Why a Spanish state aid decision is making EU governments nervous


In an expansion of our usual repertoire, this post is taking a quick look at the relationship between EU state aid rules and national support for national television platforms.

The long running Spanish state aid saga, concerning the conversion of analogue television transmission to digital transmission, has reached a decisive stage with a decision by the lower European court, the General Court of the European Union (“the Court”), in 6 joined and similar cases on 26 November 2015. Although an appeal to the European Court of Justice is technically possible, it seems unlikely.

What is the EU state aid regime?

For those of you unfamiliar with the state aid regime, the rules are set out in the EU Treaties (Article 107 TFEU) and govern (and attempt to limit) when EU member states can use public funds to support domestic industry. The purpose of these rules, in common with the competition rules, is to level the playing field across the EU for industry. Consequently, the application and interpretation of the rules are intensely political.

What was the case about?

The Court rejected appeals by a number of Spanish regional authorities against an infringement decision of the European Commission and in the process confirmed a number of important state aid principles.

Principally, the Court upheld the Commission’s decision that the fact that the Spanish government had failed to respect the principle of ‘platform neutrality’, as its digital switchover funding was only available to Digital Terrestrial Television (“DTT”), as opposed to holding a procurement competition in which satellite, cable and internet protocol TV could also bid. This conferred a ‘selective advantage’ on DTT in relation to its competitors and was therefore state aid.

What makes this case interesting?

The case raises questions about the ‘platform neutrality’ of other compensation schemes for DTT. In particular, it highlighted the issue of whether DTT platform operators should receive compensation for regulatory changes, in this case changes to spectrum position, when this is not available to other (pay) digital television platforms.

In the UK, the operators of the DTT platform have received public funds to compensate them for moving their channels to other spectrum frequencies. However, the DTT platform was not selected through a competitive procurement process. Therefore, this compensation may raise some state aid questions.

For example, in 2014 OFCOM decided to move the DTT platform from the 700 MHz band to a lower frequency, in order to use the 700 MHz band for mobile data. The change is estimated to have cost the UK Treasury between £550–660 million.

Equally, other (pay) television platforms do not receive similar compensation for regulatory changes, which could result in extra costs or a loss of income. For example, the Department of Culture Media and Sport’s (“DCMS”) 2015 proposal to deregulate the Communications Act 2003 (“the Act”) may make it harder for Sky to charge public service broadcasters for ‘technical platform services’.

How about future implications?

The Spanish DTT case also suggests that similar compensation schemes for converting analogue to digital radio, using the Digital Audio Broadcasting (“DAB”) system, may be challenged by the Commission, again on the basis of ‘platform neutrality’.

Unless EU member states hold public procurement competitions to select the technical solution for the provision of digital radio, they could therefore be open to allegations of state aid, as there are a number of competing technical systems to DAB, such as DRM+, HD Radio and DVB-T.

Noel Watson-Doig