On July 26, 2016, the Italian Communications Authority (“AGCom“) launched a public consultation on the audiovisual media services (“AVMS“) relevant market (hereinafter, “Consultation“). The text of the Consultation (Annex A to Resolution no. 342/16/CONS) is available here. Operators may send to the AGCom their contribution papers, within September 24, 2016. Below you can find a list of the main topics included within the Consultation.

Background. Section 43 of the AVMS Code

Section 43 of the AVMS Code, inter alia, prohibits dominant positions in the “Integrated Communications System” (Sistema integrato delle comunicazioni, “SIC“) and in each and every relevant SIC market, i.e.:

  • daily and periodic press;
  • digital publishing, also online;
  • audiovisual (and radio) media services;
  • cinema;
  • advertising and other form of commercial communications.

The Consultation, as said, refers to the AVMS market. According to Section 43 of the AVMS Code, in particular:

  1. a single AVMS provider – including affiliate / subsidiaries – cannot be granted with more than 20% authorizations for the broadcasting on DTT national platform;
  2. any subject enrolled with the Registry of Communications Operators shall not own – directly or indirectly – more than 20% of the overall SIC revenues.

It should be noted that the constitution of a dominant position through 1. and/or 2. above is null and void per se: the proof of the abuse of dominance, indeed, is not necessary (as per general EU competition law principles). Furthermore, even whether the abovementioned thresholds are not reached, AGCom may infer that a concentration, agreement or concerted practice among undertakings is “in any event in breach of pluralism“.

The well-known purpose of such law provisions is the protection of pluralism in the AVMS sector and, therefore, the enforcement of Section 21 of the Italian Constitution, setting forth the freedom of speech.

The Public Consultation

Based on the above and in order to enforce Section 43 of the AVMS Code, AGCom shall periodically determine the SIC relevant markets, taking into account revenues, level of competition, possible entry-barriers, economic efficiency, data on the diffusion of AVMS.

AGCom Regulation no. 368/14/CONS is aimed at regulating such administrative proceedings (as well as the proceedings for the authorization of the “transfers of radio-TV companies” and for the merger notification(s)). The two phases are as follows:

  1. Phase 1 – Determining the relevant (product) markets. This is the phase started with the Consultation, with specific reference to AVMS;
  2. Phase 2 – Analyzing the relevant markets. Based on the markets determined during Phase 1, AGCom carries out its analysis of the (possible) existing anti-competitive constraints, in order to ensure a proper level of competition among operators.

AVMS Market. Free vs. Pay AVMS

According to the AGCom, the AVMS market should be re-assessed (and, if necessary, re-determined) in light of the occurred modifications in the value-chain.

The current scenario is indeed featured by new forms of distribution of audiovisual contents, so that aggregators / distributors have generally noticed increasing revenues, compared to those traditionally pertaining to producers.

In particular, the AVMS product market is generally sub-divided in free AVMS (provided free-of-charge to end-users / consumers) and pay AVMS (implying the payment of a fee by end-users / consumers).

However, AGCom clarified that advertising – usually representing the sole source of revenues for free AVMS – should be assessed in different ways for off-line (e.g.: TV) and on-line free AVMS. This is related to the high degree of accuracy of the currently available profiling techniques, which now ensure an increasing return of investment for web advertisers.

In addition, online free AVMS are characterized by different business relationships among operators (e.g.: producers; users generating contents; online platforms; online content aggregators; end-users; etc.) and the possibility to benefit from Big Data. This is the reason why AGCom will assess such AVMS in a different market-analysis administrative proceeding.

AVMS Distribution Platforms

The distribution of AVMS in Italy is carried out by using the following platforms:

  1. Digital Terrestrial. This is the “traditional” platform, replacing the analogue TV. It should face significant reforms during next year, as the 700 MHz band (representing more than 30% of the DTT spectrum) will be allocated to mobile-broadband systems. It is arguable that the issuance of a new plan for DTT frequencies, as well as the implementation of new standards of transmission (DVB-T2 and MPEG4-HEVC) will be necessary. Furthermore, the new LCN plan is expected in the next months. This could have a significant impact on the analysis of AVMS market, due to the slots to be reserved to newcomers (see here and here for our latest posts on the LCN).
  2. Satellite. The satellite bandwidth / capacity is offered by two operators, i.e. Eutelsat and SES Astra (wholesalers). Most of the SAT broadcasters offer is transmitted via Hot Bird™, i.e. by Eutelsat.
  3. IPTV and web-TV. AGCom pointed out that the LTE Broadcast (so called “4G Plus” or “Enhanced Multimedia Broadcast Multicast Service“) will determine a delivery on mobile devices of AVMS contents (even HD) with a quality similar to that ensured via TV / set top boxes. Obviously, such possibility is conditioned upon the actual development of Fiber-To-The-Cabinet / Home networks in next years.

Concluding Remarks

Generally speaking, the AVMS market (even on IP network) is shared among (traditional) broadcasters vertically integrated, i.e. members of a large group of companies carrying out also networks and conditional access services. However, OTT operators – whose activity is currently subject to a less strict regulation – had a strong impact, also in light of their strategic partnership with Telco operators.

The Consultation may have a significant impact in order to point out AGCom official positions in the EU Digital Single Market Strategy. In addition, it will constitute the regulatory (and economic) general framework of the transformation into media companies of the traditional broadcasters.