The annual funding mechanism for France Télévisions, the leading broadcasting group in France, complies with European Union state aid rules. On 20 July, the European Commission validated the funding system that forms part of an overhaul of the French public TV system. The mechanism grants a share of the revenue from the public service broadcasting contribution (formerly the television licence) and an annual subsidy from the national budget under the law on the new public broadcasting service, under which advertising on public channels will be reduced and ultimately abolished.

REFORM

France Télévisions includes France 2, France 3, France 4, France 5 and France Ô, as well as Radio France Outremer. In 2008, the French authorities launched a thorough reform of public broadcasting to sharpen its focus and raise standards, which resulted in the law, of 5 March 2009, on audiovisual communication and the new public broadcasting service. In addition to the gradual elimination of advertising on public channels by the end of 2011, the reform introduces financial compensation for the loss of advertising revenues, which previously represented 25% to 30% of France Télévisions’ annual income. It also introduces two taxes: one on advertisements, paid by competing TV channels, and the other on electronic communications, paid by service providers (eg internet portals and cable or satellite operators).The reform also introduces a new set of specifications for France Télévisions, which consolidates its general interest mission and its specific place in French broadcasting.

REVIEW OF SUBSIDY

On 1 September 2009, the Commission approved the award of an annual subsidy of up to €450 million but launched a formal investigation to explore several aspects of the annual subsidy for subsequent years, which could add up to €1.5 billion by 2012. The executive had concerns about the possible use of the revenue from the new taxes to finance the annual subsidy and a risk of over-compensation for public service costs up to 2011-2012. With this procedure, it also sounded out third parties and competitors before reaching a final decision, thereby enhancing legal certainty.

The Commission concluded that “definition of the public broadcasting mission vested in France Télévisions and the checks to which it is subject comply with the state aid rules and, in particular, with the Commission communication on state aid for the funding of public service broadcasters”. It is “satisfied with the undertaking given by the French authorities that the annual subsidy will be calculated according to the public service costs incurred by France Télévisions and that the revenue from the taxes introduced by the reform will not be used for this aid measure and will not affect its amount, unless the scheme is amended, in which case the amendment would have to be notified and approved by the Commission”.

The EU executive consequently approved the annual subsidy mechanism for an unlimited period, enabling France Télévisions to continue the ongoing reforms with greater legal certainty about the funding of its public service mission and compatibility with EU rules. It has not abandoned the separate infringement proceedings, opened in January, concerning the tax on electronic communications, however, which is suspected of being incompatible with EU telecoms legislation. All the appeals by competitors against the Commission’s decisions have been rejected by the EU General Court.

On 1 September 2009, a formal investigation was launched to explore several aspects of the annual subsidy for subsequent years, which could add up to €1.5 billion by 2012