra-
structures. The DVB-T network was developed without
any financial risk for the network operator since the
participation of the commercial broadcasters was guar-
anteed by providing them with financial assistance.
Furthermore, the German Cable Association noted that
neither the tender procedure for DVB-T launched by
RegTP nor
for broadcasting
tender procedure
licences launched by Mabb could be described as open
and transparent. It also doubted that the assistance was
necessary since the market participants had a vested
interest in the switch-over and since alternatives to the
assistance provided had existed. The assistance was not
appropriate since it had not been calculated on the basis
of the costs actually incurred by the broadcasters.

the

(40) A similar line was taken by ANGA, which also pointed
to the lack of transparency in respect of the result of the
tender procedures at the level of the network operation
and the broadcasting licences.
It also referred to the
vested interest of the network operator and of the broad-
casters in the digital terrestrial switch-over. Furthermore,
it
specifically designed to
compete with cable and refuted arguments to the effect
that DVB-T would have to be justified as a means of
securing plurality of opinion and for
socio-political
the collection of
reasons. Lastly, ANGA argued that
customer fees would have been an alternative to public
funding.

stressed that DVB-T was

(41)

Kabel BW observed that the assistance granted by Mabb
for DVB-T had led to distortion of competition detri-
to satellite and cable services. Applying an
mental
analytical model,
it also endeavoured to show that
assistance for the DVB-T network in Berlin-Brandenburg
would not be necessary since the fees accruing to the
network operator would be sufficient to cover the costs
of digital terrestrial transmission. It concluded from this
that compensation in the form of assistance from Mabb
was not necessary even if development of the DVB-T
network were
general
as
economic interest.

service of

regarded

a

IV. COMMENTS FROM THE FEDERAL REPUBLIC OF
GERMANY

(42)

In its response to the decision to initiate the procedure,
Germany takes the view that the assistance granted by

the EC Treaty. Firstly,

Mabb does not constitute aid within the meaning of
Article 87(1) of
the assistance
did not come from State resources since the funds
were not under State control, and Mabb was free to
decide how they were to be used. Secondly, the assistance
was not granted to specific beneficiaries. This was the
case not only with the commercial broadcasters as
direct beneficiaries but also with the network operator
as indirect beneficiary, since the assistance granted to the
undertakings concerned was the result of open and trans-
parent tender procedures. As a result, no specific under-
taking benefited. Thirdly, Germany states
the
that
assistance did not distort competition.
In the case of
the broadcasters, the digital switch-over increased compe-
tition since capacities for additional programme channels
became available. In the case of the network operator,
the various modes of transmission were not sufficiently
substitutable,
this being a necessary condition for a
distortion of competition.

(43)

If the Commission were to classify the measure under
investigation as state aid, Germany would argue that the
measure was compatible with the EC Treaty under Article
87(3)(c), Article 87(3)(d) or Article 86(2).

television services or mobile

(44) Under Article 87(3)(c), the measure contributed to the
development of
the broadcasting sector since DVB-T
allowed more television broadcasters to transmit and
promoted the development of new services such as inter-
active
and portable
reception. In addition, it fostered media plurality, compe-
tition between the various modes of digital transmission
and an efficient use of frequencies. Germany also argues
that the assistance in its present form is necessary and
appropriate since market forces alone would not have
been sufficient
the switch-over and
since the measure constituted a relatively small incentive.

to bring about

(45) On the basis of Article 87(3)(d), Germany argues that the
measure can be justified as aid to promote culture and
that the assistance served to develop a pluralistic broad-
casting system and thus fell within the cultural remit of
the Member States.

(46)

the broadcasting of

Lastly, Germany argues that
tele-
vision programmes over DVB-T is a service of general
economic interest and that the Aid could be approved
under Article 86(2). Under the agreements with Mabb on
the capacity allocation and the granting of assistance, the
commercial broadcasters were charged with providing a
service, namely ‘participation in the digital switch-over
the digital
and broadcasting of programmes over
terrestrial mode of transmission’. Without the assistance,
they would not have been willing to broadcast over the
DVB-T network, and this would have jeopardised the
survival of this mode of transmission, the preservation
of which was in the public interest.

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Official Journal of the European Union

22.7.2006

(47)

and

cable,

satellite

and terrestrial broadcasting.

In its response to the comments from the interested
parties, Germany makes the point that, as a rule, the
regulation of infrastructure in accordance with Directive
2002/21/EC on the Common Regulatory Framework for
Services
Electronic Communications Networks
(Framework Directive) (39) is based on different markets
for
In
addition, the operators of these networks have failed as
yet to provide evidence that cable and satellite have been
disadvantaged in practice by the digital switch-over in
Berlin-Brandenburg. No broadcaster had yet abandoned
satellite broadcasting because Mabb was promoting the
switch-over to DVB-T. However, Germany states that,
through the measure, it intended to secure ‘viable infra-
structure-based competition’ that, as in the case of the
broadband sector, could be expected to have a positive
effect.

be considered State resources within the meaning of
Article 87(1) (41).

(51) Germany replied that, for a measure to rank as State
resources,
it must constitute a burden for the State
budget. Since, in the present case, the funding does not
represent a financial burden for the budgets of the Länder
of Berlin and Brandenburg but
is financed from the
licence fee (Rundfunkgebühr) collected from TV viewers,
the
resources.
Secondly, Germany stated that Mabb decided indepen-
dently and according to its status as an institution inde-
the State which concrete measures were
pendent of
necessary
switch-over.
to
Accordingly, there was no direct influence by the State.

does not

constitute

promote

funding

digital

State

the

(48)

In its response to additional comments from interested
parties, Germany disputes in particular the arguments
which cast doubt on the open, transparent and non-
discriminatory nature of the procedure to allocate the
network licences. Moreover, Germany disputes that the
customer data submitted by cable operators show a
negative competitive effect of the launch of DVB-T on
cable operators. Instead, Germany highlights the strong
competitive position of cable operators.

(52)

V. LEGAL ASSESSMENT

V.1. State Aid within the meaning of Article 87(1) of
the EC Treaty

(49)

The Commission has examined whether the measure can
be classified as State Aid within the meaning of Article
the EC Treaty, according to which ‘any aid
87(1) of
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.’

State resources

(50)

In the decision to initiate the procedure, the Commission
stated that advantages granted by a public or private
body designated or established by the State fall within
the scope of Article 87(1) (40). It maintained that Mabb
should be considered a public body established or
appointed by the State which performs a public task
and that the advantages granted by this body should

resources.

It
Irrespective

In the Commission's view,
the advantage granted by
Mabb is granted indirectly through State resources and
is funded from Mabb's
is imputable to the State.
budgetary
the
of whether
German licence fee, which provides Mabb's budgetary
is to be regarded as forming part of State
resources,
these monies are to be considered State
resources,
resources as of
they become part of
Mabb's budget. The fact that these monies are collected
from private individuals, as argued by Germany, does
the finding that Mabb's
not,
budget
tax
revenue
individuals becomes
State resources once the taxes have been levied and
collected by the State. Clearly,
the costs incurred by
Mabb in conferring the advantage constitute a burden
for Mabb's budget.

ranks
as State
collected from private

in any event, contradict

resources. By analogy,

the moment

in the

(53) Moreover, Mabb is a public authority established by the
State Media Treaty of the Länder of Berlin and Bran-
denburg. The Treaty defines Mabb's organisational
structure and assigns to Mabb a broad range of public
tasks
field of broadcasting and frequency
management. Moreover, Mabb is subject to legal super-
vision by the Land governments of Berlin and Bran-
denburg (‘staatliche Rechtsaufsicht’) (42) and its annual
budget is subject to control by the Court of Auditors
of the Land of Berlin (43). The public task of relevance
in the present case is laid down in the State Media Treaty
as well as in the State Broadcasting Treaty. It is described
as the promotion of the technical infrastructure of broad-
casting and of projects of new broadcasting transmission
technologies (44). More specifically with respect
to the
digital switch-over,
the State Media Treaty assigns to
Mabb the task of supervising the digital switch-over
if necessary, adopting statutes (Satzung) defining
and,

(39) OJ L 108, 24.4.2002, p. 33.
(40) See the judgement of the Court of First Instance of 12 December
1996 in case T-358/94, Air France v. Commission, ECR [1996] II-
2109 and the judgement of the Court of 16 May 2002 in case C-
482/99, France v Commission, Stardust Marine [2002] ECR I-4397.

(41) State Media Treaty, in particular Sections 7 and 8.
(42) State Media Treaty, Section 18.
(43) State Media Treaty, Section 17.
(44) See paragraph 19.

22.7.2006

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Official Journal of the European Union

L 200/23

the necessary measures (45). In particular, Mabb is entitled
to lay down specific rules on the allocation of the digital
terrestrial frequencies. To this end,
it has the right to
conclude agreements specifying the development of the
digital technology and the overall programme offer (46).
Mabb acted on these provisions of the State Media Treaty
when it adopted the statutes specifying the conditions of
the digital switch-over (DVB-T Satzung) on 9 July 2001,
when it concluded the Switch-over Agreement (Umstiegs-
vereinbarung) with several terrestrial broadcasters on 13
February 2002 and when it concluded the Agreements
with the individual commercial broadcasters on their
respective DVB-T licences and the related funding in
the
course of 2003. The Commission therefore
considers that the present measure is imputable to the
State.

(54)

Finally, Community law cannot permit the rules on State
Aid to be circumvented merely through the creation of
autonomous institutions charged with allocating aid (47).
In spite of allowing for a certain degree of autonomy, the
State Media Treaty clearly defines the public tasks to be
performed by Mabb and leaves limited discretion to it on
how to spend its budgetary resources.
In particular,
Mabb's autonomy does not preclude its activities and,
more specifically,
financial resources from
being guided by political considerations and not simply
by economic considerations. The lack of economic
considerations
for
example, from the fact that the funding is given in the
form of non-repayable grants with no direct benefit to
Mabb.

in the present case is apparent,

its use of

Economic advantage

(55)

In the decision to initiate the procedure, the Commission
held that the measure seemed to favour two groups of
beneficiaries, firstly, the commercial service broadcasters
as direct beneficiaries and, secondly, the operator of the
DVB-T network, T-Systems, as indirect beneficiary.

(56) At the level of broadcasters, the subsidy granted by Mabb
covers some of
transmission costs via the
DVB-T network for a period of five years. The support
thus relieves them of expenses which are part of their
normal operating costs.

the CSBs’

(57) Germany

that Mabb's

has maintained

subsidy
compensates broadcasters for giving up their previous
therefore not constitute an
ATT licences and does
advantage for them. There are, however, a number of
reasons why this argument cannot be accepted.

(45) State Media Treaty, Section 46(3).
(46) State Media Treaty, Section 46(4):

‘Die Medienanstalt kann durch
Satzung besondere Regelungen für die Vergabe digitaler
terrestrischer
Frequenzen treffen. […] Die Zuweisung kann durch öffentlich-rechtlichen
Vertrag erfolgen, in dem die Entwicklung der digitalen Technologie und des
Gesamtangebots festgelegt wird.’

(47) Case C-482/99, at 23, and the references cited there.

(58)

(59)

(60)

(61)

Firstly, the subsidy does not take into account in any way
the outstanding duration of the different ATT licences.
Indeed, the subsidy was also granted to channels which
were not previously present in ATT (48) or whose ATT
licence expired shortly before the analogue switch-off on
28 February 2003 (49). In any event, the agreements with
the CSBs relate the subsidy exclusively and explicitly to
the transmission costs in the new DVB-T network and
not to the return of the ATT licences.

Secondly, since the switch-over was planned several years
in advance, Mabb could have limited the duration of the
ATT licences to the switch-over date in order to avoid
any potential compensation claims on the part of the
CSBs. This was the approach followed, for example, in
Bavaria and the United Kingdom.

the CSBs which were present
if not

in ATT were
Thirdly,
least partially,
completely then at
already,
compensated for the switch-off of their ATT transmission
by the allocation of DVB-T channels. RTL Group and
ProSiebenSat.1 were,
in fact, allocated more DVB-T
channels than they previously had in ATT.

Fourthly, as regards transmission costs, the subsidy is not
designed as temporary support to facilitate the transition
during the simulcast phase (which,
in the case of the
CSBs,
lasted only four months), but for the five years
after switch-over. More generally, the transmission costs
per programme channel are lower for DVB-T than in
analogue mode so that, even without any subsidy, the
broadcasters
savings by
switching to DVB-T.

achieve per

channel

cost

(62) At

that

receives

it appears

an indirect

the network level,

is an integral part — T-Systems has

the network
operator T-Systems
advantage
stemming from Mabb's subsidy (50). Under agreements
between Mabb and the CSBs — of which the financial
support
the
guarantee that the two major German CSBs in particular,
which together account for about 90 % of total German
TV advertising revenue and for close on half of German
TV viewing (51), will use its network for five years. The
guaranteed participation of
the German CSBs is thus
important for T-Systems in terms of guaranteed revenue.

(48) This is true for the channels DSF, Eurosport and Viva Plus as well as
for the channels Super RTL, N24 and Kanal 1, which belong to
broadcasters previously present in ATT.

(49) The analogue terrestrial licence of RTL II expired on 30 September

2002 and that of ProSieben on 28 November 2002.

(50) Even though RBB rolls out part of the DVB-T network (two multi-
plexes), it cannot be considered a beneficiary because these multi-
plexes are used only by PSBs which do not receive any subsidy
from Mabb.

(51) Media Perspektiven, Basisdaten: Daten zur Mediensituation in
Deutschland 2004, pp. 11 and 18; AGF/GfK Fernsehforschung
and I-Punkt Deutschland, based on Nielsen Media Research.

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Official Journal of the European Union

22.7.2006

(63)

transmission prices

In addition, compared with a situation in which no
subsidy is granted, T-Systems might be able to charge
CSBs higher
than under normal
market conditions (52), while possibly avoiding the need
to charge end-users for access to DVB-T (subscription
fees), as happens, for example,
in the Netherlands and
Sweden. It is however not possible to establish to what
currently charged by
extent
T-Systems and not being subject
to price regulation
exceed market prices. It is therefore not possible either
to quantify the price which the CSBs would have been
prepared to pay in the absence of the aid and hence to
establish whether there has been a transfer of state
resources.

transmission fees

the

Distortion of competition

Award of network licences and broadcasting licences

through

(64) Germany has argued that the measure does not distort
competition since it does not confer a selective advantage
on either the commercial broadcasters or on the network
operator T-Systems because the respective licences were
acquired
tender
procedures. According to this argument, the tendering
has ensured that any broadcaster or network operator
could, in principle, have benefited from the funding, so
that
selective.
Germany argues that it is in particular in the case of
to be
indirect beneficiaries
selective in order to rank as aid.

the measure cannot be

a measure needs

regarded as

transparent

open

that

and

(65)

The Commission has doubts that the tender procedures
the selective economic
were such as to ensure that
subsidy would be
advantage deriving from Mabb's
minimised or even eliminated and thus adequate to
prevent a distortion of competition.

(66)

the level of broadcasters,

Indeed, at
the majority of
licences were not subject to any tender procedure. Of
the total capacity of 14 DVB-T channels reserved for
CSBs and qualifying for Mabb's subsidy, Mabb allocated
ten without any tender procedure. The basis for the
direct allocation of these channels was that the respective
broadcasters (RTL Group, ProSiebenSat.1, BBC World
and FAB) were already present in the analogue terrestrial
network (53). Contrary to the argument put forward by

(52) In particular, T-Systems' pricing in the DVB-T network is currently
not subject to regulation since RegTP has not yet analysed the
broadcasting transmission services market under the new regulatory
framework for electronic communication networks and services,
‘market 18’: broadcasting transmission
under which this
services, to deliver broadcast content to end users. See Commission
Recommendation 2003/311/EC of 11 February 2003.

is

(53) State Media Treaty, Section 6a.

Germany, there was, in the case of these broadcasters, no
tender procedure which could possibly have eliminated
the selective advantage conferred by Mabb's funding.

(67)

In the case of the remaining transmission capacity for
CSBs, Mabb published a first tender on 8 May 2002 and
a second tender on 16 April 2004 (54). Although the
attribution of licences via a tender is generally preferable
to the direct attribution, the Commission considers for
the following reasons that the tender procedures in the
present case cannot be considered to have minimised or
even eliminated the economic advantage of Mabb's
funding and were thus inadequate to prevent a distortion
of competition. Neither of
the two tenders gave a
binding commitment
that Mabb would subsidise the
transmission costs. The first tender stated explicitly that
the funding would depend on a number of conditions
related to the network roll-out. Moreover, the tenders did
not give an indication of the possible amount of any
funding. The respective tender specifications mentioned
only that the annual transmission costs per programme
channel were likely to vary between EUR 150 000 and
EUR 200 000. The Commission therefore considers that
the two tender procedures were not sufficiently trans-
parent
the advantage deriving from
Mabb's subsidy would be adequately reflected in broad-
casters’ bids or to exclude any degree of selectivity (55).

to ensure that

(68) At network level, RegTP initiated a first procedure to
allocate the frequencies for eight regional multiplexes
on 10 July 2002 and a second procedure for one
national multiplex on 27 November 2002 (56). The
Commission considers that these procedures were not
sufficient to rule out a possible economic advantage to
the network operator T-Systems as a result of Mabb's
subsidy and may thus have distorted competition:

specifications, nor was

(a) Firstly, Mabb's financial assistance to broadcasters for
using the DVB-T network was not mentioned in the
its exact amount
tender
the time the tenders were
actually determined at
published. Bidders’ knowledge of
the existence of
the aid could not have been reflected in a corre-
spondingly higher or better bid for the licence. The
German argument that bidders could deduce what
Mabb's planned financial assistance would be from
the Switch-over Agreement signed on 13 February
2002
Switch-over
accepted.
Agreement did not specify how Mabb would assist
the roll-out of the DVB-T network, nor did it give an
indication of
the possible amount of any such
funding.

cannot

The

be

(54) See paragraphs 16-17.
(55) In a fully transparent and open tender procedure,

the bidding
broadcasters could be expected to transfer part or all of
the
advantage deriving from a subsidy into higher or qualitatively
better bids for the licence.

(56) See paragraphs 13-15.

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Official Journal of the European Union

L 200/25

(b) Secondly, T-Systems as the operator and owner of
the ATT network and as a participant in the earlier
DVB-T pilot project in Berlin-Brandenburg enjoyed a
considerable advantage over any new entrants when
it came to submitting a bid. Even if competitors
could consider renting part of T-Systems’ terrestrial
infrastructure in order to roll-out a DVB-T network,
T-Systems
the
terrestrial networks throughout Germany must still
be seen to possess a comparative advantage over
any new entrant.

incumbent operator of

the

as

(c) Thirdly, T-Systems operates the DVB-T multiplexes
formally allocated to the regional public service
broadcaster RBB,
thereby conferring on T-Systems
the additional advantage of operating the part of
the DVB-T network reserved for the transmission of
the RBB and ARD channels. T-Systems can thus
exploit economies of scale and scope not available
to competitors.

the

allocation of

(d) Fourthly, as mentioned in paragraph 15, RegTP's
publication for
national
multiplex specified that
this multiplex must be
operated by one and the same network operator,
It also
effectively keeping out regional contenders.
specified that
this
multiplex were in fact not yet known, adding to
the uncertainty of the DVB-T launches.

the respective frequencies

the

for

(69)

terrestrial

coupled with a

strong position of

Indeed, T-Systems was

to submit a bid for the operation of

The tender procedures at network level were thus char-
acterised by a high degree of uncertainty and intran-
sparency
the
incumbent
operator T-Systems.
network
These elements made it difficult for any company other
than the incumbent operator of the terrestrial network,
the
T-Systems,
network.
the only company
which submitted a bid for the operation of the relevant
multiplexes. In its response to the decision to initiate the
the network
procedure, Germany has recognised that
level is characterised by conditions which are not fully
market-driven. Reference is made to the strong position
of the network operator T-Systems as the successor to
telecommunications monopoly (57). As
the previous
T-Systems was in a favourable position to operate the
DVB-T network, it may have submitted an offer that did
not fully correspond to the economic advantage derived
from the operation of
tender
procedures must be therefore considered insufficient to

the network. The

(57) Reply of Germany of 24 September 2004, point 1.3.2, p. 32 (‘Der
Umstieg hätte
finanzielle Förderung
realisiert werden können, wenn im Bereich der Organisation des Sender-
netzbetriebes voll marktkonforme Bedingungen bestanden hätten.’)
(‘T-
Systems als Nachfolger des früheren Fernmeldemonopols’).

voraussichtlich […] ohne

jede

exclude the selectivity of
sufficient to prevent a distortion of competition.

the measure and thus in-

(70)

It may be added that, even if T-Systems submitted a bid
during the tender procedure that reflected all direct and
indirect economic advantages accruing to the bidder, this
would not eliminate the sectoral aid aspects of
the
measure, which are discussed in paragraphs 74 to 83.

Different level of public support to commercial broadcasters

(71) At the level of broadcasters, the measure distorts compe-
tition in that the share of the transmission costs covered
by the subsidy is not the same for all CSBs. The share
varies between 28 % and 50 % per DVB-T channel (58).
Another element of distortion between the individual
CSBs
that RTL Group and ProSiebenSat.1 were
allocated more channels in DVB-T than previously in
ATT; all of these qualify for a subsidy. In contrast, FAB
and BBC World continue to have only one terrestrial
channel each and, accordingly,
they receive funding
only for this one channel.

is

(72)

The differences in Mabb's subsidy to the respective CSBs
distort competition since these broadcasters compete on
the same relevant market for free-to-air television broad-
casting. The Commission has consistently found that the
provision of pay-TV constitutes a market separate from
free-to-air television broadcasting (59). The markets are
separate in particular with respect
to the type of
trading relationship which exists between the broadcaster
and the revenue provider (e.g. subscriber or advertiser) as
well as with respect to the form of funding, with pay-TV
being financed primarily by subscription fees while free-
to-air television is financed by public authorities and/or
by advertising revenue (60). In the case at hand, the reci-
pients of Mabb's subsidy compete more specifically with
each other for advertising or other commercial revenue
since they are commercially funded (61).

(73) While an element of distortion is present in the case of
the CSBs, the measure does not seem to place PSBs at a
disadvantage which, however, do not receive assistance
by Mabb. The reason is that the DVB-T transmission of
PSBs is financed through the compulsory licence fee.

(58) The share varies not only as a result of differences in the absolute
amount of the subsidy per DVB-T channel but also because of
transmission prices as charged by
differences
T-Systems.

in the channel

(59) More recent decisions are,

for example, Telenor/Canal+/Canal
Digital (COMP/C.2/38.287, 29 December 2003), Newscorp/Telepiù
(COMP/M.2876, 2 April 2003), BSkyB/Kirch Pay TV (COMP/JV.37,
(COMP/M.1943, 11 July
21 March 2000), Telefonica Endemol
2000) and TPS II (COMP/JV.57, 30 April 2002).

(60) European Commission, DG Competition, Market Definition in the
Media Sector — Comparative Legal Analysis, Volume I, December
2002, p. 73.

(61) This is also true for BBC World, which describes itself explicitly as

commercially funded.

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Official Journal of the European Union

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Sectoral aid

(74)

The Commission also considers that the measure under
investigation is selective in so far as the subsidy is
granted to broadcasters who use the DVB-T platform
for example,
rolled out by T-Systems and does not,
support broadcasters who use other
transmission
platforms. As noted in the decision to initiate the
procedure,
the measure can therefore be regarded as
‘sectoral aid’.

for

(75) At the level of broadcasters, sectoral aid helps companies
to reach a wider audience and thus to increase their
attraction for advertisers as against other media.
In
the Commission has defined a product
merger cases,
‘media buying’ which includes a large
market
‘Media buying’
number of different types of media (62).
is defined as planning and purchasing time and/or space
in various media, including television, radio, newspapers,
From this
and the
magazines, billboards
perspective, sectoral aid to television via DVB-T has the
potential to distort competition in a number of other
media sectors.

Internet.

(76) At the level of network operators, the measure distorts
competition in two ways. Firstly, on the wholesale market,
the presence of a subsidy allows the operator of the
DVB-T network to charge broadcasters higher trans-
mission prices than under normal market conditions.
Secondly and more importantly, on the retail market,
the selective support and ‘artificial’ development of a
the viewers’
competing transmission technology affect
decision between the different broadcasting platforms,
in particular DVB-T, cable and direct-to-home satellite.

(77)

In antitrust and merger cases, the substitutability between
the different broadcasting platforms at retail
level has
been decided on a case-by-case basis (63). More recently,
however, there is a tendency to define a single market for
the transmission
broadcasting services,
platform (64). This
advent of
DVB-T, which has increased the capacity of the terrestrial
platform, and the decrease in the prices for reception

irrespective of

inter alia the

reflects

(62) Commission decision of 4 September 2001 (Case COMP/M.2558
— Havas/Tempus; OJ C 319, 14 November 2001, paragraph 9, and
the references cited there).

(63) For an overview of recent cases, see Commission decision Telenor/
in

(COMP/C.2/38.287, 29 December 2003,

Canal+/Canal Digital
particular paragraphs 32-50).

(64) See TPS I (IV/36.237, 3 March 1999, paragraph 30), British Inter-
(IV/36.539, 15 September 1999,
and Telenor/Canal+/Canal Digital

active Broadcasting/Open
OJ L 312, paragraph 26)
(COMP/C.2/38.287, 29 December 2003, paragraph 50).

(78)

(79)

equipment such as satellite dishes or set-top boxes, which
has reduced the ‘lock-in effect’ (65).

In Germany all three transmission platforms offer a large
number of free-to-air television channels, which points to
a certain similarity of offer. More specifically, the current
offer of in total 28 channels in DVB-T in Berlin-Bran-
in
denburg is nearly as comprehensive as the offer
analogue cable (with about 34 channels), which is the
most common transmission platform in Berlin-Bran-
denburg.
important
In particular, DVB-T includes all
programme channels in terms of viewer share and adver-
tising revenue (66). Moreover,
the complaints received
from satellite and cable operators suggest a perceived
substitutability between platforms.

the switch-over

In the case of Berlin-Brandenburg, there is also empirical
the substitutability between the different
evidence of
transmission platforms and, more particularly, of
the
competitive effect of the DVB-T launch on cable. The
in
data collected during and after
Berlin-Brandenburg show that
the
terrestrial
transmission has been strengthened since
switch-over and there has been some substitution of
cable by terrestrial transmission even though the substi-
i.e. during switch-over, stronger in
tution was initially,
the other direction (67). Figure 1 shows
that, most
recently, the share of households in Berlin-Brandenburg
relying on terrestrial TV reception has increased very
strongly from 5,3 % in 2004 to 11,4 % in 2005.

the position of

(80) Moreover, cable operators have submitted data showing
that their churn rate (rate of customers cancelling their
subscription) has increased significantly since the digital
(see Figure 2) (68). Among the
terrestrial switch-over
reasons why viewers opt for DVB-T instead of cable, a
survey has identified in particular the fact that DVB-T
reception is
free of charge while cable requires a
monthly subscription fee (69).

(65) A ‘lock-in effect’ exists where households are not ready to make an
transmission so that switching
in another form of
investment
between the different platform is unlikely;
see Commission
Decision MSG Media Service (OJ L 364, 31.12.1994, paragraph 42).
(66) The programme channels present in DVB-T in Berlin-Brandenburg
accounted for more than 80 % of the viewers and for more than
the TV advertising revenue in Germany in 2004; see
90 % of
references in footnote 51.

(67) In the short-term, cable operators attracted those viewers wishing to
maintain analogue reception; this, however, was a one-off effect
which ceased after the digital switch-over. In the medium term,
they have been losing subscribers to the subscription-free DVB-T
platform.

(68) The negative trend in the number of cable subscribers evident from
Figure 1 is further substantiated by data from other cable operators.
Data from one other regional cable operator show a peak in the
absolute number of subscribers in the 2nd quarter of 2003, but
since then (until the 2nd quarter of 2005) a steady decrease of
some 7 % in total. Data from a third cable operator active in
Berlin-Brandenburg show in 2004 an increase in the churn rate
of 50 % relative to 2003, but at least part of this increase has to
be attributed to a price increase in September 2004.
(69) See ‘Berlin/Potsdam: Erste DVB-T-Region Deutschland’,

in: Media

Perspektiven 12/2003, p. 565.

22.7.2006

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Official Journal of the European Union

L 200/27

Change in net number of customers of a regional cable provider in Berlin

Figure 2

from the fact

transmission platforms

(81) Germany has maintained that the lack of substitutability
is apparent
that no broadcaster has
abandoned transmission via satellite or cable following
the
launch of DVB-T in Berlin-Brandenburg. This
argument relates, however, to the wholesale transmission
market, where broadcasters may indeed regard the
complementary
different
rather than substitutable. A clear distinction needs to
be made between the wholesale market, where broad-
casters
from platform
operators, and the retail market, where viewers receive
from platform
transmissions of broadcasting content
regard the
operators.
different
and
migration between the platforms weakens the respective
platform operators
cable
in income
operators, which suffer an immediate fall
from subscription fees.

In the retail market, viewers

concerned, most notably

transmission platforms

transmission

substitutes

capacity

buy

as

as

besides free-to-air television. DVB-T has the potential for
supplying pay-TV services, as clearly shown by devel-
opments in other Member States (70). Once the DVB-T
network is in place, broadcasting transmission may also
be combined with telecommunication services.

(83)

for

infrastructures

Finally, Germany has stated explicitly that one of the
the measure is to promote competition
objectives of
between different
television trans-
mission, in particular cable, satellite and terrestrial trans-
mission. According to this view,
the measure gives
consumers a greater choice and prevents cable from
gaining a monopoly in large parts of Berlin-Brandenburg.
Leaving aside for
these
arguments (71),
that Germany
the Commission notes
seems to acknowledge that there is a certain degree of
competition between the different broadcasting trans-
mission platforms.

the merits of

the moment

(82)

In view of future applications of the DVB-T network, the
distortion of competition may well go beyond the
and affect new markets
current market

structure

(70) Notably in Italy, France, Sweden and the United Kingdom.
(71) The merits of

these arguments will be assessed in the section

dealing with Article 87(3)(c).

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Effect on trade

(87)

(84)

The Commission considers that the measure in question
affects trade between Member States. CSBs like RTL
Group and ProSiebenSat.1 are internationally active on
the markets for television advertising and for film rights,
where they compete with other broadcasters and tele-
communications
network
operators like Deutsche Telekom's subsidiary T-Systems
compete with cable operators and media corporations
like UPC (Liberty Media), satellite operators like SES
Astra, NSAB and Eutelsat, and others offering infra-
structure services to broadcasters. The same interna-
tionally active operators compete on the retail
trans-
mission market for viewers.

companies.

Terrestrial

V.2. Compatibility assessment

Principles to consider when assessing the compatibility
of public support for the digital switch-over

(88)

(85)

The transition from analogue to digital broadcasting
(‘digital switch-over’) has great advantages in terms of
more efficient spectrum usage and increased transmission
possibilities. These will
lead to new and better quality
services and to wider consumer choice.

(86)

television by 2012 will

The Commission actively supports digital switch-over
and it has underlined these advantages in the Action
Plan eEurope 2005 and in two Communications
relating to the digital switch-over (72). In its Communi-
cation ‘i2010 — A European Information Society for
growth and employment’ (73)
the Commission has
pointed out that the planned switching off of analogue
terrestrial
improve access to
spectrum in Europe. Regulation should neither impose
nor discriminate in favour of the use of a particular
terrestrial or
digital platform such as cable, satellite,
DSL TV thus adhering to the principle of ‘technological
neutrality’. As stated in the Framework Directive, this
does not preclude a Member State from taking propor-
tionate steps to promote certain specific services where
this is justified, for example digital television as a means
for increasing spectrum efficiency (74). This means that
each platform should in principle compete on its own
strengths, but that intervention targeting in correcting
market failures that are specific to one platform can be
envisaged. In the end, the platforms should prevail which
offer the greatest benefit to consumers.

(72) COM(2002)263 final,

‘eEurope 2005: An information society for
‘Communication from the Commission
all’, COM(2003)541 final,
on the transition from analogue to digital broadcasting (from digital
“switch-over” to analogue “switch-off”)’, and COM(2005)204 final,
‘Communication from the Commission on accelerating the tran-
sition from analogue to digital broadcasting’.

(73) COM(2005)229 final, 1 June 2005.
(74) OJ L 108, 24.4.2002, p. 33.

The Commission recognises that the digital switch-over
may be delayed if the process is left entirely to market
forces; hence it has no objection of principle to public
intervention in this field. Public authorities have various
means of facilitating and encouraging digital switch-over,
for example, regulatory means, financial support or infor-
mation campaigns. In its recent State Aid Action Plan,
the Commission explains its general approach to State
Aid geared to sustainable growth, competitiveness and
that Member States may use
cohesion.
State Aid to overcome a specific market failure or to
ensure social or regional cohesion.
it
must, however, be shown that aid is the appropriate
instrument
is limited to the
minimum necessary and does not unduly distort compe-
tition (75).

to address the issue,

In such cases,

It points out

it

It is generally recognised that the switch to digital tele-
failures.
vision may be hindered by certain market
Moreover, there is a risk that not all parts of the popu-
lation can benefit from the advantages of digital tele-
vision (problem of social cohesion). These problems are
more acute in the case of terrestrial TV reception than for
other platforms because the terrestrial TV network has
relatively little capacity and has so far been used in many
Member States to fulfil universal coverage obligations. As
explained in more detail
in paragraphs 101-107, a
market failure might exist, for example, where market
players are unwilling to agree to a common timetable
to switch to digital TV waiting for others to make the
first step (coordination problem) or where market players
do not take into account the positive effects of digital
switch-over on society as a whole because they do not
have the right incentives to do so (positive externalities).

for

costs

some

entails

consumers

elderly people,

(89) With respect to social cohesion, Member States will want
to make sure that all citizens have access to digital TV
once analogue TV is switched off. Since the digital
switch-over
and
requires a change in habits, Member States may want
to assist in particular disadvantaged groups of society
such as
low-income households or
people living in peripheral regions. There is a risk that
reception of some regional and local programming may
be lost in some areas and that some areas in the far
north of Europe may lose TV reception altogether once
switched off. Member States may
analogue TV is
therefore also consider measures
to ensure that all
geographical areas continue to have appropriate TV
coverage. However, as will be shown below,
these
considerations do not justify the aid which was given
in the present case.

(75) These long-standing basic principles of Community state aid policy
have recently been confirmed in the State Aid Action Plan: Less and
better targeted state aid: a roadmap for state aid reform 2005-2009.
http://europa.eu.int/comm/competition/state_aid/others/action_plan/

(90)

(91)

(92)

(93)

(94)

(95)

22.7.2006

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Official Journal of the European Union

L 200/29

Legal bases for the assessment of compatibility

(96)

The presence of State Aid in the present case is not called
into question by the possible application of the Altmark
ruling (76). None of
the four criteria (definition and
assignment of the service of general economic interest,
ex ante determination of parameters for compensation,
no overcompensation and choice of efficient provider)
is met. Germany has, however,
invoked Articles
87(3)(c), 87(3)(d) and 86(2) of the EC Treaty to justify
the compatibility of the aid.

Secondly, the switch-over may have positive externalities
due to the better use of the frequency spectrum, i.e. the
social benefit of more channels and services may exceed
the incumbent broadcasters in
the private benefit of
for example, being exposed
switching since they risk,
to more competition for audience and advertising. Broad-
casters may, therefore, be reluctant to take part in the
switch-over.

Article 87(3)(c) of the EC Treaty

In its response to the decision to initiate the procedure,
Germany argued that the measure was compatible with
the EC Treaty since it was in the Community interest as
expressed in particular in the Action Plan eEurope 2005
and in the Switch-over Communications (77).

The Commission notes that the policy documents cited
by Germany encourage the digitisation of broadcasting in
general. They do not, however, provide a universal justi-
the terrestrial
fication why only the digitisation of
platform should be aided and not that of other trans-
mission platforms. Moreover,
the
measure supports the introduction of a new technology
does not make it a project of Community interest.

the mere fact

that

In addition, Germany has maintained that
the Aid
It
promotes the development of an economic sector.
refers to the broadcasting sector in general, which will
transmission
benefit
platforms. More
activity
targeted by the aid could be described as ‘digital trans-
mission of terrestrial television signals’.

from the digitisation of
the

the
economic

specifically,

In order to decide whether the Aid is necessary and
proportionate, the Commission has tried to identify the
possible presence of market failures in this economic
activity. Several
failure have been
suggested.

types of market

Firstly, the development of digital terrestrial broadcasting
may be hampered by a coordination problem between
market players. Particularly in view of
that
frequency spectrum is insufficient to transmit analogue
(the so-called ‘simul-
and digital TV signals in parallel
castphase’),
agree on a
timetable in order to ensure a short switch-over period.

all market players must

the fact

(76) Judgement of 24 July 2003 in case C-280/00 Altmark Trans GmbH

[2003] ECR I-7747, at 88-94.

(77) See footnote 72.

(97)

(98)

Thirdly, the presence of market power may prevent the
market from securing the full benefits of competition
between operators and, specifically in the present case,
it may prevent that the digitisation of broadcasting trans-
mission is being achieved solely by market forces.

Fourthly, since the investment in the infrastructure is not
made by the broadcasters, the network operator faces the
risk that
the commercial broadcasters may withdraw
Indeed, Germany has
from terrestrial
indicated that ATT was on a declining trend and that
broadcasters were considering abandoning this platform.

transmission.

(99)

Fifthly, the existence of uncertainty may prevent inno-
vations and the development of new services in this
market.

(100) On these points,

it should be assessed, firstly, whether
these are true market failures which prevent the market
from achieving economic efficiency, secondly, whether
State Aid is the appropriate remedy for such market
failures and,
thirdly, whether the aid granted is the
minimum necessary to achieve the objective. It is only
if these conditions are met that necessity and propor-
tionality, the criteria to be met for approval of the aid
under Article 87(3)(c), can be considered to be present.

The coordination problem

(101) The Commission recognises

that

the
coordination
in principle,
problem between market players may,
represent a ‘market failure’. The problem arises because
broadcasters need to agree on common dates
for
switching off analogue transmission and for switching
on digital transmission so as to overcome the lack of
frequency spectrum and to minimise the costs of
parallel transmission. Consumers might not be willing
it carries a large
to shift to the digital platform until
number
broadcasters
broadcasters. Accordingly,
might wish to await the arrival of other broadcasters
before moving to the digital platform themselves.
In
the absence of coordination, this approach might delay
the switch-over. There is therefore an interest in limiting
the duration of the simulcast phase and in achieving
simultaneous switch-over of broadcasters.

of

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Official Journal of the European Union

22.7.2006

(102) State Aid to reduce the burden of transmission costs does
not, however, seem to be the appropriate instrument for
addressing this problem. The broadcasters do not own
the frequency spectrum but operate on the basis of
licences. The licences for ATT were awarded for a
limited period, i.e. seven years in the case of Berlin-Bran-
denburg. Accordingly, the authorities could have resolved
the coordination problem by setting a common expiry
date for all analogue licences (78).

Positive externalities

(103) Accelerating the switch-off process of analogue television
in order to reap the benefits of the better use of the
freed-up spectrum is,
in principle, a valid objective for
public intervention. It should be assessed, however, to
what extent public support of broadcasters’ transmission
costs is necessary and proportionate to achieve this goal.

(104) Germany has argued that the subsidy is needed to free up
the spectrum by compensating CSBs for giving up their
ATT licences. As explained in more detail in paragraphs
57-61 (79),
there are, however, a number of reasons
which contradict this line of argument. To sum up, the
reasons are that Mabb could have limited the ATT licence
to the switch-over date; the CSBs present in ATT had
already been compensated by the award of DVB-T
licences and the subsidy is not conceived or calculated
as a compensation payment.

(105)

If the aid is assessed not as a compensation payment but
as an incentive for the development of an economic
activity, it should be considered that transmission costs
for DVB-T are generally lower than for the ATT trans-
mission and that DVB-T allows for additional channels
and improved services. Moreover, a report by Mabb
points out that the CSBs themselves had an interest to
sustain the terrestrial platform as a third platform, on the
one hand,
in order to limit their dependence on cable
and satellite providers and, on the other, to be able to
In
develop mobile
particular the latter point illustrates that the CSBs may
well be able to internalise some of the positive extern-
alities of the digital switch-over. In any case, Germany
has not provided any reasoning or calculations showing
that the aid represents the minimum necessary for broad-
casters to switch to DVB-T.

applications (80).

portable

and

(106)

It may be added that, by reducing broadcasters’ trans-
the aid introduces a distortion in the
mission costs,

(78) See paragraph 59.
(79) See paragraphs 57-61.
(80) Mabb (2003): Berlin goes digital, p. 14: ‘Es gibt aber ein Interesse
der privaten Veranstalter an der Erhaltung des dritten Weges,
einerseits um nicht allein in die Abhängigkeit von Kabel und
Satellit zu geraten, zum anderen um mobile und portable
Nutzungen entwickeln zu können.’

process of spectrum allocation: the objective of achieving
a more efficient use of frequencies implies that those
frequencies be allocated in a way that reflects their
economic value, without decisions by market operators
being affected by the granting of aid.

(107) To sum up,

an appropriate

the Commission considers that,

in the
present case, aid to broadcasters’ transmission costs is
not
encouraging a
instrument
prompt switch-off of analogue terrestrial broadcasting
transmission and the release of frequencies. Regulatory
intervention in respect of the transmission licences is
an example of a less distortive means of achieving the
same goal.

for

Strengthening of competition between transmission platforms

(108) Germany has argued that the availability of an additional
transmission platform increases competition for
the
transmission of broadcasting signals and acts as an
incentive for
the other
platforms to improve and update services.

the incumbent operators of

(109) Germany

convincing
has, however, not provided
evidence that broadcasting transmission in Berlin-Bran-
denburg is characterised by a structural competition
problem or that DVB-T could help in resolving certain
market rigidities (81). Even leaving aside terrestrial trans-
mission, cable and satellite offer a large range of free-to-
air television channels and are generally available. There
is also competition among different cable operators for
the connection to households. More competition is
emerging from television via broadband (e.g. DSL),
to establish itself as an additional
which is about
platform for broadcasting transmission.

(110)

In such circumstances,
in which the market appears
capable of supporting various platforms, use of State
Aid to steer the market in a certain direction is not
needed and might discourage the development of alter-
natives such as DSL. As noted in the Commission's
‘in principle, each network
Switch-over Communication,
should compete on its own strengths’ (82). This is to ensure
that selective aid does not jeopardise past and future
investments in other networks.

(81) Germany has highlighted the strong market position of cable
networks in Berlin-Brandenburg.
this
position results mainly from court rulings which enable landlords
to oblige tenants to pay for cable subscription as part of their rent.
As Germany itself concedes, DVB-T can,
in this situation, hardly
challenge the market position of cable networks.

It explains, however,

that

(82) COM(2003)541 final,

analogue to digital broadcasting (from digital
analogue “switch-off”)’.

‘Communication on the transition from
to

“switch-over”

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Official Journal of the European Union

L 200/31

(111)

if

there were a competition
It may be added that,
problem at network level, aid to the network operator
would have been a more transparent way of assisting the
development of
terrestrial platform. The
questions as to whether and to what extent aid was
needed to develop a terrestrial network could have
been determined via an open tender procedure for the
award of the network licences.

the digital

(112) Accordingly, the Commission rejects the view that state
aid to broadcasters is an appropriate means of stimu-
lating competition between transmission platforms.

Risk for network operator

(113) As regards the risk borne by the network operator, the
switch-over in Berlin-Brandenburg was the first in Europe
and its success was therefore particularly uncertain.

(114) However, as suggested by the launch of other trans-
mission platforms (satellite, ADSL), there is no particular
reason to believe that the market cannot cope with this
type of risk. Moreover, there are Länder — Hessen is one
example — in which DVB-T was launched without
public support when the success of the switch-over in
Berlin-Brandenburg was still uncertain.

Promotion of
terrestrial platform

innovation and specific advantages of

the

(115)

It is suggested that the DVB-T network will serve to
promote innovation by offering interactivity and addi-
tional capacity for new media and telecom services. It
will also have specific advantages such as portability
and mobility.

(116)

Interactive services require a return channel for content.
However, as for satellite, DVB-T does not provide for a
return channel and has only one channel which carries
the signal to the end user (83). Accordingly, interactivity is
not an intrinsic feature of DVB-T (84).

(117) As for other services,

it is important to note that in
Berlin-Brandenburg neither the capacity allocation nor
the public support is focused on any innovative media

(83) Interactivity can be achieved only by deploying DVB-RCT (Return
Channel Terrestrial), which involves additional costs and a more
expensive set-top box, or by conventional return channels like
the telephone or an interactive cable connection.

(84) Unlike digital cable, which may be upgraded with a return channel
to provide advanced interactive services, in parallel with the pure
transmission of broadcasting signals.

telecom services

in particular. With respect

to
or
capacity, only one multiplex is currently allocated to
new media services. With respect to the public support,
only the transmission of television channels is subsidised
and not the provision of any other services.

(118) Lastly,

said to have the
the DVB-T technology is
advantage of mobile reception. However,
in order to
receive DVB-T signals in mobile mode, the equipment
entails a very high consumption of energy which goes
beyond the capacity of current handheld equipment and
would only work in cars and trains or on boats (85).
Moreover,
trials have shown considerable problems
with the reception of DVB-T signals when vehicles
move at higher speed.

(119) Accordingly, DVB-T does not represent a clearly superior
technological solution with respect to other platforms
and it is not for reasons of market failure that DVB-T
is not being developed. On the contrary, the technical
and economic conditions in Berlin-Brandenburg are such
that various and competing market-based solutions can
be developed. In those circumstances, public support of
DVB-T represents an unjustified departure from the
principle of
technological neutrality and may hamper
the roll-out of other platforms, e.g. DSL, which might
have other advantages in terms of innovation and tech-
nology and are capable of developing autonomously.

Conclusion regarding Article 87(3)(c) of the EC Treaty

of

terrestrial

switch-over

(120) The analysis conducted in the light of Article 87(3)(c) has
identified two potential market failures specific to the
digital
broadcasting
the
platform: coordination problems between the different
market players
in achieving a smooth switch-over
process and positive externalities associated with the
frequency spectrum. While these market
freeing-up of
failures may,
justify a departure from the
in principle,
principle of technological neutrality, they cannot serve
as justification for the aid granted in the present case.
Accordingly, the Commission is not convinced that the
aid is an appropriate, necessary and proportionate
instrument to remedy a market failure and to promote
the roll-out of DVB-T. Even if account is taken of the fact
that the amount of aid is relatively low in absolute terms
and that the distortion of competition at broadcasting
limited,
level
in case of
is rather
some channels,
the transmission
to close to half of
costs and may have influenced the choice of broadcasters
in favour of the DVB-T platform, thereby causing a more
important distortion of competition at network level.

the aid amounts,

(85) The DVB project has therefore developed a new transmission
standard, DVB-Handheld (DVB-H), but the latest information on
the DVB-H standard is that commercial deployments may be
more than three years away (see Analysys Study, August 2005).

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Article 87(3)(d) of the EC Treaty

(121) Germany has argued that the establishment of a plura-
culture
the
the EC
in its assessment

listic broadcasting
competence
of
Community, as
Treaty, has
under the State Aid rules.

stated in Article 151(4) of

to take into account

system is part of

States, which

the Member

the

(122) The Commission agrees that, as stipulated by Article
151(4) of
the EC Treaty, cultural aspects, and in
particular the promotion of cultural diversity, shall be
in the Community's action. The
taken into account
Commission considers however that the ‘culture’ dero-
gation enshrined in Article 87(3)(d) must, as any
exception, be applied narrowly and in cases where the
culture product is clearly identified or identifiable (86). In
the present case, the aid concerns the transmission of
broadcasting signals and is not related to any particular
cultural content that would otherwise not be broadcast.
Nor is the aid targeted at certain types of broadcaster, e.g.
local operators, which would not otherwise be
small
present on the terrestrial platform.

Article 86(2) of the EC Treaty

(123)

channels

In its response to the decision to initiate the procedure,
Germany made a brief reference to the argument that the
transmission of broadcasting
via DVB-T
qualified as a service of general economic interest
(‘SGEI’).
the SGEI consists in the
achievement of
to
switch-over
digital transmission in order to promote technological
innovations such as mobile and portable reception, to
transmission
safeguard competition between different
platforms and to promote pluralism.

It maintained that

from analogue

the

(124) More specifically, Germany stated that the aid to the
CSBs was justified in order to compensate them for
their ‘participation in the digital switch-over and the
broadcasting of programme channels via digital terrestrial
(‘Teilnahme am digitalen Übergang und
transmission’
Ausstrahlung
digitale
Programme
der
Terrestrik’). It added that the CSBs have been entrusted
with this SGEI by public agreements assigning the trans-
mission capacity and determining the financial support.
Without support, the CSBs would have been reluctant to
use and build up the DVB-T network, and this would
have put at risk the future of the terrestrial platform, in
which there is a public interest.

über

die

(125) The Commission considers, firstly, that national autho-
it
rities have to define the SGEI clearly and entrust
In the present
explicitly to a particular undertaking.
case, Germany seems to have made the SGEI argument

(86) Commission Decisions NN 88/98, BBC 24-hours

(OJ C 78,
‘Kinderkanal and Phoenix’ (OJ C 238,

18.3.2000) and NN 70/98,
21.8.1999).

in contrast

on an ad hoc basis. In fact, the alleged public service
compensation is paid to the commercial broadcasters,
to the public service broadcasters,
which,
are not charged with any public service task.
Instead,
supporting the transmission costs of CSBs confers an
advantage on their normal commercial operation.

(126) The arguments that the aid is needed to achieve digiti-
sation of broadcasting transmission and to promote
pluralism are not specific to the terrestrial platform.
Cable and satellite can also contribute to the achievement
of such objectives. Since these alternative platforms have
greater transmission capacity,
it even appears that they
are more suitable for achieving a quick and smooth
switch-over process and ensuring pluralism through a
broad range of broadcasting channels.

(127) As for the promotion of innovation by means of DVB-T,
the main arguments have already been assessed in para-
graphs 115-119. In particular, it should be noted that the
SGEI
innovative
services which, however, do not receive direct financial
support, are not carried out by the CSBs receiving the aid
and are not defined in a sufficiently clear manner.

is declared to be the promotion of

(128) As for the objectives of protecting competition between
broadcasting platforms and ensuring pluralism, there are,
as noted in paragraphs 108-112, no indications that in
the region of Berlin-Brandenburg there are economic
factors causing a structural competition problem or the
risk of abuse of a dominant position with respect to the
the
transmission infrastructure which would hamper
pluralism.
distribution
Moreover, the argument that CSBs need to be assisted
in order to make DVB-T a commercial success cannot be
accepted as a valid justification for supporting it as a
SGEI.

endanger

content

and

of

VI. PRACTICAL APPLICATION OF STATE AID RULES TO
PUBLIC SUPPORT FOR THE DIGITAL SWITCH-OVER

(129) Before formulating its conclusions,

to public support

the Commission
wishes to give some indications to both public and
economic actors on the practical application of
its
for the digital
policy with respect
switch-over. These indications are derived from the appli-
cation of the principles set out in the Action Plan and
the Communications quoted in paragraph 86 to specific
case examples. Member States remain, of course, under
an obligation to notify to the Commission all below
mentioned measures ranking as State Aid before they
put these measures into effect. The Commission then
investigates whether
considerations put
the general
forward below fully apply to the notified measures.

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Official Journal of the European Union

L 200/33

(130) There are numerous possibilities for Member States to
actively promote the digitisation of broadcasting in
ways which are compatible with European State Aid
law and, hence, with the ultimate goal of growth, compe-
titiveness and social cohesion.

offered by different operators. Examples of interactive
services are
electronic programme guides, news
search, games or e-commerce.

(131)

further
In the present case,
receiving
subsidies
investigate
social welfare allowances in order to buy set-top boxes.

the Commission did not
to 6 000 households

(b) funding for the roll-out of a transmission network in
areas where otherwise there would be insufficient TV
coverage;

(132) The Commission has also approved a Digitalisation Fund
in Austria which comprises several measures supporting
the digitisation of broadcasting (87). The measures
include:

(c)

financial means to public service broadcasters to
enable them to be broadcast via all
transmission
platforms in order to reach the entire population.
In this context, Member States have to set out
clearly any obligations on the public service broad-
casters as to which transmission platforms should be
used;

(a) pilot projects and research activities to test,

for
example, digital transmission technologies and inter-
active applications;

(b) subsidies to individuals for the purchase of set-top
boxes for any platform to prevent the exclusion of
low-income households from access to TV reception
and to reach a critical mass of users;

(c) grants to companies to develop innovative digital
services such as electronic programme guides and
mobile applications;

(d) subsidies to broadcasters to compensate for addi-
broadcasting
tional
analogue and digital TV in parallel (‘simulcast phase’).

costs when

transmission

(133) Apart from such measures on which the Commission has
already pronounced itself, Member States may also
support provided that
consider other
the
an unnecessary distortion
measures do not
between
such
conditions, Member States may, for example, consider
the granting of:

forms of
entail
or

companies. Under

technologies

(a) subsidies to consumers for the purchase of digital
decoders. Such subsidies should be technologically
neutral as described above.
In granting subsidies,
the authorities may encourage the use of open
standards for interactivity. Open standards enable
services
consumers

from interactive

to benefit

(87) N622/03 Digitalisierungsfonds — Austria, Commission decision
of 16 March 2005, see http://europa.eu.int/comm/competition/
state_aid/decisions/additional_docs.html

should

(d) financial support as fair compensation to broad-
casters which are required to give up the use of
the
analogue spectrum before the expiration of
licences. The
into
compensation
account the actual costs of the switch-over to broad-
casters including costs to adapt equipment to digital
transmission and to broadcast in another channel/-
multiplex where applicable and including spectrum
costs. When calculating spectrum costs the granting
of digital transmission capacity should be taken into
account. Member States will need to provide the
evidence that this has been the case.

take

(134) The Commission confirms that the digitisation of broad-
casting is an objective of common interest. With the
it, however, wishes to underline that
present decision,
the granting of State Aid should always
follow a
process of
clearly identifying the problem to be
addressed and of choosing the least distortive means of
resolving it. Only well-targeted aid is in line with the
overall objective of
competition and
promoting competitiveness
and technological devel-
opment in Europe.

ensuring fair

VII. CONCLUSION

(135) For the reasons set out above, the Commission concludes
that the subsidy granted by Mabb to the commercial
broadcasters constitutes aid within the meaning of
Article 87(1). The aid is not compatible with the
common market.
It was not notified by the Member
State to the Commission as required by Article 88(3)
into effect
of
without
be
recovered from the commercial broadcasters involved.

the EC Treaty and was
Commission

authorisation.

illegally put

It must

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22.7.2006

it
there has been an actual

(136) Although the subsidies granted by Mabb also appear to
the level of
have conferred an indirect advantage at
is not possible to establish
network operations,
whether
transfer of State
resources to T-Systems within the meaning of Article
87(1) (88). Moreover, as the onus in the first place was
on the broadcasters to behave as diligent operators and
to verify whether the aid they were offered had been
notified and approved, the Commission considers that
it is of prime importance to recover the aid from the
direct beneficiaries,

HAS ADOPTED THIS DECISION:

Article 1

The State Aid which the Federal Republic of Germany has
implemented for the introduction of digital terrestrial broad-
casting in Berlin-Brandenburg and granted to the commercial
broadcasters present on DVB-T is
incompatible with the
common market.

Article 2

Articles 9 and 11 of Commission Regulation (EC) No
794/2004 (89). Interest shall be calculated on the basis of the
reference rate used for calculating the grant-equivalent of
regional aid.

4. Within two months of the notification of the present
decision, the Federal Republic of Germany shall enjoin all bene-
ficiaries referred to in Article 1 to reimburse the unlawful and
incompatible aid and the interests due.

Article 3

this Decision, of

The Federal Republic of Germany shall inform the Commission,
within two months of notification of
the
measures already taken and planned to comply with it. It will
provide this information using the questionnaire attached in the
Annex of this Decision. The Federal Republic of Germany shall
submit within the same period of time, all documents giving
evidence that
the recovery proceedings have been initiated
against the beneficiaries of the unlawfully granted and incom-
patible aid.

1.
The Federal Republic of Germany shall take all necessary
measures to recover from the beneficiaries the aid referred to in
Article 1 and unlawfully made available to the beneficiaries.

Article 4

This Decision is addressed to the Federal Republic of Germany.

Recovery

shall be

effected without delay

2.
and in
accordance with the procedures of national law provided that
they allow the immediate and effective execution of
the
decision. The aid to be recovered shall
include interest from
the date on which it was at the disposal of the beneficiaries
until the date of its recovery.

3.
The interest to be recovered under paragraph 2 shall be
calculated in accordance with the procedure laid down in

Done at Brussels, 9 November 2005.

For the Commission

Neelie KROES
Member of the Commission

(88) In this respect, the case is different from the Court judgement of 13
June 2002 in case C-382/99 The Netherlands v Commission, Dutch
Service Stations [2002] ECR I-5163, at 60-69 where oil companies
were considered indirect beneficiaries of an aid granted to Dutch
service stations. In that case, the aid had the effect of releasing the
oil companies from a contractual obligation to grant a discount to
the service stations. In contrast,
in the present case, there is no
automatic and quantifiable relationship between the amount of
aid given to the CSBs and the transmission fees charged by
T-Systems. Only for some broadcasters in case of a change in the
fee, such a relationship exists but since switch-over, transmission
fees have been stable.

(89) OJ L 140, 30.4.2004, p. 1.