Eugenio Prosperetti September 16 2004 New Broadcasting Framework Signed into Law Portolano Cavallo Studio Legale | Tech, Data, Telecoms & Media - Italy Eugenio Prosperetti Tech, Data, Telecoms & Media Range and Scope of Application Digital Terrestrial Television Infrastructure Protection of Minors Antitrust Television Advertising Comment During the past two years the Italian Parliament has dedicated much time to the issue of television broadcasting. This time was largely spent discussing the articles of one single statute named after the current minister of communications, Mr Gasparri.The statute, which contains crucial provisions on the new Italian broadcasting system, was finally approved on May 3 2004 and is now registered as Law 112/2004 (effective as of May 6 2004). It provides for the shutdown of analogue terrestrial television by 2006.This update examines the key provisions of the Gasparri Law.Range and Scope of ApplicationArticle 1 states that the purpose of the Gasparri Law is to provide a new set of principles to update the television broadcasting system, taking into account the introduction of digital media, convergence and the Internet.All television and radio broadcasts (terrestrial, cable and satellite) fall within its scope of application, together with interactive services and pay-television services provided in connection with such broadcasts. This wide scope of application is sure to raise several issues concerning the interrelation of the Gasparri Law with existing laws and regulations.The terms defined in the Gasparri Law include 'television broadcasts', 'data broadcasts', 'network operator', 'content provider' and 'interactive services provider'. These definitions are already proving challenging for the first commentators on the statute. For example, 'television broadcasts are defined as broadcasts "which are televised under a common editorial mark for the general public...by any means". The definition de facto extends the provisions of the Gasparri Law to any platform capable of supporting television broadcasting (eg, the Internet and some types of mobile platforms).A substantial part of the new statute is devoted to RAI, the Italian public service broadcaster. New rules are set out on its internal organs and its relationship with Parliament, and the groundwork is laid for its transformation from a state-owned enterprise into a publicly owned joint stock company.Digital Terrestrial Television InfrastructureIn Italy, broadcasting has traditionally been carried out through free-view analogue terrestrial frequencies. Satellite was introduced just 10 years ago and pay-television operators do not have a very large market share (at present only Sky Italia is active, with about 3 million subscriber accounts). The traditional Italian broadcasting operator is a dual-purpose entity which provides content to be broadcast and owns the network on which such content is broadcast. Previous regulations did not allow for terrestrial operators to split these activities. However, digital terrestrial television has introduced a different concept: network operators can now operate separately from content providers. These entities can be two separate enterprises, bound to each other by service and capacity agreements.The three categories of player within the digital terrestrial television framework are discussed below.Network operators Entities requesting a licence to operate as a network operator should meet the requirements set out in Communications Authority Regulation 435/01/CONS on digital terrestrial television testing. In essence, this means that such entities must already be legitimately broadcasting in the Italian territory. If the entity is not currently experimenting with digital terrestrial television, it will be allowed to experiment with a view to reaching 50% population coverage. If it is already experimenting, then as soon as its digital terrestrial coverage reaches 50% of the population (national broadcasts) or of the local area (regional broadcasts), it can file a request to become a network operator. Of the available 18 multiplex frequencies, 12 will be made available to national network operators; therefore, a maximum of 12 entities will be able to obtain a national network operator licence. The remaining six frequencies will be distributed to local network operators.The Gasparri Law imposes a significant undertaking on entities seeking network operator licences: they must commit to investing €35 million in the network over a three-year period. The Communications Authority is currently investigating the exact scope of this undertaking and considering whether it needs modification.Content providers These entities are not limited in number - although there are high-profile requirements in terms of corporate capital, number of employees and the like, any entities meeting these can apply. Each content provider should enter into a capacity agreement with a network operator to acquire a certain amount of airtime in which to broadcast under a common editorial mark, and name its channel programming. This category is similar to a satellite channel broadcasting through a satellite network operator. Many issues concerning the future activities of content providers require analysis in light of the Gasparri Law. Some of its key provisions in this respect are as follows: The content provider will be the sole editor of the channel, liable for any infringement of regulations with respect to content; The network operator will not be able to play any role in determining the channel programming, although this relationship is yet to be explored; and Content included in the channel programming which is simultaneously broadcast on different platforms may be subject to restrictions caused by different IP regulations and agreements; the Gasparri Law does not address such problems arising from the convergence of platforms in the digital era.Service providers The third category of entity, 'service providers', is defined in the Gasparri Law but is still not very popular among digital terrestrial television operators (to date, few requests have been filed for this kind of authorization). Service providers will provide interactive services, electronic programme guides and conditional access services to digital terrestrial television; their requirements are defined on a case-by-case basis. In the future, service providers may also provide internet access through digital set-top boxes and television sets, if there is consumer demand for such services.Protection of Minors A major concern of the legislature was to prevent the use of minors under the age of 14 as actors in some kind of broadcasts (eg, advertisements against which there is an express prohibition) and to introduce other kinds of safeguards in broadcasting (eg, sports commentary should not condone violence and should promote a non-commercial view of the sporting event). The Gasparri Law also prevents certain broadcasts which are unfit for minors from being shown at hours when minors are likely to be watching, and subjects this provision to the control of a special committee which can impose administrative sanctions (in addition to any penal sanction which may apply under other laws).Antitrust The new regime set out in the Gasparri law on antitrust in the broadcasting and media sector was harshly criticized by commentators even before its entry into force. Now that the law is effective, the system it establishes will have to prove that it preserves competition and does not limit the overall number of broadcasters by encouraging mergers between the main players. The Gasparri Law defines the media system as an 'integrated system of communications' (ISC), comprising all media and resources present on the media market. Antitrust thresholds are calculated on the basis of the resource quotas owned within this ISC, regardless of the nature of those resources. In particular, a single entity cannot directly or indirectly own and/or control more than 20% of the income deriving from resources in the ISC.However, the law identifies a very wide range of different 'media' activities as eligible for inclusion in each operator's ISC quota. The result is that in the Italian market - which is characterized by a few operators, some of which are very large - the ISC boundaries are expansive, easily encompassing the existing system.The Gasparri Law also contains provisions on television-newspaper cross-ownership. In particular, it provides that television enterprises which operate more that one channel may not acquire equity in newspapers or begin publishing newspapers before December 31 2010.Television Advertising The Gasparri Law resolves a dispute which has been raging for over 10 years in Italy. At its heart was a particular kind of advertising which is generally defined as 'time-consuming': similar to tele-shopping in presentation (ie, time-consuming and with a host) and similar to television spots in its essence (ie, it promotes a product/service without offering viewers the possibility to buy that product/service directly). Prior to the approval of the Gasparri Law, there was much debate as to whether 'time-consuming' advertising was to be considered as television spots or as tele-shopping, or as some third category. The debate was triggered by the existence of limits on the number of spots shown (percentage of airtime per hour devoted to advertising) and on tele-shopping (percentage of daily airtime plus total minutes broadcast in the day), which have now been changed as follows: The 'per hour' limit (maximum 7% of airtime per hour) applies only to spots; The daily limit which applies to 'other kinds of advertising' (ie, all advertisements besides spots and tele-shopping) stand at 15% of daily airtime if only tele-shopping is broadcast; and The daily limit increases to 20% of daily airtime if other forms of advertising (eg, time-consuming advertising) are broadcast, up to a maximum of one hour and 12 minutes per day.CommentThe above provisions are just some of those contained in the new statute, which overhauls a complex sector that has long suffered from inactivity by the regulator. The Italian Communications Regulatory Authority (AGCOM) has done its best to compensate for regulatory gaps and inefficiencies, but its powers are limited to the level just below that at which a parliamentary statute, such as the Gasparri Law, can intervene.Only time will tell whether, notwithstanding some defects, the Gasparri Law will change the Italian broadcasting system for the better. Early indications are positive, as during the law's preparation the Italian broadcasting industry reversed its downward trend. For further information on this topic please contact Eugenio Prosperetti at Portolano Colella Cavallo by telephone (+39 06 3974 5437) or by fax (+39 06 3974 5400) or by email ([email protected]).