The contractual freedom of broadcasters in Europe: the retransmission fees

di Manlio Luigi Marano Abstract: The television market is not a free market. As television has a great influence on people free thinking, countries has always wanted to provide for strict legislation, both for public and private television. It is for these reasons that countries have created regulatory bodies to supervise television market. However there are several weak points in the legislation of the European countries. One of the most interesting question is about the contractual freedom of television as undertakings. For example, in certain circumstances, televisions owning a platform have the duty to transmit certain channels. That is to say that they have a must-carry obligation both for public and private channels. Thus, a satellite operator may find itself in a situation in which it is obliged to retransmit some channels without receiving any remuneration. Sometimes, satellite operator must even pay to retransmit channels that they are anyway obliged to carry on their platform. This issue is very important both in a political and juridical perspective.

Since the contents that are transmitted by broadcasters that are also satellite operators are covered by copyright, could it be possible to consider copyright as a public good? The must-carry obligation goes beyond the mere right of information. If a country obliges a satellite operator to retransmit contents covered by a certain copyright does that mean that this copyright has to be considered a public good to share with the citizens-viewers? European legislators are not clear about this issue, and this lack of clarity has given birth to litigation all over Europe. The decisions have been different. In Italy the must-carry obligation has never existed, so the decisions of the regulator has always been for the contractual freedom of the parties. The television market is constantly changing and today, it is changing even more due to the Internet. The European Union has adopted a net neutrality principle meaning that every legislation regarding audiovisual contents on TV also applies to audiovisual contents “consumed” on the Internet. This situation has generated several law issues, especially in relation to the new entrants in the television market such as Netflix, whose network is exclusively an online network. We can say that, for the moment broadcasters are free to contract or not, depending on the distribution platform. Today, traditional distributors are less free than the new ones. However, this is a very open issue, and it will be interesting to analyze its future developments.

Abstract: Il mercato televisivo non è un mercato libero. Data l’influenza che la televisione esercita sul libero pensiero, i paesi hanno creato impianti legislative alquanto rigorosi, sia con riguardo al settore pubblico sia a quello private. Per questi motivi i paesi hanno creato degli organismi pubblici aventi lo scopo di esercitare un controllo sul mercato televisivo. Ad ogni modo, esistono diversi vuoti nelle legislazioni europee. Una delle questioni più interessanti riguarda la libertà contrattuale delle televisioni in quanto imprese private (o pubbliche). Per esempio, in alcuni casi i broadcaster che possiedono anche una piattaforma via satellite hanno l’obbligo di ritrasmettere determinati canali. Essi hanno dunque una cd. must-carry obligation con riguardo ai canali pubblici e private. Talvolta gli operatori via satellite sono addirittura costretti a pagare per ritrasmettere canali che essi hanno l’obbligo di ospitare sulla loro piattaforma. Tale questione risulta essere molto importante sia da un punto di vista politico sia da un punto di vista giuridico. Poiché i contenuti trasmessi dagli operatori via satellite sono coperti da proprietà intellettuale, è dunque possibile considerare la proprietà intellettuale come un bene pubblico? L’obbligo di must-carry va oltre il semplice diritto all’informazione. Se un paese obbliga un operatore via satellite a ritrasmettere contenuti coperti da proprietà intellettuale, ciò può forse voler dire che il legislatore considera quella determinata proprietà intellettuale come un bene pubblico da offrire ai cittadini-spettatori.

Le legislazioni europee hanno avuto un atteggiamento poco chiaro con riguardo a tale questione, e questa mancanza di chiarezza ha dato vita a molto contenzioso. Le decisioni sono state diverse. In Italia l’obbligo di must-carry non è mai esistito, dunque le decisioni delle autorità sono sempre state nel senso della libertà contrattuale delle parti.

Il mercato televisivo è in continua evoluzione, anche a causa dello sviluppo di internet. L’Unione Europea ha adottato il principio della net neutrality, il che vuol dire che qualsiasi legislazione che riguardi contenuti media audiovisivi su supporto televisivo si applica tout court anche ai contenuti “consumati” su internet. Tale situazione ha generato diversi problemi giuridici, soprattutto in relazione ai nuovi attori del mercato televisivo quali Netflix, che opera esclusivamente online.

È possibile affermare che, per il momento i broadcaster sono liberi di contrarre o meno a seconda della piattaforma di distribuzione. Oggi gli operatori tradizionali sono sicuramente meno liberi di quelli nuovi. Ad ogni modo, si tratta di una questione estremamente aperta, e sarà interessante analizzarne I future sviluppi.

Summary:

1.1. The birth of television; 1.2. The end of the monopoly of public television: the Italian case; 1.3. Is Broadcasting and Cable TV in Europe a free market?; 1.4. The concept of relevant market; 1.5. Television distribution; 1.6. New platforms: the online television; 1.6.1. The convergence; 1.6.2. Green Paper: Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values;

2.1. Article 11bis of the Berne Convention and Article 8 of the 1996 WIPO Copyright Treaty; 2.2. 1993 Satellite and Cable Directive; 2.3. Legislation in European Countries; 2.3.1. Overview; 2.3.2. Belgium; 2.3.3. The Nordic Countries (Denmark, Sweden, Norway, Iceland); 2.3.4. Germany; 2.3.5. France; 2.3.6. Spain; 2.3.7. The Netherlands; 2.3.8. Switzerland; 2.3.9. Hungary; 2.4. The possible duty of providing a retransmission rights clearance; 2.5. The idea of a “European Copyright Code”;

3.1. The main models of public television in the world; 3.2. A focus on the European-British model; 3.2.1. Overview on the British television market; 3.2.2. The new television: the strong changings of the last decades; 3.2.3. The position of Sky UK; 3.3. Retransmission and must-carry obligation; 3.3.1. Retransmission fees in America; 3.3.2. A bargaining model for retransmission; 3.3.3. the must-carry obligation a burden?

4.1. An equitable remuneration for retransmission fees; 4.2. Copyright as a public good; 4.3. The willingness to pay: the Bohm’s experiment;

5.1. European Court of Justice case-law; 5.1.1. The Coditel case; 5.1.2. The Hotel Rafael Case; 5.1.3. ITV Broadcasting Ltd. v. TVCatchup Ltd.; 5.1.4. Belgian broadcasters v. the Kingdom of Belgium; 5.2. Retransmission fees in Italy; 5.2.1. Rai v. Sky; 5.2.2. Sky v. Mediaset; 5.3. Retransmission fees in the United Kingdom: PBSs v. Sky and Virgin; 5.4. Retransmission fees in Germany; 5.5. Retransmission fees in Belgium; 5.6. Retransmission fees in the Nordic Countries;

Conclusion

Television in Europe: a brief history of the end of the monopoly of public television

  • The birth of television

Television is certainly one of the most significant discoveries of the 20th century. It has changed the communications in the world, becoming  a way to transmit the same message at the same time to millions of people.

We can say that the history of television officially started the 25th of March 1925, when the Scottish engineer John Logie showed this new device in the commercial center of Selfridge, in London.

For a long time television has been wholly public owned, on one hand because it was a too huge investment to build for businesses, and, on the other hand, because it was a powerful tool for governments. Thus, for a long time, television has only been public-owned.

The spread of television started in the United States in 1928 and in the United Kingdom and Germany in 1929. It was, of course, a very embryonic stage of television, and the geographic area in which it operated was very limited. Later, in 1936 a completely electronic television started to be provided in the United Kingdom and in Germany; then, in 1939, in the United States.

When we talk about television there are two main models to be taken in account: the American model and the British model. In the United States, television has been, from the beginning, open to the free market, thus it was a business-initiative system, and it funded itself through advertising. In the United Kingdom television was instead a monopoly of the State with public service mission, and so was in the other countries of Europe.

The monopoly of public television lasted until the Seventies, when private televisions started to develop. The free competitive market produced a high quality offer, and was well appreciated by consumers. That is why public television, too, had to improve the quality of its offer, although it always had to bear in mind the public service mission. For example, the public television, all over Europe, always committed to provide services of social interest such as cultural programs.

  • The end of the monopoly of public television: the Italian case

The trespassing from the monopoly of the public television to the free market was not easy in Europe. Italy is one of the countries where this process has been particularly complicated. In the Italian case the monopoly was broken through the sentences of the Italian Constitutional Court. In 1960 this Court was asked about the constitutionality of an article of the Postal Code (R.D. 645/36), according to which the State had the exclusivity of the television services. The Court confirmed that this monopoly was right and appropriate, by defining television as a general interest service. Actually, the Court was afraid of the risk of the business-initiative in this field, on the conceptual basis that only the State had the fair objectivity and impartiality to manage such a socially important instrument. All over the Sixties the situation remained stable, then, in 1971, a small undertaking called “Telebiella A21 TV” registered its mark as “video-periodical”. It was, in fact, the first Italian private television, and they used the coaxial cable, a technology that in the United States was already present in the Forties. The creator of this television, a filmmaker called Peppo Sacchi, was denounced for infringement of the article 178 of the Postal Code. Nevertheless, there was no punishment for the installation of a cable TV, because in 1936 this technology did not exist in Italy. Therefore, Mr Sacchi was absolved. The legislator intervened then with the D.P.R. 156/1973 that modified the Postal Code by introducing a new article that generally prohibited all unauthorized «telecommunications». In this definition it was certainly included Cable TV too. An important year for the end of the monopoly of the public television in Italy was 1974. Two sentences of the Constitutional Court broke the myth of the public monopoly. These sentences affirmed that the control on public television had to pass from the Government to the Parliament and they authorized the business initiative via cable TV, even though only on a local scale. This last provision was justified by the idea that the limited geographic area impeded the creation of broadcast oligopolies, which was the main fear of the Constitutional Court. This situation generated the proliferation of a huge number of local televisions, but they were transmitted on air, not via cable. The question arrived before the Constitutional Court, which stated that, even though the law only allowed the transmission via cable on a local scale, and not also on air, the difference between these two systems was not reasonable. The monopoly of the public television was completely broken when Canale 5 was created. It was a broadcaster that had several channels in Lombardy. It started buying channels almost in every region in Italy. The system was the following: every regional channel transmitted on a local scale. But, since Canale 5 controlled all the channels, they transmitted the same programs at the same time. The result was the transmission as a single national channel through a system called “interconnection”. Thus, all these local televisions were denounced by their respective local competitors, and all the judicial decisions agreed on the fact that the channels belonging to Canale 5 could keep transmitting, but only on a local scale. The Canale 5 Group, having reached a significant position, reacted very strongly and stopped all the transmissions. Nevertheless, by that time people had already got used to the new channels, and felt the need of receiving that service. That gave the justification for the Italian Government to enact a Decree by which it was allowed for private televisions to transmit their programs, including by the system of the interconnection. After that, in 1985 an Act of the Parliament allowed the principle of the pluralism in the Italian system, by which a public-private broadcasting system was finally introduced. The regulation of the private television was then referred to another following law, which will be the Law n. 223/1990, also known as “Mammì Law”.

  • Is Broadcasting and Cable TV in Europe a free market?

The broadcasting and Cable TV market consists of all terrestrial, cable and satellite broadcasters of digital and analog television programming. This market is substantially funded through advertising, subscriptions or public funds. In Europe the broadcasting and cable TV market produces a total revenue of  €102.3 billion in 2014 with a compound annual growth rate of 2% from 2010 to 2014. The hugest part of this market is composed by the subscriptions, that are 39.3% of the total revenue. The performance of the market is forecast to accelerate during the following years, with a compound annual growth rate of 2.9% from 2014 to 2019, reaching a value of €118 billion in total revenue.

The second largest segment of revenues is advertising, which constitutes 36.2% of the market. Finally, 24.5% is composed by TV license or public funds.

The segmentation of the Europe broadcasting & cable TV market geography is the following: United Kingdom 18.7%, Germany 16.0%, France 12.5%, Italy 9.5%, Spain 5.7%, Rest of Europe 37.5% [1].

Broadcasting & Cable TV is a huge market, where the bargain power of individuals is very weak, since they can only have an impact as a whole, relating to their choices to watch some programs or others. Furthermore, individuals may not have any impact towards public television, since TV license fees are fixed by the state, and they are charged as an objective consequence for owning a television. What can the individual do as a user is to choose wheter or not to subscribe to a pay TV service. Notwithstanding sometimes these services hold exclusive broadcasting rights for huge sport events or popular movies and TV series, thus watching them is seen as a necessity by some users. Important players of this market are businesses which buy advertising space, fundamental source of revenue for broadcasters. Sometimes broadcasters produce their own contents and when they are resold to other broadcaster when particularly successful. That generates a competition with the suppliers of programs themselves. It is important to stress that this market is today threatened by the use of internet as a new broadcasting platform, with unlimited broadcasting capacity. In fact, a lot of new entrants of the broadcasting and cable TV market are trying to follow this path, but such players find in any case hard to seriously threaten big broadcasters. They have done significant investments in online broadcasting platforms, and they have already a strong brand image. Furthermore, they have a huge bargaining power and a great capital expenditure strength, so they always own the rights of the most popular contents. Broadcasters are also quite resistant to substitutes such as film, PCs and video games, because TV is still one of the most effective forms of advertising for businesses that are interested in buying an advertising space.

Rivalry is very strong in this market, and the competition between broadcasters become fierce mostly during the negotiations for the purchase of the rights on the most popular programs such as sporting events. Since these are very expensive, it is easy to understand that only the big players can afford this kind of expenditure. This is why we can conclude that in European countries, even if the Broadcasting and Cable TV market appears to be a free market, it is in fact an oligopoly, mostly constituted by big broadcasters owning multiple television channels.

  • The concept of relevant market

Every market can be evaluated under an economic or a geographical perspective. In the first case the analysis must focus on the individuation of the products/services that may be considered competitive. In the second case the evaluation must be concluded with respect to the geographical area where competition conditions are homogeneous.  It is worth mentioning a statement by the Italian Competition Authority (AGCM), which during a procedure between RAI, RTI and Cecchi Gori Communications, made an important distinction regarding sport programs. It distinguished the popular sport events from the other general programs.

It is worth, for the purpose of this paper, making an analysis of the television market related to the sport rights, because they are the most important part of a cable or satellite operator offer, economically speaking. Sports contents have the wider public, much more than films, and that is the reason of the economic battle for the purchase of the sports retransmission rights. As mentioned before, in the television market it is interesting to stress a difference that must be done between “general sports events” and “huge audience sports events”. There are some sports that have a different legal framework because of their wider diffusion and interest that they have for people. For example, soccer, cycling, and Formula 1 have in Europe much more audience than other sports, thus they are the most desired by the television operators. Furthermore, they attract a target of viewers which are particularly interesting for the advertising market operators. The degree of substitutability between different sports is very low, because the fans of a given sport will hardly have the same interest towards another sport.  One of the “transmission rights battlefield” is the Champions League, which is one of the most viewed sports competition. In 2000, in Italy, RAI unsuccessfully tried to argue that Champions League television rights constituted a relevant market during its litigation against RTI (Mediaset).

It is crucial to determine the relevant market, mostly for competition-related reasons. As an example, it is possible to mention a Spanish case. The question regarded an alleged dominant position of LNFP (National Professional Football League). The Spanish Tribunal for Competition stated about the importance of delimitating the market in order to determine the effects. The first thing to analyze was the substitutability, then the differentiation, and lastly quality and price. According to the Spanish Tribunal of Competition, the first thing to do in order to evaluate the relevant market is determining the degree of substitutability. The Tribunal concluded that football was the most viewed sport, and it stated that sports are not substitutable between them for the viewers, nor have they an equivalent attractive power for the audience. The audience is not the same for every sport, thus prices are not comparable. Then, there was no reason to demonstrate that the market of products was “sports programming”. The Court concluded that the relevant market was strictly related to the professional football.

Another interesting case to understand the concept of relevant market with respect to television matters is a statement of the Italian Competition Authority. In a question regarding retransmission rights related to the Road Racing World Championship Grand Prix and to the Superbike, AGCM considered the general market of the motorbike races as one, because of the low audience that it has.

It is worth citing another Italian decision of AGCM. During the proceedings that led to this decision, RAI and RTI proposed a new and broader definition of the relevant market, which included also non-sports event. They wanted to support the idea of a relevant market including all the “premium” contents, that is to say all those programs with a high audience. These programs were considered fungible only with those popular sports event capable to attract even non-sport-addicted viewers. On this point also intervened AGCOM (Italian Authority for Communications), whose statement agreed with AGCM in defending the peculiarity of these particular sports rights with respect to the other common sports rights.

  • Television Distribution

The television industry has faced major changes since 1990. On one hand deregulation has broken the tradition cable and telecommunication monopolies, and, on the other hand, digitization has created new business models [2]. Distribution has a key role in the content industry, because it constitutes a fundamental part of the supply chain determining access to the audience. Nowadays, distribution platforms control access and bundle programming to consumers that can access contents in a quadruple way: television, Internet, telephony, mobile. «This gatekeeping position may impact on the power structures within national audiovisual ecosystems. Undoubtedly, the spectacular growth of worldwide over-the-top (OTT) streaming services including Netflix, Hulu and YouTube, as well as the enduring popularity of illegal platforms such as Popcorn Time and BitTorrent further challenge existing industry structures and established regulatory approaches, both at the national and supranational level» [3]. This is a strong debate that opens a reflection within the political economy of television distribution. Industrial, technological and cultural changes always generate instability in the relations between producers, distributors and consumers, and often legislation is not able to follow these changes. The post-television era has led to a situation of strong fragmentation in distribution, that is reshaping the way audiovisual contents are distributed and consumed, and destroying the traditional business models. However, the development of digital platforms does not necessarily mean the end of the traditional distribution platforms. Leading distribution platforms are still cable and satellite, and they are trying to interpret the current situation of the audiovisual industry.

These huge changes in the television industry, in which boundaries between operators are increasingly less clear, have caused conflicts between television broadcasters and distributors. Among others, the issue of the retransmission fees is one of these major conflicts. These tensions are likely to increase, because convergence between programming and distribution will be stronger. Two main examples are, on one hand, the case concerning the retransmission fees between public service broadcasters and pay-TV platform Sky (both in the United Kingdom and in Italy) and on the other hand the regulation of sports rights in the British pay-TV market. These cases highlight the impact of regulation on the relations between television broadcasters and distributors.

Even though public broadcasters have been for years the main commissioner of original contents, the fierce market competition has induced distributors to invest in original programming. Nevertheless, investments made by television distributors and pay-TV operators are still very modest in comparison to those of public and private broadcasters. Furthermore, in some countries such as France and Belgium, there is a debate on the implementation of policies obliging distributors to contribute to domestic production. Some analysts have made a comparative study of domestic content policies in four countries in four different contents (Australia, Canada, Ireland, South Korea) [4]. They concluded that these politics are useless to guarantee domestic, high-quality productions. They propose to involve new platforms and foreign distributors in the production of original domestic contents, by granting them subsides and by using taxation instruments. It is clear that the improvement of high-speed connection technologies has put the Internet in a privileged position with respect to the consumption of audiovisual contents. This growth generates some doubts about the future of the traditional television and of the concept of “broadcast channel” itself.

However, due to the proliferation of the new platforms, the traditional operators are playing, on one hand, by adapting to these new platform and, on the other hand, by claiming for rigid regulatory framework, to cut out new operators. Anyway, there is a strong support for a platform-neutral regulatory approach, and, for the moment, it seems the approach adopted by the European Union.

  • New platforms: the online television

The rise of the Internet and of other devices has strongly changed the way in which we access media. The television industry has been stroke by this revolution and needs to reconsider its business. Especially because on the Internet the system to access to the contents is different, and substantially on demand. It is even conceivable that in a future-extremely-tech society television networks and cable services may cease to exist. Anyway, it is sure that in a medium-term they will not only exist, but will maximize their revenue by entering in the digital television market. Furthermore, it must be considered that some contents are not usefully accessible on demand, since they are live contents. It happens that this kind of contents is strongly requested and is sometimes constitute the main reason why people decide to pay a cable-TV subscription. Let us think, for example, to sports event, election coverage, award shows. They are extremely viewed content, and people want to watch them live. Anyway, online television is a fact, and it represents what has been defined as «the archival turn» [5]. The range of the modern viewers is potentially very large, so addressing their need is complicated, and implies a deep knowledge of the new way to access media contents. Online television is the next stage in the cultural history of television, where economic, political, cultural and technological developments imply a deep reflection about the new engagements of television operators.

The notion of connectivity is crucial mostly as regards the fact that online contents are “archived” and constantly accessible to viewers. Audiovisual heritage is a cultural memory, an important component of historical knowledge, socially and culturally relevant for the European society. Since the birth of television, moving images have always been the prominent expression of information transmission. But today the role of television is harder, mostly in the creation of new and modern contents. For example, before the Internet, some television broadcasters recycled old contents. With the new technologies, programs of the past are always available, visible and accessible on a much larger scale.

It is impossible not to speak of the first players to understand these changes and make of them its key business: Netflix. Some figures related to the access to the Internet in the United States will help us in our analysis, and it is a good projection for Europe as well. In 2012, 87.5% of the American population had Internet access, which constitutes nearly the double in comparison to 2000. Out of these, around 70% watched at least one video on a computer. What has really helped this process of digitalization is the possibility to access these contents on multiple platforms. Of course, television is still an integral part of people’s daily entertainment. Citing again an American survey, television has a penetration of 95.8% of households [6]. It is plausible to think that this number will decline. At least, what is changing is not the owning of televisions set, but the access to it. Thus, many households own a television set, but the commercial offer that they watch is internet-based. In fact, through a lap-top it is not always so easy to link it to a television set. The procedure would imply too many steps, like for example plugging and unplugging the lap-top, or having to approach to it to switch channels. That is the reason why a development of gaming consoles is predictable. They have access to the Internet, and they have a remote control.

Another major revolution in the television industry has been the introduction of Roku. The company was founded in 2002 in California, and offers a product that is similar to the one provided by cable operators. The only difference is that Roku works through the Internet and is organized in the form of channels. Roku merges the key elements of traditional cable/satellite TV (such as high quality programming, access to a huge number of channels) with those of YouTube (on-demand access). Actually, with Roku anyone can create its own channels, even if it is much more complicated than YouTube, since it needs complicated coding knowledge.

1.6.1. The convergence

The world of communications is facing huge changes. The digitalization of communications means evolution of the platforms of distribution and of the ways to access contents. The basis of this epochal change is the phenomenon of convergence. Technically, this word means the union between communication instruments. Using the definition given by USC Professor Henry Jenkins: «By convergence, I mean the flow of content across multiple media platforms, the cooperation between multiple media industries, and the migratory behavior of media audiences who would go almost anywhere in search of the kinds of entertainment experiences they wanted. Convergence is a word that manages to describe technological, industrial, cultural, and social changes, depending on who’s speaking and what they think they are talking about. In the world of media convergence, every important story gets told, every brand gets sold, every consumer gets courted across multiple media platforms. Right now, convergence culture is getting defined top-down by decisions being made in corporate boardrooms and bottom-up by decisions made in teenagers’ bedrooms. It is shaped by the desires of media conglomerates to expand their empires across multiple platforms and by the desires of consumers to have the media they want where they want it, when they want it, and in the format they want it» [7]. Convergence is a fusion. Each medium is not only directed to make a single type of work, but is able to diffuse diverse contents, such photos, radio, TV, music. Convergence means using an only device, for example the computer, to access different information services. With a single device it would be thus possible to pass from watching TV to make a banking operation, from the reading of a newspaper to watch a video on YouTube.  As a consequence, we are witnessing the birth of a new market, where all the systems to access audiovisual contents are involved. For instance, instead of watching TV, viewers can directly access contents on YouTube. Or, instead of watching a film while it is broadcasted, users can watch it after it is put on-air, through the on-demand system. This is the convergence: media increasingly overlap, merge; they are flexible to users’ needs. In the creation of Hulu, which is a great web container of audiovisual content (mostly film and TV shows), competitors such as NBC Universal, Fox NewsCorp and Abc Disney has made a joint venture. Today platforms merge technologies, business models, ways to organize contents. It is not a coincidence if companies such as Apple and Google are becoming media centers, with the aim to link technologies to TV contents. It is like a smartphone for TV, there are apps, video, music, and websites optimized to be watched on TV and in high-definition. This process is unstoppable because viewers are involved too. There are emotional touch-points to link the users to the contents.

As regards the scope of this paper, convergence is a major issue with respect to retransmission. As it does not exist in Europe a clear legal framework regarding the online access to contents, we could ask ourselves if we can speak of retransmission on the Internet. Technology neutrality is one of the key principles of the European regulatory framework for electronic communications. This principle was introduced by the Directive 2002/21/EC, regarding the common regulatory framework for electronic communications networks and services. That was reaffirmed by Directive 2009/140/EC and recognized in 2011 by OECD. Nevertheless, a clear legal framework about the retransmission of contents on the Internet would be desirable. For example, some countries in the world, such as Australia, have decided to exclude retransmission fees for the retransmission of free-to-air contents over-the-internet. This kind of choice is maybe not in line with the European principle of technology neutrality, but it is at least a legislation which states how to behave in the case of retransmission on the Internet, which is something that does not exist in Europe yet.

1.6.2. Green Paper: Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values

Acknowledging the challenges of the new media, on 24th April 2013 the European Commission published a Green Paper to open a public debate on the implications of the transformations in the media market. This has been changed by the convergence of the media service and by the way to access them. Convergence can be defined as the progressive fusion between the traditional media services and the Internet. This situation has stimulated the creation of new devices, such as the television set with access to the internet, or the set-top boxes which offer media contents over-the-top, computers, tablets and other mobile devices. Furthermore, it must be considered that viewers use tablets and smartphone while watching TV, for example, to search further information about what they are watching, or to connect with the program itself. Thus, it is rapidly changing the relation between the traditional platforms and the new ones, and, with it, the relation between the linear transmission and the modern on demand services. Moreover, the Green Paper hypothesize that in the future, people will pass from a passive consumption of the media content to the active participation through smartphone. Within 2016 the majority of EU households will own a television set with access to the Internet [8]. Nowadays technology allows people to create, distribute and access to every type of content, in any moment, any place and with any device.

The Commission concern is to take the chance offered by this technological evolution to grant to every European citizen the broader access to diversified media contents. The values that have inspired the European Commission in the regulation of the media service are freedom of expression, cultural diversity, protection of personal data, protection of consumers. Moreover, the European Union promotes the technological neutrality, thus the media services are regulated in the same way, regardless of the device. Nevertheless, the Audiovisual Media Service Directive (2010/13/EU) makes a distinction between linear and on demand services, because the latters present a higher degree of control by the consumer. That is why that needs a lower regulation. Competition between linear and on-demand services is forecast to increase, because they offer the same content to the same consumers. The mentioned directive only applies to distributors that are subject to the EU jurisdiction. Satellite media services must be regulated by the legislation of a Member State if the link between Earth and satellite (up-link) is situated in the Member State or if the used satellite is competence of this Member State. These provisions do not apply to internet contents which leave from extra-EU countries towards EU countries. To regulate this issue it will be necessary to understand how to deal with the problem of the overlapping of competences.

The first question posed by the Green Paper public consultation regarded the main legal and other obstacles that impede the development of the digital single market for the cross-border distribution of audiovisual works. Another question was about which framework conditions should be put in place to stimulate a dynamic digital single market for audiovisual content.

The first thing to mention is the fragmentation in the licensing regime across the countries that are part of the European Economic Area. A rationalization would decrease the costs for users of rights. Most economic rights are sublicensed to audiovisual content aggregators that make use of distributors. This sublicensing is generally done on a territorial basis. There is a debate currently taking place about the creation of new collecting societies that offer licenses across European countries. Another question posed by the European Commission is about the practical problems that arise for audiovisual media services providers in the context of clearing rights in audiovisual works in a single territory and across multiple territories. Specifically, the Commission asks what rights are affected and for which uses. Today the European digital market is fragmented, and one of the problems is the different collective copyright management across Member States. This situation makes it very hard to foresee the future of the clearance of digital audiovisual rights.

Then the Commission asks if a copyright system based on territories is appropriate in the online environment.  Rights-holders have so far defended the territoriality of the management of their rights. Of course it is a way for them to negotiate their rights in different countries, and thus to earn more money. However, in a recent ruling, the European Court of Justice has stated that «a system of territorial licenses for the broadcasting of football is contrary to EU law» [9]. The Court pointed out that the fragmentation of the rights on the same contents creates artificial price differences between Member State, and generates a price discrimination that is not in line with the Treaty. This ruling, as well as common sense, makes it understand that the current clearance rights business model is incompatible with the online platforms. This judgment will affect current business practices, especially as regards premium contents. Anyway, the most important thing is that this decision might affect also the online geo-blocking (the practice of restricting access to contents based on users’ location). It must be pointed out that geo-blocking might constitute a territorial discrimination within the meaning of Article 20.2 of the 2002 Universal Service Directive. The traditional hierarchy with cinema as the first window followed by DVD, pay-TV, free-to-air TV and Video on-demand no longer makes sense with the emergence of new online distribution operators (such as Netflix, which in the last days of October 2015 has started to deliver its services in Italy). It is clear that banning the digital distribution of a film from four months up to three years does not reflect the reality of the 21st century. This is one of the reasons why users find themselves in a situation where they can choose between legal, but non-available or illegal, but available contents. It is unlikely that modern consumers wait for months before they can download a movie that has already been promoted through social media, blogs and other communications channels.

Despite the objective of the 2001 Information Society Directive to harmonize the European Copyright framework, actually there has been no harmonization of copyright limitations across Europe. This is a matter that needs a deep reflection by the European institutions, in the aim of creating more certainty for consumers about what they can and cannot do with legally acquired contents.

Another question posed by the Green Paper regards the technological means that can be used to enable users to access their contents, irrespective of their location and what impact that can have on licensing models. This topic is related to the geo-blocking and is actually a way to avoid the need of the geo-blocking itself. In fact, this question is not a mere technological question. Prior to this issue, there is another one: consumers face the non-availability of contents in their country of residence, which is due to territorial exclusivity. The limitation of licensing systems and the legal uncertainty derives from the difference between national legislations. Moreover, the proposition made by the Commission would only allow a user that has bought access in one country to make use in another country. That means that, for instance, an Italian consumer living in Spain would have difficulties in accessing French contents. Then, it must be pointed out that one of the greatest limit for a pan-European satellite broadcasting is the enforcement of signal encryption techniques. This has probably been the main reason of the market fragmentation.

Then the Green Paper asks what would be the advantages and the disadvantages of an extension of the country of origin principle, as applied to satellite broadcasting, to online audiovisual media with respect to online transmissions. Furthermore it asks the costs and benefits of extending copyright clearance system for cross-border retransmission of audiovisual media services by cable on a technology neutral basis. The first thing to say about this topic is that the current distinction made by 1993 Cable and Satellite Directive does not make much sense today, especially because of convergence. Under this directive, satellite, terrestrial and mobile TV constitute direct communication to the public, whereas satellite and IP TV are not. That would mean the non-application of the Directive to these devices, and thus a different copyright clearance system is required. The huge difference is that the Internet and the satellite have no borders, so they should not be subject to different copyright clearance rules. Nevertheless the European Commission adopts a technology neutral approach, then Cable and Satellite Directive should also apply to the online and on-demand environment. Anyway, retransmission on the Internet may reduce costs and enhance the availability of audiovisual works cross-border. For the moment, encryption technology and geo-blocking have solved the problem. Nevertheless the question is only postponed, because it will be important to make a deep reflection about the extension of the market of the audiovisual contents.

Another question regards the need to provide measures with respect to the development of social media sites that rely on the creation and upload of online content by end-users (i. e. YouTube). The role of the modern users is changing fast. Consumers are becoming active players and creators of contents. They constantly disseminate information and knowledge. These user-created contents (UCC) need to be clearly defined with a specific legal framework. A precise definition is given by the OECD (Organization for Economic Co-operation and Development) which, in its paper “Participative web: user-created content” affirms that such contents are: «publicly available over the internet, which reflects a certain amount of creative effort, and is created outside of professional routines and practices». An European legislation would be opportune about the protection and the limits of the rights connected to user-created contents. Another issue related to the distribution and thus the retransmission of audiovisual content, regards the technological developments, for example, of cloud computing. Such a question is crucial because cloud computing allows user to access contents anywhere. That could cast doubt on the geo-blocking principle, something to which legislators do not want to renounce.

 

The international legal framework in cable retransmission

2.1. Article 11bis of the Berne Convention and Article 8 of the 1996 WIPO Copyright Treaty 

At the international level, cable retransmission is regulated by Article 11bis, paragraph 1, of the Berne Convention and Article 8 of the WIPO (World Intellectual Property Organization) Copyright Treaty regarding the right of communication to the public. Specifically, Article 11bis, paragraph 1, of the Berne Convention states: «Authors of literary and artistic works shall enjoy the exclusive right of authorizing:

(i) the broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images;

(ii) any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one;" [...]. It is clear that (i) deals with the author’s right to authorize broadcasting and (ii) regards the author’s right to authorize the retransmission of broadcasts».

This article is the result of the compromise between those who wanted to extend the protection to these new type of representation and those who did not. In this case, thus, the Convention is particularly flexible and allows the protection also when the retransmission of a broadcast is carried out by an entity other than the original one.

The criterion of “an organization other than the original one” is decisive because it reveals the fundamental aspect of Article 11bis, paragraph 1, (ii), that is to say that it protects not only the rights of the initial broadcast, but also the retransmission as a new act of communication to the public, and the broadcaster which retransmit some contents is protected as if it were the creator of the contents. According to the Guide to the Berne Convention (Masouyé, 1978), when the author authorizes the broadcast of his work, to him the final user will be the owner of the reception equipment who receives the broadcast program. Now, in the case of cable retransmission, there is an potential audience, which is not determinable in advance. However, this is not necessarily a new public compared to the one receiving the original broadcast service. Even if this public receives the cable retransmission of contents that it can also receive on air, the retransmission is always a new act of communication to the public. During the negotiations of Article 11bis, paragraph 1, (ii) a debate was initiated around the meaning and the importance of the concept of “new audience”. Belgium proposed that, to receive protection, the retransmission had to reach a new audience, but, eventually, the criterion of “an organization other than the original one” was preferred. But, it was clarified that a mere technical intermediary, such as the local telecom operator, was considered irrelevant. However, for the purpose of the copyright protection, the question related to the new audience is not a determining factor. What is decisive instead is that the retransmitting organization uses the broadcast for its own business purposes. Thus, in order to determine whether a retransmission is under Article 11bis, paragraph 1, (ii), it is necessary to focus on the economical advantages gained by the retransmission.

It is interesting to explain that a cable operator can engage not only in the redistribution of traditional, terrestrial, over-the-air channels, but also in cable-originated transmissions. That would mean broadcasting by means of wire diffusion, but the same rules are to be respected as in the case of traditional broadcasters. We can conclude that Article 11bis, paragraph 1, (ii) applies to any such broadcast, as long as this is done by another operator, for business purposes. The good that this norm aims to protect is the right of the author against a new use that is capable to generate new revenues for another “organization”.

It is worth saying that Article 11bis, paragraph 2, of the Convention allows the signing countries to determine the conditions under which the right is exercised. Thus, countries can provide stricter requirements or reduce the scope of the Convention. However, we can say that the general interpretation is that member countries can use an obligatory licensing system and provide in parallel a right to an equitable remuneration, to be established by the parties, or, failing that, by the competent authority.

In the European Union the simultaneous, unchanged and unabridged retransmission of foreign broadcasts must respect a mandatory collective licensing scheme in accordance to Council Directive 1993/83/EEC (Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission).

Another important legal reference for the purposes of this paper is Article 8 of the 1996 WIPO Copyright Treaty (WCT), which tried to face the new systems of communication. It affirms: «Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them”. For the sake of completeness, the fact that Article 8 of the WIPO Copyright Treaty does not recall Article 11bis, paragraph 2, of the Berne Convention does not mean that this is not applicable».

2.2. 1993 Satellite and Cable Directive

This directive introduced a legal framework for the simultaneous, complete and unchanged retransmission of foreign broadcasts. In fact, the directive aimed to remove the obstacles to cross-border broadcasting due to the differences that might exist between two Member countries. However, there was no doubt that the cable retransmission was subject to copyright. The directive established a collecting society to protect the right owners. The licensing of cable retransmission rights was mandatory, and this system was adopted more on the request of the cable operator that on that of the right-owners.

The Commission’s report of 26th July 2002 [10] clarified the implementation of the above-mentioned directive. Specifically, it explained the need of the existence of a collecting society for the management of the rights. It was said that it «fulfilled a need for a balance between the exercise of the exclusive right and an assurance for the cable operator that all copyright and related rights had been acquired for the programs being retransmitted, due in particular to the extension of collective management to non-members, which guaranteed the cable operator complete representation of the collectively managed material».

Article 10 of the Directive regulates the cable retransmission by the broadcasters. It states: «Member States shall ensure that Article 9 does not apply to the rights exercised by a broadcasting organization in respect of its own transmission, irrespective of whether the rights concerned are its own or have been transferred to it by other copyright owners and/or holders of related rights». This provision excludes individual broadcasters from the mandatory licensing scheme. The reason of this choice is that broadcaster are fewer than the copyright owners in the broadcast programs, thus they are much easier to identify for the cable operator. Then, as regards the particular contractual context of cable retransmission, the Report concludes that «an extended system of mandatory collective management ensures legal certainty as regards the settlement of fees for all right-holders and remains an essential principle in the context of retransmission by cable». Moreover the Report points out that the provision of the Directive concerning the payment of the cable retransmission rights has been correctly transposed by all the Member States. The Commission encouraged the improving of negotiating conditions, but left them to the Member States, otherwise «this would jeopardize the principle of contractual freedom». The Report also suggests the possibility to create a system by which cable operator only negotiate for the collecting society of each Member State, obviously according to the legislation of the single country. Then the Commission admits that «some broadcasting organizations manage the acquisition of all cable retransmission rights on behalf of the cable operator, who remains legally responsible for the acquisition of such rights». However, this system is convenient only for the big broadcasters that own trans-national channels. Acknowledging that, the Commission then specifies that this must not rely on a broadcasting organization, «as the legal responsibility and financial commitment associated with the retransmission rights and initially incumbent upon the cable operator might be too much of a burden for some broadcasting organizations. It would amount to setting up a one-stop-shop system with the risk that it would be an empty shell in view of the specific difficulties involved in its implementation which would be faced by some broadcasting organizations when it came to determining the remuneration». Eventually, in its report, the Commission considers that the one-stop-shop system, that is to say the system providing the existence of a collecting society as the only entity with which to deal, keeps being a major project. In fact, in a growing information society the provision of collecting societies managing the transmission rights deserves an in-depth consideration.

2.3. Legislation in European Countries

2.3.1. Overview

It is now worth explaining how this supranational legislation is applied at the national level. European countries have implemented the European and international instruments in a harmonized way. The legislations of the considered countries state that cable retransmission is an act of communication to the public. Furthermore, no legislation makes any difference between the retransmission of foreign and national programs. Moreover, rights are managed as urged by the Satellite and Cable Directive. For example, Belgium, the Netherlands and Germany provide that the cable retransmission rights must be managed by the collecting societies, with the exception of autonomous broadcasts, who can negotiate their own retransmission rights. Even if not part of the European Union, for the purpose of this paper it is interesting to underline the case of Switzerland, which set an exception, since the only body entitled to negotiate the retransmission rights are the collective societies. Cable operators must thus necessarily deal with them. In the above mentioned countries there is no legislation providing a one-stop-shop for cable rights. So, in these countries, there is either a global contract or a situation where these contracts are cancelled or not renewed as a result of the decision of cable operators, and that happens mostly in the Netherlands or in Belgium. In the Scandinavian countries the collective agreement are extended also to authors which are not represented by the collecting society, which always provides legal assistance. The unrepresented authors may then claim to the collecting society for the remuneration due to exploitation of their works.

It is worth mentioning that in some countries such as Germany, there is an obligation for cable operators and right-holders to negotiate reasonable terms for cable retransmission. The only way not to apply this obligation is an objective impossibility to accept these terms. However, in some countries, when negotiations fail, they are provided systems to unblock the process. For example, in Germany, where there is no agreement between the cable operator and the right holders, an arbitration of the Federal Patent Office decides for the parties, who have the possibility to appeal to Court. In Belgium, then, there is a mediation system which is not binding for parties, and that also exists in the Netherlands, even if this system has not been used yet. In Denmark and Norway arbitration is provided by the copyright tribunal. In Switzerland, where the broadcasters have the obligation to be represented by a collecting society, the agreement proposed must be approved by the Federal Commission.

As regards to the adaptation to the new media, which should be considered as falling under the legal provisions of the Satellite and Cable Directive, the situation differs from one country to another at the national level. In some countries such as Belgium, Switzerland and the Scandinavian countries, the legislative approach for retransmission is particularly broad, including also the new technologies, and thus wire or wireless, IPTV, mobile. Conversely, in other countries such as Germany or the Netherlands, the definitions of “cable retransmission” or “broadcasting network” are less open and limited to wire platforms. However, it must be said that in such countries the legislation about wire platform is extended by analogy to DLS, IPTV or mobile.

 

2.3.2. Belgium

The 1993 Cable and Satellite Directive has been transposed in Belgium by the Law of 30th June 1994 (hereafter “The Belgian Copyright Law”). It is a national legislation, since copyright matter falls under the competence of the Ministry of Economy. In the respect of the Directive, Article 52 of the Belgian Copyright Law defines cable retransmission as «the simultaneous, unaltered and unabridged retransmission by a cable or microwave system for reception by the public of an initial transmission by wire or over the air including by satellite or of television/radio programs intended for reception by the public». In this definition it is also contained a principle taken from Article 11bis of the Berne Convention, according to which cable retransmission is made by “an organization other than the original one”.

It is now worth focusing on the Belgian model for the management of cable rights. This model comes out from 1993 Cable and Satellite Directive. Thus Article 51 of the Belgian Copyright Law gives exclusively to right-owners the power to authorize the cable retransmission of their works. But then, Article 53, in compliance with the Directive, points out that the management of these rights has to be entrusted to collecting societies. The only exception is for broadcaster with respect to their own transmission rights, which can be exercised individually. Thus, in the Belgian model, cable operators only deal with two kinds of players: broadcasters and collecting societies. The aim of this system is to give legal security to retransmission rights negotiations. In short, the European Commission has put collecting societies in the center of the system, and that has improved the management of cable rights. Prior to the Directive, cable operators had to negotiate individually with each right-holder.

It is, moreover, important to stress that the Belgian Copyright Law treats in the same way cable and microwaves retransmission. Article 52 defines the cable retransmission as retransmission “by cable or by microwave system”. The authorization of right-holders for the retransmission is needed when there is a communication to the public. This principle is contained in the mentioned Article 11bis of the Berne Convention, so, as a consequence, no authorization is requested when the communication is made in a “family circle”. This concept refers to a limited group of persons who have a close relationship between them.

According to Article 11bis of the Berne Convention, Member States’ legislations «shall not in any circumstances be prejudicial to […] the right of the author to obtain equitable remuneration». Notwithstanding, in Belgium, as in other countries, cable operators have always tried not to pay the retransmission fees, at least for national channels. Their justification was that in fact the rights for such a retransmission had been already paid for the first retransmission. Moreover, cable operators has always argued that the unabridged and unaltered cable retransmission takes place in the same geographical “service area” and thus with the same audience as the first transmission, for which the rights have been paid. This theory is clearly not compliant with the principles of Article 11bis of the Berne Convention. That states that any retransmission made by an organization different than the original one constitutes a new act of communication, and, as such, it needs a new authorization from right-holders.

It is now worth mentioning some court cases on cable retransmission. Substantially, all the decisions confirm the principle of the 1993 Cable and Satellite Directive, transposed in the national legislation. But it is interesting to see that even before, the Belgian jurisprudence was already on the path of the future Directive. A decision of Belgian Court of Cassation of 1981 decided, for example, that cable retransmission constitutes a communication to the public. And that is why cable operators are obliged to obtain the authorization of right-holders.

Another decision of the Brussels Court of First Instance established that the existence of a must carry rule does not exempt cable operators from paying fees for the retransmission of those channels. To conclude we should cite some decisions about the concept of communication to the public. The Brussels Appeal Court decided that the public character of the communication depends on the fact that it is directed to a generic public, without any link between them. Anyone can participate to this communication, which makes it a non-private communication.

2.3.3. The Nordic Countries (Denmark, Sweden, Norway, Iceland)

In the Nordic Countries, television matter is managed by the UBOs (Union of Broadcasting Organizations). The UBO organizations are associations of broadcasters with respect to the cable, satellite and wire retransmission of their broadcast signals. There is a UBO in each and one of the mentioned countries. In Denmark, the part related to retransmission is Section 35 of the Copyright Act and provides the same principles as Belgium. Thus cable operators are obliged to deal with collecting societies who manage the rights of right-holders. The only exception, in this case too, regards broadcasters for their own rights, that they can manage individually.

In Norway, section 34 of the Copyright Act states that: «Works that are lawfully included in a broadcast may, by simultaneous and unaltered retransmission, be communicated to the public when the person effecting the retransmission fulfills the conditions for an extended collective license pursuant to section 36, first paragraph, or retransmits with the permission of a commission pursuant to the provisions of section 36, second paragraph.

The exclusive right of the author as regards retransmission may only be exercised through an organization approved in terms of section 38 a. Retransmission of works originally broadcast by wire is not covered by this section».

In Sweden too there is an obligation to negotiate with collecting societies and Article 42 f of the Copyright Act states that: «Anyone is entitled to transmit to the public (retransmit), simultaneously and in an unaltered form, by wireless means or by wire, works which form part of a wireless sound radio or television broadcast, provided that an extended collective license applies pursuant to Article 42 a.

The provisions of the first Paragraph do not apply to works where the retransmission right belongs to the sound radio or television organization that carries out the original transmission».

So, here, as well, we find a system in which the only exception on the obligation to negotiate with collecting societies, regards broadcasters for their own rights.

In Denmark the national television channels benefit of a must-carry obligation from cable operators, and there are similar provisions in the other Nordic countries. For example, in Denmark, Norway and Iceland cable operator are not only obliged to carry the national channels, but they are also obliged to pay retransmission fees.

In Sweden the Public Broadcasting Service (SVT) has paid until 2009 the remuneration to the collecting societies on behalf of the cable operators as regards to retransmission by wire.

Like in other countries, in Denmark cable operators has tried not to pay retransmission fees with respect to channels that they had the duty to carry. But both the Copyright License Tribunal and the courts have confirmed many times that cable operators have to pay retransmission fees. It is interesting to cite the Copyright License Tribunal’s decision n. 16 of 27th June 1987, which stated that there is no distinction between national must-carry channels and other channels with respect to the tariffs.

2.3.3. Germany

The German legal framework of cable retransmission is the Urheberrechtsgesetz (URhH), which is the name of the German copyright law. Article 20a UrgH provides a very broad definition of the right of broadcasting, stating that it regards the works that are accessible to the public by wireless broadcasting such as, radio, television, satellite, cable or similar technical devices. This last provision is clearly open to the new platforms. Article 20b UrgH directly regards cable retransmission. It provides that the right to retransmit a transmitted work as indicated by the 1993 Satellite and Cable Directive (simultaneous, unaltered and unabridged retransmission of programs by a cable or microwave system), can only be exercised by collecting societies. Moreover, as established by the Directive, the only exception to this principle regards the broadcasters for their own rights. However, cable operators need the authorization of collecting societies or of the broadcasters for the retransmission of programs. Article 20b makes no distinction between national and foreign television-channels and then underlines that also the retransmission of national channels must be remunerated as copyright-relevant act. Section 2 of the same article states that the remuneration rights of the authors can be managed only by collecting societies, but that must be established in advance.

It is important to stress the importance of the so-called global cable agreements. On the request of a broadcaster or the cable operator all right-owners involved in a program have to negotiate together. Article 87, Section V of the UrgH provides that the contracts negotiated by broadcasters and cable operators must provide reasonable terms. They cannot make the negotiations fail, unless there are some reasonable justifications. This provision is a limit for the contractual freedom, and it constitutes an exception with respect to Article 9 of Cable and Satellite Directive. This exception is justified by another provision of the same Directive, which is Article 12. It provides that legislations must guarantee that the contractual parties do not refuse or hinder the negotiations without a justified reason.

Article 87, Section 5 of UrgH seems to provide an obligation to contract or a compulsory license. In fact, it only establishes an obligation to negotiate, and that is proved by the faculty that parties have to refuse. Nevertheless, this refusal must be done on the basis of “objective grounds”, meaning reasons that objectively impede the conclusion of an agreement. They could refer to legal reasons or to material reasons. In case of failure of the negotiations, the arbitration board at the German Federal Patent Office can make proposals for interlocutory agreements, which are binding until a decision is taken on the case. Eventually, if parties do not arrive to any agreement, the Court of First Instance (Oberlandergericht) concludes the negotiations by defining the content, which is binding but can be appealed. In case of appeal, the Federal Court of Justice decides with binding decision that, in this case, cannot be appealed.

As regards to the administration of the cable rights, if right-holders have not entrusted any collecting society, thus the collecting society which normally deals with such rights can manage their rights. This is called “outsider-rule”, and exists in other European countries too, since it provided by the Satellite and Cable Directive.

As regards the new technologies, Article 20b of the German Copyright Law offers a very tight definition of “cable retransmission” which covers a small range of technologies, namely cable and microwave systems. However, the word “cable” comprises a lot of technologies, such as the DSL. So, many German broadcasters, such as RTL, ProSiebenSat1, ARD, ZDF have concluded retransmission with the IPTV-platform of the Deutsche Telekom. As regards instead microwave retransmission, in this definition is not included new wireless retransmission technologies such as mobile platforms or satellite retransmission platforms. We could say, then, that the retransmission through these specific technologies is not regulated by the German law. However, we can extend by analogy the term “microwave system” also to wireless technologies. It is clear that technically it does not mean the same thing. So there are strong demands for clarifying the wording of Article 20b UrhG, to adapt it to new technologies. Another issue that is not compatible with the wording of this article is the encryption of a digital satellite retransmission. This legal vacuum has created some critical issues. For example, satellite operator APS (Astra Platform Services) has put in place a system of generally encrypted digital retransmission of programs via satellite, based on the platform Entavio, initiated by APS. It is, in fact, the configuration of a new “pay-TV” because customers must pay a monthly fee for decrypted reception even for programs that are normally free-to-air. This system is not technically illegal, because since it involves no “microwave system”, Article 20b UrhG should not theoretically apply. For these reasons the German anti-trust authority has raised some doubts about the compliance of this platform with the respective legislation. Thus, the commercial free-TV broadcasters have interrupted, for the moment, the encryption of satellite transmissions. Moreover, we must consider that the lettering of Article 20b UrhG, only applies to the simultaneous, unaltered and unabridged retransmission of a program. It means that retransmission of single parts of programs or at different times from the original ones, is not subject to Article 20b. Moreover, it certainly does not apply in case of providing of new services such as time-shifted viewing or on-demand based services.

As regards the administration of retransmission rights, Germany complies with the Satellite and Cable Directive in legislating about the collecting societies. These operators exercise the rights under Article 20b, Section 1, UrhG, the rights of the authors and of the so-called “outsiders”. Collecting societies negotiate with the authors a license and then deal with cable operators for the payment of an equitable remunerations for the retransmission of the rights.

It is worth pointing out that some doubts can be raised with respect to Article 11, Section 2, UrhG. It provides that: «Should no agreement be reached with respect to the amount of remuneration to be paid for the grant of a license or for an approval, the license or approval should be deemed to have been granted if the remuneration demanded by the collecting society has been paid without prejudice, or if such remuneration is deposited in favor of the collecting society». It is clear that a problem can occur if cable operators refuse to pay any remuneration at all. In this case the broadcaster would prohibit the retransmission, to the detriment of the legal asset, which is, in this case, the diffusion of the intellectual property rights. German procedural law does not provide any form of interlocutory injunction and it could take years before obtaining any decision on the payment. The result would be the non-retransmission of the programs. In this case, we can consider that Article 87, Section 5, would apply. It states: «Broadcasting organizations and cable operators shall be mutually obliged to conclude a contract on reasonable conditions concerning cable retransmission within the meaning of Article 20b (1), first sentence, unless there are objectively justifiable reasons to refuse to conclude such a contract; the broadcasting organization’s obligation shall also apply in respect of the broadcasting rights granted or transferred to it in regard to its own broadcast. Upon the request of the cable operator or the broadcasting organization, the contract shall be concluded with the collecting societies which are entitled to assert a claim in relation to cable retransmission, so far as there is no objective ground to justify the refusal of joint conclusion of the contract». It means that, as in other countries, in Germany there is the possibility to conclude an agreement when the refusal is not justified by objective reasons.

German cable market is one of the hugest ones in Europe, involving around 18 million households. The main operators are Kable Deutschland GbH, Unity Media and Kabel Baden- Württemberg. These cable operators have a strong position in Germany, and that has consequences on the bargaining power that they have in their relations with broadcasters. Thus, in Germany, unlike other countries, the major three cable operators are in the position to ask for carriage fees from each broadcaster for the distributed programs. Nevertheless, it must be considered that, according to the German Copyright Law, cable operators should not refuse retransmission agreements if there are no objective reasons to justify that. Thus if an agreement on tariffs proposed by the collecting societies is refused by cable operators, it is provided the possibility to appeal to an arbitration board, as a last resort.

Starting from 2006, many operators began to provide DSL retransmission. Collecting societies have agreed to this new distribution platform, because it gives access to a broader public. Nevertheless, as mentioned above, the German Copyright Law lettering does not state anything about wireless retransmission, thus a modernization of the legislation is strongly requested in Germany by the television market players.

2.3.5. France

Article 34-I of the French Law of 30th September 1986 on freedom of communication (Loi Léotard), as amended by the Law of 1st August 2000, and more recently by the Law of 4th August 2015, states that cable networks are authorized by the communal authority upon which territory they want to establish. In fact, communal authorities propose to the French Telecommunications Authority (Conseil Supérieur de l’Audiovisuel – CSA), and then this authority decides whether or not to grant such authorization.

Article 34-II provides that the authorization “may contain obligations”, and they can be related: a) to the retransmission of services which normally are free-to-air and to the retransmission of international channels regarding French speaking communities in which at least one of the public channels takes part (i. e. TV5); b) to must-carry obligation with respect i) to the communal authorities for communal information; ii) to non-for-profit association for programs related to local life; iii) to the distribution of a minimal number of own programs.

So, when a cable operator applies for the CSA authorization through the communal authority, commits to include all terrestrial and local channels in its offer. So the must-carry rule applies in France with respect to both public and commercial channels. Among these channels there are:

  • National public channels: France 2 (generalist), France 3 (regional and generalist), Arte (generalist and cultural), La Cinquième (educational);
  • Private (commercial) national channels: TF1 (generalist) and M6 (generalist and musical);
  • Private pay-TV channels: Canal + (cinema, sport and entertainment).

Furthermore, in areas close to borders, cable operators must distribute the free-to-air foreign channels in the concerned area, such as RAI, ARD, ZDF, RTL, SW3.

As regards instead satellite operators, they are only obliged to declare their service to the CSA by representing a detailed information about their commercial offer. Moreover, any change must be notified to CSA. Article 34-2 of the Law of 1986 states the obligation for satellite operators to provide to their subscribers, on a free basis, programs about the influence of French-speaking communities and French language, and in which at least one public channel is part. Article 34-3 states that in the metropolitan territory, which means France excluding DOMs and TOMs, satellite operators must retransmit public channels and European cultural channels.

Generally the distribution costs are borne by the satellite operators themselves, except in overseas departments, territories and collectivities and New Caledonia, where these costs may be shared with Radio France Outre-mer.

We can say thus that in France the must-carry rule is very broad, including French and foreign channels, private and public, generalist and specialized and even pay-TV channels.

It is interesting pointing out that as regards satellite operators, the must-carry obligation is imposed by primary legislation. The non-respect of these obligations may cause fines or even the suspension or the withdraw of the authorization by the CSA.

Thus, distributors of television services in France are subject to a must-carry obligation with respect to the French PBS channels. It is obvious that it also exists in the French Copyright Law an implicit must-offer obligation on the part of public broadcaster services. That means that PBSs cannot refuse the cession to television distributors. When the Law of 1986 was enacted Internet did not exist, thus the must-carry obligation only referred to television operators. The Law of 2014 amended Loi Léotard and provided a principle of technology neutrality, in accordance to European Union legislation.

It is now interesting to analyze France retransmission legal framework through a recent law-case. Play TV is an over-the-top platform which retransmitted on the Internet the programming of France Télévisions (the French PBS). After the denial by France Télévision to give Play TV the right to retransmit its programming, Playmédia, which is the editing company of playtv.fr, brought the case before the CSA (Conseil Superieur de l’Audiovisuel). Playmédia invoked Article 34-2 of the Loi Léotard that imposed a must-carry obligation for distributors regarding public channels. The Authority verified if the conditions foreseen by this law to be considered distributors under the must-carry rule were covered. It discovered that Playmédia had the status of distributor. Nevertheless, Playmédia did not have any subscriber, because it provided a free service. Having subscribers was a fundamental condition to be subject to the must-carry obligation. Then the Authority rejected the question. However, this is not the end of the story. The CSA decided to give Playmédia a term to cease the retransmission of France Télévisions channels. This term gave Playmédia the time to be compliant with the decision, and, in the meanwhile, since the retransmission was effectuated, Playmédia could pay a fair compensation for the distribution. The CSA also stated that playtv.fr had to put in place a mandatory subscription system, and the company did so.

However, playtv.fr did not cease to transmit France Télévisions channels and in October 2014, it was condemned to 1 million euros for copyright infringement in a separate judgment. The execution of the decision was suspended because of the appeal proposed by Playmédia against the judgment.

In February 2015 another decision of the Conseil Supérieur de l’Audiovisuel stated that as regards the Law of 1986, playtv.fr did not comply, at the time in which the question was firstly brought before it, with the necessary condition of a distributor. Specifically, to be considered a media distributor, and to be subject to the must-carry rule, it had to dispose of subscribers. The questioned article’s lettering was: «when proposing an offer on a digital platform, the editor gives its subscribers the services of these societies which are diffused in digital terrestrial». At this point, France Télévisions had to comply with the present decision. But, in March 2015, France Télévisions refused to do that and received the formal request to respect Article 34-2 of 30th September 1986, about the must-carry obligation. According to Article 42-1 of the same law, France Télévision could be fined for the infringement. Moreover CSA could forbid it to sell advertising space, or even withdraw the authorization that render it a public broadcasting service. Thus, Playmédia is today compliant with the law according to CSA. Its users subscribe and accept the general conditions of use. Play TV has reached 30% share of the live television market.

2.3.5. Spain 

In Spain the must-carry obligation is very broad, including 60% of television programs. Under Article 11 of the Cable Telecommunications Act and Article 26 of Royal Decree 2066/1996, cable operators must retransmit:

  • The two channels of the public broadcasting service RTVE;
  • The three channels of the private broadcasting companies;
  • The local public channels of autonomous regions;

Before 2014, also in Spain there was no technology neutrality, the obligation being provided only to cable operators. Today, after some law amendments this principle has been adopted also in Spain. Anyway, must-carry obligations are imposed in both primary and secondary legislation at national, regional and local level. Sanctions can be imposed by a Secretariat for Communications and may even include the revocation of the license.

2.3.5. The Netherlands

In the Netherlands it is curious to see that Article 11bis of the Berne Convention has been transposed in a mirrored mode. Article 12, sub. 6 of the Dutch Copyright Act states that as a separate communication (to the public) is not considered the simultaneous broadcasting of a work contained in a radio or television program by the same organism that originally broadcasts that program. Moreover, with a different act of legislation (Media Act – Mediawet in Dutch), the Netherlands regulate the issue related to the management of the rights to retransmit. Effectively, as provided by the Directive, those rights are managed by corporate bodies, the collecting societies. Then, the Dutch Copyright Act (Article 26a, paragraph 4) states that the mentioned provision of the Media Act does not apply to broadcasting organizations with respect to their own broadcasts. Unlike Germany, the Netherlands propose a very broad definition of retransmission. The combined provisions of Article 1, sub q) of the Media Act and of Article 1.1 sub e) of the Telecommunication Act gives the definition of electronic communication. It states that transmission systems include switching or routing apparatus and other means, that makes it possible to transmit signals via cables, radio waves, optic or other electromagnetic means, including satellite networks, fixed or mobile terrestrial networks, electricity networks, as far as these are used for the transmission of signals and networks for radio and television broadcasts and cable television networks, regardless of the nature of the transmitted information.

All channels can authorize or prohibit cable retransmission on the basis of their copyright on their programs, and can demand remuneration for their rights. Nevertheless, it must be said that this issue is not that straightforward in relation to national channels.

Some case-law will help us to understand the way in which retransmission is conceived. Two decisions, respectively of 1982 and 1984 , stated that a central antenna system which receives a program constitutes a new act of communication to the public. It did not matter that the audience, in this case, could have received the program also with its own antenna. The central antenna constituted a new organization in the meaning of the Berne Convention. As such, it needed a separate authorization.

As regards to small cable systems, they constitute a new organization, unless these systems are used to carry programs into circles of families, friends or with close personal connections.  However, in the Netherlands, the colleting societies cannot be compelled to negotiate their cable retransmission rights only with the broadcasters.

As regards the must-carry rule in the Netherlands it is regulated by Article 82i of the Media Act. It is a very straightforward provision, which states an obligation of must-carry for the benefit of the national channels; the regional and local televisions with respect of the cable operators of the respective province; two television and two radio channels of the VRT (the television of the Belgian-Flemish Community).

Furthermore, besides these must-carry channels, Article 82k of the Media Act provides that if the must-carry television channels are under 15 in number, the City Council can oblige cable operators to carry other channels to fill this number.

As regards the Dutch cable market, out of 7.1 million households, 6.2 million are dependent for the reception of television programs on cable retransmission.

2.3.7. Switzerland

Although Switzerland is not part of the European Union, it is interesting for the purposes of this paper to analyze its legislation on cable retransmission matter. First of all, as regards the management of the retransmission rights, the collecting societies rule mentioned about other European countries applies both to wire or wireless signals. Moreover, under the Suisse Law, it is irrelevant if the retransmission is made by cable, telephone, the Internet, satellite, digital or otherwise. And it makes no legal difference between national, foreign or must-carry channels. As Switzerland is not a Member State of the European Union, there can be found some difference with the provisions of 1993 Cable and Satellite Directive. For example, under the Suisse Law, authors and broadcasters can never enforce the cable rights directly against the cable distributor. It means that in Switzerland, collecting societies not only manage the rights of authors or broadcasters, but they acquire them. Thus, collecting societies themselves are right-holders in the strict sense of the word. The Suisse legislation on retransmission is called Exploitation Act, and it states that cable rights must be collectively managed by collecting societies under a federal concession. Collecting societies negotiate the compensation for the retransmission of the rights within the Tariff agreement, which must be approved by the Federal Commission. The Tariff is based on the amount that cable operators charge to their connected households, normally for a percentage of 12%.

As regards the Suisse television market, cable network covers the whole territory, and more than 90% of the population receives television signal via cable networks with around 2.8 million cable households.

2.3.7. Hungary

It is now worth mentioning the Hungarian case, which recently approved a strong legislation which is not in line with the other European countries and that maybe reveals a new trend on the retransmission matter.

On 12th September 2014, the Hungarian Parliament enacted a law which prohibits to the two main national commercial television channels (RTL Klub and TV2) to ask retransmission fees to cable operators.  As a consequence, the two broadcasters will have to change their business model. The two national broadcasters had already calculated to collect the retransmission fees starting from 1st January 2015. RTL and TV2, unlike other channels, were completely free-to-view, at least in the system previous to the switch off from the analogue to the digital.

As the analogue system does not exist anymore, the two broadcasters could keep with their activities at the same condition as the other broadcasters, and thus ask for the payment from cable operators for the retransmission of their contents. In fact, the situation was not completely clear in a juridical perspective. Players operating in the Hungarian television market took for granted that the two broadcasters had the intention to ask for retransmission fees with respect to their programs starting from 2015.

So, the Hungarian government considered that it was necessary to intervene on the national commercial television market. As a consequence, the Parliament adopted an amendment stating that RTL Klub and TV2 have to give the authorization for retransmission to distributor, and that should not ask for any remuneration. This situation will continue until the Government establishes a model to calculate a fair pricing that could maybe lead to the transition from commercial to a pay-TV model.

2.4. The possible duty of providing a retransmission rights clearanc

As explained above, retransmission by cable operator is a new act of communication, and as such it is relevant for the right-holders of the retransmitted contents. The one-stop-shop proposed by cable operators provides an almost exclusive responsibility on broadcasters. Obviously, this unbalanced system is not justifiable, since cable operators ask consumers to pay subscription fees. Moreover, in some countries, the behavior of cable operators has been ambiguous, since on one hand they complained about the necessity of dealing with multiple collecting societies and right-holder groups, and, on the other hand, they left the direct negotiations with broadcasters. For example, in the Netherlands, cable operators recently started negotiating directly with authors’ groups and film producers, or with individual broadcasters. That created a big confusion on the distribution of the rights and contradicted the intention by cable operators to simplify the negotiations. However, a model of retransmission rights clearance would not necessarily be a good thing, because that might multiply the number of negotiations. For example, in such model, broadcasters should first negotiate with the right-holders’ groups before concluding their contract with the cable operator. This system is surely not preferable to the “global agreements” system, where all parties sit around the same table. Moreover, during the negotiations with the right-holders groups, the position of the broadcasters is unknown. Thus, in their negotiations with the right-holders, broadcaster would not sufficiently know in which countries and under which circumstances their channels will be retransmitted, and that implies a very weak position for broadcasters. This system, thus, instead of simplifing the procedures, might make them slower and more laborious. Moreover, it is worth mentioning that new platform such as DSL or IPTV would not necessarily benefit of the right clearance system. The directive does not mention these new platforms, but among operators there is a strong consensus to apply this system by analogy also to the new media. The directive talks about “simultaneous, unabridged and unchanged retransmission”, which is something that can be easily provided by the new platforms. The strong diffusion of the new platforms, and the success of the new operators has opened an important reflection.

It is worth mentioning the different negotiation models with different degrees of “collectivism” in the relations between right-holders, broadcasters and cable operators. On one hand, we have the fully individual negotiations, where cable operators negotiate separately with each broadcasters and with each category of right-owner (films, music, graphic arts, etc). In this case it is easy to understand that there would be high-cost negotiations, and that was exactly what 1993 Satellite and Cable Directive aimed to avoid. On the other hand we have a model where cable operator negotiate with each broadcaster, but not also with each category of right-owner. This model is applicable when cable operators only wish to retransmit a limited number of the channels owned by a broadcaster. The cost of the negotiations and of that transaction would obviously rise with the number of channels.

For cable operators it is more convenient a system where they can negotiate with each broadcaster separately. But it is very common that the right clearance for all the “retransmittable” channels are managed by the collecting societies. And that is because collecting societies want to be involved in direct negotiations with the cable operator, because otherwise the economic risk of negotiations would only be borne by the broadcasters.

2.5. The idea of a “European Copyright Code”

Many television operators stress the need to create a European Copyright Code on the basis that the Lisbon Treaty states the competence of the European Union to harmonize the copyright law. A project exists and is called “The Wittem project”. It is not a project coming from European institutions, but “That was established in 2002 as a collaboration between copyright scholars across the European Union concerned with the future development of European copyright law. The project has its roots in an International Network Program run by three Dutch universities (Radboud University of Nijmegen, University of Amsterdam and Leiden University), and sponsored by the government-funded Dutch ITeR Program [11].

There would be many advantages from the creation of such code. First of all, a fair harmonization can be put in place about the Digital Single Market for content online, which is one of the current major problems in the audiovisual matter. Furthermore, a European Copyright code would decrease the costs related to the clearance of rights and precise the delicate balance existing between rights holders and rights consumers. However, an eventual European legislation should not only codify existing legislation, but should give juridical meaning to the copyright needs of the society. Obviously, a European Copyright Code would create legal conflicts with the national legislations, thus it would need a clear definition of the matters to be harmonized.

A Copyright European Code would be also useful with respect to the definition of the cross-border rights licenses and for the distribution of contents.

Also the issue of the retransmission fees, which is the core problem of this paper, would receive a clear European legal framework.

Nevertheless, the Witten Project has received many critics. One of the main detractor of the so called “European Copyright Code” is Dr. Mihály J. Ficsor, Member of the Board and Honorary President of the Hungarian Copyright Council and former Assistant Director General of WIPO. In his work regarding this matter, he affirmed that «What has been published as the ‘European Copyright Code’ is not a European Copyright Code (but a set of text-book-style draft provisions on certain issues adopted by a group of  academics – with whom many other academics and a lot of stakeholders do not agree)» [12]. Thus he stresses that what has been called code, first of all, is not a code, and even if we wanted to accept that it is a code, we should call it a tentative draft code.

Secondly, this draft is not a comprehensive work, because it only covers some general issues of copyright, like, for example, the crucial question of collective management. Furthermore, Dr. Ficsor underlines that a European Copyright Code is not timely, at least for three reasons: a) «Before considering any idea of working on a Code, it would be necessary to agree on a well-thought, well-informed and well-balanced EU copyright strategy and policy» [13]. This is not the current situation. It is clear that about this matter there is still a strong political uncertainty; b)  «At present, the efforts for further EU-level harmonization should rather be directed to certain weighty unsettled issues, in particular to an overdue updating of the legal machinery against rampant online infringements» [14]. According to the quoted paper, the creation of a European Copyright Code is not a major priority, and is certainly secondary with respect to the need to enforce the means to combat online infringements; c) «Copyright is closely linked to cultural policy in respect of which the present stage of EU integration (rightly enough) is at lower level» [15]. It substantially means that European Countries are not culturally ready for a full harmonization with respect to copyright.

Dr Ficsor then underlines that the willing to protect cultural diversity within the EU countries is not a demonstration of euroscepticism, but a value to protect. He concludes his paper by saying «that the draft should be set aside for a while. To be set aside, in this form, with these objectives, for quite a long while. Instead of dealing with it, the available capacity, time, and energy should rather be used for addressing the most important and most urgent current issues. One of these is trying to work out and adopt further harmonized legal and technological measures that might guarantee the re-establishment of the balance which has been by now drastically changed to the detriment of authors, other owners of copyright and beneficiaries of related rights as a result of widespread and massive online infringements» [16].

 

The funding of public television: are retransmission fees allowed for channels that traditionally are Free-to-air?

 

3.1. The main models of public television in the world

Among the western countries there are substantially two main models of conceiving television. On one side we have the American model, strictly related to the free market American culture, and, on the other side the European-British model, where, for a long time, television has been managed exclusively by the public sector. Even though the first television was created by John Logie, as mentioned above, the real ancestor of the modern television was designed in 1927 by Philo Taylor Farnsworth, a 21-year-old American inventor. He conceived a system to code onto radio waves moving images and to transform them back into a picture on a screen. This device scanned images with a beam of electrons, and, according to an hilarious story, one of the first images that he transmitted was a dollar, and that was because an investor had asked: “When are we going to see some dollars in this thing, Farnsworth?”.

Anyway this invention kept the attention of RCA (Radio Corporation of America), the company that dominated the radio business in the United States, and who owned the two NBC networks. They invested $50 million in the development of electronic television. We need to wait until 1967 to see the first American public television, when a Carnegie Commission report recommended the creation of a fourth, noncommercial, public television network. It was structured, at the beginning, as an educational nonprofit station. That year the Congress created the Public Broadcasting System, which was spread across the country. That was something new for the United States, since commercial networks were centered in New York or in Los Angeles. The Public Broadcasting System was composed by more than 300 stations and some of the most successful programs were imported from Britain, which had been doing television at a high level for a long time.

The funding of the Public Broadcasting Service has three major sources. The first one is, of course, congressional appropriations. Even though they suffered cuts beginning in 1982, they are still a substantial way of funding the public television. Nevertheless, this system has strongly been criticized because of the influence that it implies on the public television from the government. Donations are the second way of funding and, finally, there are the private corporate underwriters. This latter system is criticized because it may imply that to win corporate support it is discouraged a programming that might challenge corporate values.

3.2. A focus on the European-British model

3.2.1. Overview on the British television market

With respect to the European-British model we can say that «Understanding the television industry in the United Kingdom used to be fairly straightforward» [17]. Until 1990 it was very easy to understand the British broadcasting system, because there were only three televisions, and all of them were public. They was substantially funded by a license fee paid for the owning of a television, like in the case of BBC (British Broadcasting Channel), or by the sale of advertising time, and this was the case of ITV and Channel Four. Today the UK television landscape has become far more complex and marketized. One of the main elements to take in account to understand this epochal change is the delivery of new technologies, such as satellite and digital television, as well as, most recently, the Internet. That caused the birth of an enormous number of new channels, which needed, and still need, to find new sources of revenue. One of these is the payment of a subscription for viewers, or the sale of advertising space. The growing number of private televisions has increased the concern of the British government, which has felt the need of strongly regulate the television market, and, more specifically, the relationship between broadcasters (channel owners and/or content aggregators) and distributors (owners and/or controllers of key delivery platforms). This is a very complicated relation to regulate, since distributors and broadcasters have a mutual dependence. On one hand the broadcasters, in order to be viewed, need a platform. But, on the other hand, distributors are obliged to high quality standards because they need to sell their commercial offers to potential subscribers.

There are some broadcasters that are also distributors, such as Sky UK. As a vertically integrated player, Sky UK is under strict regulatory obligations. For example, it has to guarantee fair, reasonable and non-discriminatory access to its platform, to all the broadcasters, at the same conditions as its own programs. This is why the balance of power between broadcasters and distributors can be best seen as shaped by specific market and regulatory conditions [18]. Anyway, although the strong regulatory obligations, Sky UK has still a powerful position in the British television market, due to its successful vertical integration. Anyway, they have been in the middle of important happening for the broadcasting system. First of all, the negotiations on the commercial terms for distribution with the public service broadcasters. Due to the strong position of Sky UK, the regulatory authority in the United Kingdom, the Ofcom, has imposed a wholesale Must-Offer obligation for the supply of its two premium sports channel (Sky Sport 1 and 2) to other pay-TV platforms, namely its competitors. The Sky UK case is important for all the European Broadcasting System, because it has set an important precedent. This case demonstrates that even if the changing market conditions have had a strong impact on the relations between distributor, broadcaster, and customers, the regulation of television distribution is an important policy tool for governments. They can use it for pursuing public interest objectives, and this is very important because it is the demonstration that governments can shape the nature of the television industry notwithstanding the ending of spectrum scarcity.

 

3.2.2. The new television: the strong changings of the last decades

Over the last decades, a combination of technological, market and policy developments has completely changed the broadcasting system all over the world, and mostly in Europe. One of the major changes has regarded the total switchover from analogue to digital television around the year 2012. Today, after only three years, the real contemporary concern is the rise of broadband Internet supporting IP delivery of audio-visual content and portable consumer devices [19]. Actually, for the moment, the television remains the most used device to watch audiovisual contents. In the United Kingdom, which is very representative of the European situation, television viewing has remained robust at just under 4h/day in 2013 according to Ofcom statistics. Moreover, the British market is substantially polarized between two main distributors, Freeway (terrestrial) and Sky (satellite) reaching 80% of the household. The remaining 20% subscribes to Virgin Media [20]. A new entrant, BT has in the last years strongly developed as a hybrid DTT (Digital Terrestrial Television) and IPTV (Internet Protocol Television) platform. Anyway, the main five public broadcasting service channels (BBC1, BBC2, ITV, Channel 4 and Channel 5) still account for the 72.3% of all viewing, and they offer 16 of the 20 most viewed channels. All these channels are distributed also by pay-TV such as Sky. In the last years, according to Ofcom, the pay-TV subscriptions have increased, becoming the most significant source of revenue in the television market (46%, while advertising account for 28,6%).

Even if the traditional television maintains its strong position, in the last years, the constant rise of the distribution of audio-visual contents on the Internet (OTT, Over-The-Top), has made it the fourth distribution platform, after the three traditional ones (terrestrial, cable and satellite). It is interesting to stress that video-on-demand (VoD) services are rapidly moving online. This market is dominated by Netfilx and Amazon, but, as they provide previously broadcast television programs and movies, for the moment, they does not constitute a serious threat for the traditional television. It is important to underline that this is simply true for the moment, since Netflix has already started to provide original productions and so has done Amazon with new series and children’s animation programs. The entry on the media market of Netflix and Amazon is a concern not only for the UK traditional television, but for that of other countries too, such as Italy (where Netflix will soon start its transmissions).

In the United Kingdom, traditional television has responded by improving their offer. For example, BBC has invested in Freeview, Freesat (the satellite FTA platform) and YouView (the IP-enabled TV platform) maintaining its free-to-view nature. In parallel, pay-TV has responded with the improving of their premium contents, basically films and sport. For example, BT has invested £2 bn on sports rights, mainly UEFA’s Champions League and Premier League football matches and Sky has launched its OTT service, Now TV. This provides premium contents, and it is interesting to underline that it is the first time that Sky has unbundled Sky Movies and Sky Sports. Sky Now is the response to the growing competition of the OTT services.

Actually, more than one traditional player decided to launch a triple-play bundle offer (television, broadband Internet and voice telephony), and this “multitasking” offer is made to “lock in” customers. «Competition is heating up and convergence is becoming evident as the worlds of television and the Internet are getting closer and as the distinctions between a traditional fixed or mobile telecommunications operator and a traditional media operator are blurred» [21]. For example, in 2015 BT bought the mobile operator EE (owned by Deutsche Telekom and Orange) for 12.5 bn, while Sky preferred a less expensive choice by using Telefonica’s O2’s network.

According to Ofcom, consumption of online content has grown very slowly and the increasing use of non-linear contents is complementary, and not substitutive, to linear TV.   The introduction of digital television during the late 1990s brought some concerns that needed to be resolved through regulation. At both the European Union and the United Kingdom level the main concern was to remove the risk that the dominant players could abuse of key technologies. In the UK the Ofcom published guidelines (Provision of Technical Platform Services – TPS) to regulate the freedom on contract between broadcasters and satellite platforms. According to the Ofcom paper, satellite platforms must offer access to their platform on “fair, reasonable and non-discriminatory terms (FRND)”[22]. Of course, these contractual relationship depends on the bargaining power of each player. For instance, satellite platforms will be willing to retransmit the programs of a popular channel, but, at the same time, broadcasters may be willing to pay “platform charges” to secure their presence among the channels “offered” (more precisely: “carried”) by the satellite. Anyway the regulation provided by the Ofcom’s Code of Practice on Electronic Programme Guides imposes to give a “due prominence” to the main channels, such as BBC1, BBC2, ITV, Channel 4 and Channel 5. In the case of the main public service channels the UK has ensured their widespread availability through the legislation. Specifically, the 1988 Copyright, Designs and Patents Act allowed cable providers to carry public service channels without the need to pay for their retransmission. Moreover, in 2003, Communications Act included “must carry” and “must offer” obligations. Anyway, so far Ofcom has not needed to put into effect the must carry obligation and, in any case, must offer obligations need to respect the Ofcom’s TPS Guidelines. It is important to stress that when Sky entered in the television market, it brought a technological revolution which put the company in a strong position and gave it a huge bargaining power. That is why public service channels such as BBC and ITV ended up paying Sky a negotiated yearly fee for carrying their channels (around £10m-£20m each). However, during the last years the position of public broadcasting service channels has strengthened because of the success of the platform Freeview, which has reduced the risk of availability in the digital era. Furthermore, the public television has maintained high quality standards in its programming, and the public channels are still the most popular channels in the United Kingdom. Nevertheless, in 2010 PBSs had to face cut to the public funding. For example, BBC suffered a cut of more than £700m from 2010 to 2015. Moreover, the fragmentation of viewers and the growth of the Internet reduced revenues from advertising for the commercial funded public channels.

It is easy to understand that PBSs have always had a strong bargaining power in relation to satellite platforms. Furthermore, in 2003, the BBC decided to transmit its channels “in the clear” via satellite, and that reduced the strength of Sky in the negotiation of the “platform fee” for EPG (Electronic Program Guide) and regionalization services. Other PBSs such as ITV, Channel 4 and Channel 5 did the same, and that led to the launch of Freesat, a free-to-air satellite television platform. Due to all these changings, there is a strong debate in the UK about the possibility of a deregulation of television-related issues. However, a complete deregulation presents several risks. First of all, in the case of failed negotiations between broadcasters and satellite platforms, channels would be withdrawn in a situation of substantial black out. Moreover, unlike the American television market, which is substantially regionalized, the British market is considered on a national scale, and a complete deregulation could cause the complete disappearing of a channel whose bargaining power is weak.

3.2.3. The position of Sky UK

 

Due to the success of the Sky platform, which has revolutionized the European television market, Sky UK has gained a great market share in Great Britain. Its position has fallen under the control of the British Office of Fair Trading (OFT). It was easy to conclude that Sky had a dominant position in the pay-TV market, intended as such. More complicated was to prove that Sky had been abusing of this dominant position. The OFT’s investigation considered a number of complaint from cable broadcasters over the treatment received by Sky. In 1996, the OFT concluded that Sky had not acted anti-competitively [23], and agrees some “informal undertakings” with the broadcaster regarding its future relationship with cable operators. In 2002, even if the position of the regulator was clear to say that there were no sufficient grounds to say that Sky had abused of its dominant position, surprisingly OFT Director General, John Vickers, described Sky’s conduct as around the borderline of anti-competitive behavior. Later in 2010, after a review on the UK pay-TV market, Ofcom concluded that Sky had «market power in the wholesale provision of premium channels» and «exploits this market power by restricting the distribution of its premium channels to rival pay TV providers» [24]. Thus, Ofcom imposed to Sky a wholesale-must-offer (WMO) system, by which Sky was obliged to offer to its competitors the retransmission of its premium channels (namely Sky Sports 1 and Sky Sports 2) at prices decided by the Ofcom itself. This generated a legal battle between Sky and Ofcom which is still ongoing. Nevertheless, in the meanwhile, Sky is obliged to supply its premium channels to its competitors. The key contents that put Sky in a dominant position are certainly those related to sports. In the UK market, exclusive rights for the transmission of the football Premier League have proved to be by far the strongest weapon for the pay-TV market. In February 2015, the Premier League agreed to sell the right for a total of £5.1 bn for three seasons. These rights are shared by Sky and BT, but Sky has much more matches and that puts it in a dominant position, also considering that the transmission by BT only lower of 6% the total revenue that Sky receives from having the rights of football Premier League [25]. Ofcom affirmed in its paper of 2014 about the pay-TV regulation in the UK that a broadcast not having the possibility to transmit football matches is in a too weak position and that is not fair for competition. Then Ofcom analyses the position of Sky by considering that without regulation Sky could choose whether to consent or not the retransmission of such important contents, and that can unfairly cause a significant damage to rivalry in this market. That is why Ofcom concludes that it may be «appropriate to maintain regulation on Sky with the objective of ensuring fair and effective competition» [26]. At the same time, Ofcom considered that BT not supplying deals with smaller pay-TV platform such as Talk Talk (which also offer broadband services, like BT) is not a concern for competition. «To some extent this decision could be justified by an underlying desire to facilitate the long term growth of a more meaningful rival for Sky in the UK pay-TV market. At the same time, however, this recommendation also highlights the limitations of a piecemeal approach to the regulation of the supply of key content in the wholesale pay-TV market. The establishment of legal guidelines for the supply of key content of FRND terms, in the same vein as Ofcom’s existing TPS guidelines, may offer a more satisfactory long term solution to the regulation of the supply of key content to a variety of distribution platforms» [27].

3.3. Retransmission, must-carry obligation and welfare implications

3.3.1. Retransmission fees in America

The first country to regulate the issue of the retransmission consent is the United States through Section 6 of the Cable Act of 1992, which amended Section 325 of the Communications Act of 1934. This law was very clear in its aim of regulating this matter. First of all, this law establishes that a cable system cannot retransmit the signal of a broadcasting station without the consent of the station. Then, a local commercial television station is obliged to make a choice, for every cable system in the same geographic area, between the right to grant retransmission consent and the right to signal carriage under the must-carry rule. In the first case, the cable operator will be obliged to ask the consent of the broadcaster to retransmit their contents; in the second case, the cable operator will be subject to the must carry rule, meaning that he will be in the duty of transmitting the signal of these broadcasters. It is important to stress that, according to the Cable Act of 1992, no consent is required for noncommercial broadcasting stations.

The Section 4 of the Cable Act of 1992 amended Section 614 of the Communications Act of 1934 by regulating the must-carry rule for commercial broadcasters. According to it, cable operators have the duty to carry at least the signals of local commercial television stations. As regards to other broadcast television signals, the cable operator is free to choose whether retransmit or not. Then, cable system providing less than 12 channels must, at least, carry three local commercial television stations. Conversely, when they have more than 12 channels they must carry local commercial television stations up to at least one-third of the number of its channels. Bearing in mind that cable operator must respect these standards, then they are free to carry or not the channels of other television stations. They have some technical restrictions though. First of all, they cannot carry a qualified low-power station in the place of a local commercial television station and second, if a cable operator decides to carry the affiliate of a broadcast network, it must choose the broadcast network whose city of license reference point is closest to the principal headend of the cable system. As regards to positioning, each signal carried by cable operators must be positioned in the same channel number that it has when transmitted over the air. If that is not possible, the channel number must be mutually agreed. Furthermore, a cable operator is not allowed to ask a remuneration for carrying local commercial television stations, except in three cases: a) the costs of delivering a good quality signal to the cable system; b) indemnities for copyright liability; c) preexisting agreements between the station and cable operator.

Every three years, both public and private broadcasters can choose between a must-carry status and a retransmission consent, also called a “may-carry status”. If broadcasters opt for the must-carry, they cannot ask any remuneration for the retransmission, and operators which will carry their channels need no explicit authorization. If instead broadcasters opt for the retransmission consent, then they will have to negotiate with cable operators the terms of the retransmission agreement. This choice obviously depends on the bargain power that has each broadcaster. Thus, smaller broadcasters will opt for a must-carry status, whereas big broadcasters will opt for the retransmission consent.

As regards satellite operators, they must respect the principle “carry one, carry all”, meaning that if a satellite operator decides to carry one local channel, it must do the same for every local channel within that area. This is to prevent satellite operators from only favoring its subsidiaries.

3.3.2. A bargaining model for retransmission

If we put ourselves in the shoes of a commercial broadcasters, we understand that we fundamentally have two choices: a) asking to be carried for free and gaining from the augmentation of the advertising space that we can sell; b) asking the payment of retransmission fees, facing the risk of not being carried. So, it is interesting to predict what choice a commercial television might take.

At this point it is interesting to cite the results of the studies made by Professor Suchan Chae of the Rice University of Boston. He analyses the choices that a broadcaster might take when he decides to entertain business relations with a cable operator. Professor Chae proposes a first supposition: there are no payment between the broadcasters and the cable operator, but both increase their profit, respectively of an amount a and b.

The broadcaster’s net benefit a consists in the additional advertising revenue, and so we can assume that it is positive. The cable operator’s net benefit b is more complicated to calculate because it depends on the capacity that the carried channel has. Then if the broadcaster invokes the must-carry rule, its signal is carried on the cable system and the payoffs are, respectively, a and b. If the broadcaster decides to opt for asking retransmission fees, there is a second stage regarding the negotiation of the amount to pay for the operator to retransmit a given channel. Chae believes that the payment p can be positive, negative or zero. It can be negative because the broadcaster could decide to pay the cable operator with the aim of being transmitted in order not to be blacked out. That is true only if the advertising payment is larger than the payment. The game proposed by Chae is a bargaining problem with total pie a + b and breakdown point (0, 0). With the payment p, the payoffs to the broadcaster and cable operator are represented by the pair (a + p, b - p). If the surplus from the bargaining is negative (a + b < 0), we can assume that the equilibrium outcome of the bargaining is the breakdown point (0, 0). Then Chae adds two more elements to his model. One is the cost of bargaining and the other is information asymmetry. If the broadcaster decides to negotiate retransmission fees, both the broadcaster and the cable operator will face fixed costs for the bargaining, c and d, respectively. Regarding information asymmetry, a and b are common knowledge at the bargaining stage but not at the initial stage. For example, b is unknown to the broadcaster when he makes an election. So, in making the election at the initial stage the broadcaster compares her payoff from invoking the must-carry rule with her probabilistic payoff from negotiating for retransmission fees. I assume that the broadcaster is risk neutral and thus her objective is to maximize expected payoff after observing her net benefit a.

The choice of the broadcaster will depend on the gain from negotiating retransmission fees rather than invoking the must-carry rule. If the surplus from the bargaining is positive, then a + b > 0 and the gain will be p – c, namely the difference between the payment that the broadcaster receives from the cable operator and the cost of bargaining. According to Chae, who introduces a mathematic model that is too technical for this paper, a broadcaster invokes the must-carry rule if the adjusted expected payment conditional on a is smaller than her bargaining cost, and chooses to negotiate for retransmission fees when this is greater than her bargaining cost. Normally, when the cost of bargaining is small, a broadcaster prefers to negotiate for retransmission fees, if the conditional expectation of the cable operator’s net benefit is greater than her own net benefit after adjusting for the possibility of breakdown. The more the cost of bargaining increases, the less the broadcaster will elect the retransmission fees negotiation.

It is now interesting to understand how to calculate a (the conditional distribution of the cable operator’s net benefit) and b (conditional on the broadcaster’s observation on its net benefit). The benefit of a broadcaster is that, when it is carried by a cable operator, the carriage extends the reach, and this means more income in the sale of advertising space. So, on one hand the broadcaster’s net benefit is equal to the increase in its advertising space, and, on the other hand, when a broadcaster’s signal is carried by a cable operator, the benefit of the latter will be measured as the difference between the increase in subscription fees and the opportunity cost of using the channel, meaning the marginal cost deriving from carrying that channel.

Anyway, both retransmission consent and must-carry rule generate inefficiencies, economically speaking. The first introduces a bargaining cost, whereas the latter creates a distortion on the allocation of the channels.

Having said that, in the United States, in the past, few cable operators wanted to pay for the carriage of broadcasters. It was very common, instead, that the cable operators offered the creation of new cable channels to be run by the broadcasters. But that is not always very profitable. It only depends on the broadcaster’s expectations about the new cable channels. At the beginning of the Nineties, broadcasters used to give retransmission consent for non-cash agreements or to grant short term retransmissions agreement in order not to block the negotiations. It is clear that the bargaining power of the cable operators was particularly strong and even an operator such as CBS did not arrive to any deal with cable operators because it “dared” to ask for cash payments. Some broadcasters made deals to sell advertising on cable, and others just to provide news. The lack of leverage in the retransmission negotiations made that many small independent stations went for must-carry. After having analyzed Chae’s bargaining model in the negotiations between broadcasters and cable operators, we can conclude that broadcasters with a higher b will probably go for retransmission fees, bearing in mind the b is the additional advertising revenue that a broadcaster can get from the fact of being carried by a cable operator.

3.3.3. Is the must-carry obligation a burden?

The must-carry rule dates to a time when space on analogue broadcasting networks was limited. This rules wanted to grant the free access to public service broadcasting and ensure a diverse choice of programs [28]. «Traditionally, governments play an important role in creating, guaranteeing and protecting pluralism in society in general and in the media in particular, thus ensuring that every group of any size has an opportunity to express its views on society, that communities within a country are represented in the assortment of programs and that each community can obtain information about opinions and ideologies differing from its own» [29]. Thus, at the beginning the must-carry rule was only based on the scarcity of broadcasting capacity. With the birth of commercial television, this rule was based as a regulatory burden in the relations between broadcaster and distributors, for the protection of consumers. In the past, must-carry rules occupied a huge space of the transmission capacity of distribution network, then a little space was left for the transmission of other channels. With the digital technologies the capacity has increased and with satellite it become potentially endless.

In the rapidly changing media landscape, critical questions are asked about the current must-carry rules. For example, one major issue is if it is fair that public channels has priority on private channels. In fact today there is no great difference between them, public channels selling advertising space. Another question regards the Internet, and specifically how the Internet must be treated as an audiovisual content distribution platform.

It is easy to understand that if must-carry rules constituted for the past a way to grant consumers free access to media content, today this obligation «may put an unreasonable financial burden on distribution networks, which will have consequences for consumers as well» [30].

3.4. New platforms for retransmissions

The technologies existing today pose some questions regarding retransmission, for example, with respect to the broadcast across frontiers. It is clear that the television market has opened to the new media, such as DSL or IPTV. The business model is the same: these operators buy some contents from their right-holders. Article 1, paragraph 3, of the Satellite and Cable Directive provides a broad context of application for the rights clearance system with respect to cable retransmission [31]. This norm protects not only the technical kind of retransmission but rather the commercial nature of the retransmission activity, substantially by any means.  It is to consider that this is justifiable in the perspective of a broader protection of the consumer, which can receive the signals by different means. That is also important to stress that if it is true that Article 1, paragraph 3, of the Satellite and Cable Directive also applies to the new media, thus a system of simplified clearance of cable distribution rights should be extended to them too, with the consequence that they should be entitled to negotiate with the collecting societies.

Is television a public good?

4.1. An equitable remuneration for retransmission fees

What could be a fair price or an “equitable remuneration” for the retransmission of copyright subject matter? This is a very hot topic today. When a subscriber pays for the transmission of a pay-TV he or she pays both for original contents and for retransmitted ones. But, with respect to the latters, they could have access to the retransmitted contents through other ways, and always for free.

Article 11bis of the Berne Convention for the Protection of Literary and Artistic Works says that copyright owners should «enjoy the exclusive right of authorizing any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one». Article 11bis then affirms that countries can provide the need of statutory licenses in respect of this “exclusive right” as long as these licenses are «not in any circumstances […] prejudicial […] to [the] right to obtain equitable remuneration». «Thus in many countries the ‘retransmission right’ resolves to a non-exclusive right to equitable remuneration, comprising one of the several rights granted to copyright creators»[32]. But it is not clear what the meaning of “equitable remuneration” is. According to Ricketson, «No guidance as to the meaning of the expression ‘equitable remuneration’ is to be found in the convention, but essentially it must mean that the author is to receive, for the compulsory use of his work, an equivalent remuneration to that which he would have received if he were free to authorize the use in the absence of the compulsory licensing provision» [33]. It is hard to define what is an equitable remuneration for retransmission fees. In the United States retransmission fees were determined through industry compromise or tribunal determination. Actually, only the retransmission of “distant” signals were remunerated, since the local signals created no liability to pay copyright owners. This same position was adopted in Europe by the Republic of Ireland, where the Irish Music Rights Organization’s licensing activities with respect to retransmission extended only to “retransmission and rebroadcast of foreign broadcast television programs”.

4.2. Copyright as a public good

It is interesting to analyze the economic nature of public goods. In his article about retransmission, D.J. Brennan cites Paul Samuelson who used, in two different works [34], television broadcasting and lighthouses as examples of pure public goods. When we define a public good there are at least three characteristics to take in account: “non-rivalry”, “supply jointness” and “undepletability”. These three concepts refer to the fact that a new user does not mean an additional marginal cost for supplying the good. In supplying a public good, the average cost per user decreases.

According to D. J. Brennan, copyright subject matter has this quality of undepletability. “Once a work of authorship is created, the cost to the author of one person’s consumption of that copyright good is zero. Similarly, the cost to the author of an additional 1 billion persons’ consumption is zero. Further, the consumption by those 1 billion people in no way prejudices the consumption of the work by another billion people. Copyright is a non-rival or undepletable good”. Another quality of public goods is the “non-excludability”. When a public good is provided, it is impossible to exclude new users. An example could be the national defense services. Even if a new consumer wants to benefit of this good, the supplier is unable to exclude non-payers and consumption will occur without payment. Even though the non-excludability is essential to define a public good, increasing acceptance has been given to the idea that, actually, what really matters for a public good is the undepletability [35]. We could thus categorize public good in excludable and non-excludable. Copyright subject matter could be an example of an excludable public good, and that is why it may be provided through private market [36]. Moreover, «the raison d’être of copyright lies in the promise of economic rights to prospective creators as incentives to create» [37]. It is interesting to cite the study of Ronald Coase about copyright as a public good. He thinks that copyright, assuming it to be an excludable public good, may be privately supplied without offending notions of economic efficiency related to public goods. According to Coase, copyright subject matter will be supplied by the market efficiently where property rights are properly enforced and defined, because «those rights are initially allocated to the party responsible for the creation of the rights, and those rights are able to be easily licensed or assigned to parties who most highly value them» [38]. This is a view which emphasizes the efficient allocation of resources to create public goods, and that is in contrast with a theory that focuses on the importance to disseminate the public goods once created.

There is another interesting study about retransmission seen as public good by Janusz Ordover and William Baumol [39]. It shows the differences between diffusion and exclusion with a television broadcast signal: normally, the additional cost for transmitting a signal in an additional household is zero, and the cost of excluding a household from benefitting of the signal could be higher than the one necessary to transmit it.

We can say that copyright may be considered as an excludable public good according to Coase. Actually the concept of exclusion, in a civilized society, is something related to norms, and not necessarily to physical criteria. Schmanske uses the example of a private car and says that, actually, the lock is not a great nuisance to a serious car thief: «The answer lies in the institution of private property rights and the enforcement of those rights, whereby the expectation of sanctions against a captured car thief also works toward the exclusive private use of the automobile». With respect to copyright, the “car lock” is represented by the sophisticated technical protections that are developed to protect the copyright.

The issues related to retransmission involve two markets: the broadcast television market and the subscription television market. These two markets have two different business models. Normally, the price that a copyright owner can obtain depends on the willingness of the end recipient to pay. «If the only two agents are the copyright supplier/broadcaster and the copyright consumer/end recipient, leaving aside altruism or voluntary payments by recipients no incentive was thought to exist for the private provision to the public of broadcast signals which included valuable copyright content». The broadcast television market has a very simple scheme, where the copyright owner is the “wholesaler”, the Private free-to-air broadcaster is the “retailer” and the Advertiser is the “consumer”. So the copyright owner supplies its rights to a private free-to-air broadcaster that sells advertising time to the advertiser. The end recipient is not actually the consumer in this market and he pays no money to anyone, but his or her number, interests and geographic location are critical for this market. It is a “business model which relies on advertising”, and it is an example of a market for the private provision of an excludable public good. «However, once the broadcast rights to a television program are purchased, the sale of advertising time is an illustration of a market for the private provision of an excludable private good; only one advertiser may avail itself of any one advertising ‘slot’» [42].

4.3. The willingness to pay: the Bohm’s experiment

The television market has a peculiar structure. It is certainly possible an exclusion because the copyright subject matter is distributed on a “pay-per-use” basis. In England this was the commercial basis, unlike the United States, where the history of broadcasting reveals an advertising funded structure. In England, already in 1904 the Wireless Telegraphy Act 1904 introduced an annual fee (wireless license) to be paid for the owning of a broadcast reception equipment. This fee was used to fund the British Broadcasting Company. This fee is still applicable today. The British model abhorred the advertising funded system, and that is clear by reading a Parliamentary Committee report of 1949 which stated that advertising «puts the control of broadcasting ultimately in the hands of people whose interest is […] the selling of some other good or services […] If people of any country want broadcasting for its own sake they must be prepared to pay for it as listeners or viewers». At this point it is interesting to report a study by Shapiro and Varian which substantially affirms that: a) an important particularity of information goods is that the contents can be sold over and over again; b) the important thing is to maximize the value of that information good; c) a producer’s reward is the added value obtained by reason of that information good.

«Retransmission, as a non-exclusive right to remuneration attached to copyright, can be usefully considered within these three observations pertaining to information goods generally»[44]. Moreover, «with information goods, unit costs of production are negligible […] the key to reducing average cost in information market is to increase the sales volume» [46]. The information goods can be sold over and over again without depleting the good. According to Shapiro and Varian, that is due to the copyrights public good nature.

Retransmission is also a further sale of the information good. The price is stipulated as “equitable remuneration” and reflects what a further consumer would pay for the use of the information good. We could conclude that, seen from this perspective, retransmission “price” is determined in the context of, but independent from, prices paid by other consumers of the information good. Shapiro and Varian affirm that in an information economy, the only concern of copyright owners should be the maximization of their revenues, and not simply their protection. So, the access to the contents should be encouraged, as long as it generates added value.

In the article mentioned above, D. J. Brennan cites an experiment made by Peter Bohm to calculate the added value of retransmission. He involved six groups of around 35 people. Each individual was paid 50 kronor for the participation. Group 1-5 were told that the experiment involved other groups as well and that they were going to be shown an unreleased television program involving the two most famous comedians in Sweden. Furthermore, they were asked how much they were disposed to pay for that show. Only if the total amount had reached 500 kronor [46] the program would have been shown. Then they were told how much they were going to pay individually if this amount was reached according to the following scheme:

Group 1 – The actual amount stated as an individual’s willingness to pay

Group 2 – Some proportion of an individuals stated willingness to pay, so that if (for example) the summation of the of all individuals willingness to pay was 1000 kronor (i. e., twice the cost of access to the program) each individual would pay only half his or her specified amount

Group 3 – Either a) the stated amount, b) a proportional amount, similar to group 2, c) 5 kronor or, d) nothing at all, the payment obligation to be determined by random draw

Group 4 – 5 kronor

Group 5 – Nothing [47]

Bohm’s intention was to detect the free riders intention of the involved people with respect to television and thus retransmission. Group 1 is where the free rider question is most likely to appear: it is normal to understate his willingness to pay when one can rely on the aggregation of the others’ preferences to reach 500 kronor. In the Group 5 Bohm found an overstatement of the value in the attempt to ensure that the program was shown. In the other cases the average willingness to pay was of about 7-8 kronor.

Group 6 was not told about the 500 kronor threshold, and they were directly asked the highest admission fee they would be willing to pay if they were asked to pay an admission fee for watching the program. Then Group 6 was told that only ten people would have been allowed to see the show, those ten being «the highest bidders […] [and] will actually have to pay the amount they state to watch the show» [48]. In this last case the average willingness to pay was from 10.19 to 10.33 kronor. The following table resumes the data mentioned above:

Summary of Bohm’s findings

Group 1: Pay stated willingness to pay Group 2: Pay proportion willingness to pay Group 3: Basis of payment undecided Group 4: Equal payment of 5 kronor Group 5: No payment Group 6 (1): No payment Group6 (2): Pay stated willingness to pay, however only top 10 obtain accessAverage willingness to pay (in kronor) 7.61 8.84 7.29 7.73 8.78 10.19 10.33

This study was analyzed by Robert Mitchell and Richard Carson in “Using Surveys to Value Public Goods: the Contingent Valuation Method”. They concluded that this experiment showed the real willingness to pay at the second question asked to Group 6. On one hand because the “auction” form of a survey was proved to be often the best to determine the willingness to pay, and, on the other hand, because the answers given by Groups 1-5 were too influenced by the fact of relying on a considerable group size. Nevertheless Mitchell and Carson affirm that the results of Groups 1-5 were not so far from the value of Group 6, meaning that they revealed 71-85% of this true value.

This study is particularly important for the present paper because it shows how much an average consumer estimates the fact of receiving retransmitted television programming. Moreover, the Bohm’s experiment could be useful to calculate the “equitable remuneration” mentioned above for retransmission. From the perspective of the copyright owner, this experiment reveals the demand from consumers for access to the copyright subject matter. At this point it is possible to conclude that in this market the copyright owner is the wholesaler, the retransmitter is the retailer and the individual consumer/end recipient is the consumer. In the relation between consumer and retailer it is possible to estimate the added value for the retransmission, whereas in the relation between the retailer and the wholesaler it is showed how this added value can be shared between these two players. «This sharing of added value might take the form of a payment by retransmitter to copyright owner; a payment which might be considered equitable remuneration» [49].

This investigation aims to ascertain the added value of retransmission so to calculate what an equitable remuneration is.

 

Case-law 

5.1. European Court of Justice case-law

5.1.1. The Coditel case

It is worth reminding that even though European Union is not directly part of the Berne Convention, Article 9 of TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, it has to comply with the Convention.

In the field of cable distribution there are two major decisions of the European Court of Justice which help to resolve two important questions related to the right of communication to the public by means of cable. The first one is the Case 62/79 Judgment of 18 March 1980, and Case 262/81, Judgment of 6 October 1982 - Coditel/Ciné Vog Films, known as Coditel case law. A French film producer had granted to a Belgian distributor a seven-year copyright license for the distribution of his film for the Belgian territory. The film was shown in the Belgian territory, but also on a German television channel. This broadcast was bought in Belgium by a cable network company called Coditel, which distributed it to its subscribers. The Belgian distributor considered that the retransmission by the cable operator would cause harm to its commercial exploitation of the film and sued Coditel.

The Court of Appeal considered that Coditel had made a communication to the public because the broadcast of the film had been picked up by a German Broadcaster. Eventually, the Court concluded that Coditel should have asked the authorization of the Belgian distributor to retransmit those contents. The fact that the authorization had been given to the German television, did not imply a permission for cable distribution outside Germany. It was not an act of new communication to a new audience, and thus it clearly violated the exclusive seven-years copyright of the Belgian distributor.

5.1.2. The Hotel Rafael Case

Another major case is Case C-306/05, Judgment of the European Court of Justice, 7 December 2006 - Rafael/SGAE, known as The Hotel Rafael case. The fact was that a Spanish hotel had installed television sets in guest’s room, and SGAE (the Spanish Authors’ Collecting Society) complained about the presumed act of communication that the hotel was doing. In SGAE’s opinion, the hotel was infringing the copyright because it was doing an act of communication to the public by wire. The legal issue was to understand if the reception by the hotel and the distribution to its guests was an act of communication to the public. Actually, the guests of a hotel are not present at the same time.

A similar case had occurred in 2000, C-293/98 [2000] ECR I-629, also known as EGEDA case. It was in Spain as well, but, in this case, the European Court argued that the matter was not under the Satellite and Cable Directive, and that it was up to the national law to resolve the issue. Already at that time, Advocate General La Pergola considered that the use of such television set was an act of communication to the public. Eventually, the Court stated that the matter was not under the Satellite and Cable Directive, but under the EC Copyright Directive 2001/29 on copyright and neighboring rights in the Information Society. But, at the same time, the Court also pointed out that the concept of communication to the public was not defined by that Directive, but Recital 23 in its Preamble stated that communication to the public must be interpreted broadly. And by “public” we have to intend an indeterminate number of potential television viewers. So, in this case, “public” was not only the guests in the room, but also all the customers in any other area of the hotel. Furthermore, the Court considered that even if hotels have a private nature, that does not mean that it is not a communication to the public. Then the Court concluded that this distribution activity by the hotel constituted an act of communication under Article 11, paragraph 1, of the Berne Convention, made by an organization different by the original one. One of the important statements of the Court was the following: the hotel’s provision of access to the broadcasts «must be considered an additional service performed with the aim of obtaining some benefit. It cannot be seriously disputed that the provision of that service has an influence on the hotel’s standing and, therefore, on the price of rooms. Therefore, even taking the view, as does the Commission of the European Communities, that the pursuit of profit is not a necessary condition for the existence of a communication to the public, it is in any event established that the communication is of a profit-making nature in circumstances such as those in the main proceedings». Thus the Court recognized an economical benefit deriving from the retransmission activity. To this point, the hotel argued that what it did was to simply provide technical facilities to view the original broadcast. The Court responded by stating that the retransmission of the signal through a television set installed in the guest rooms constituted communication to the public.

At the national level the two main kind of litigation regarding retransmission right are related to two main issues: a) the small cable network (called SMATV networks), b) the relation between the must-carry obligation and the cable retransmission right. For the first issue, generally, the retransmission through these small networks is considered irrelevant for copyright protection purposes, and do not need any act of authorization. For example, in Germany, the practice of the collecting societies has made that in less than 75 household the retransmission of programs is exempted from any authorization from the rights holders. This principle is not respected in the Netherlands, where in the expression “any other body” are also included very small cable network.

Ad regards the must-carry obligation, even if cable operator try to use this rule, both national legislations and case-law, normally, do not exempt the cable operators from paying copyright remuneration for the retransmission. It is worth citing the Sweden case where the public service broadcaster pays the national collecting society on behalf of the cable operators for the must-carry channels.

5.1.3. ITV Broadcasting Ltd. v. TVCatchup Ltd.

According to decision C-607/11 broadcasters can impede the retransmission of their programs by another operator. This retransmission constitutes, under certain conditions a “communication to the public” and as such, it must be authorized by its author. The European Union aims to grant a high standard of protection in favor of the authors, by allowing them to have a fair compensation for the use of their contents. This is more important in the case of the communication to the public. Thus, authors have an exclusive right to authorize or limit any act of communication to the public of their works.

TVCatchup Ltd (TVC) offers media contents on the Internet. Its contents are basically made by live transmission of free-to-view channels. TVC operates in the British market, and ensures that its subscribers only can access to contents that they are entitled to watch by virtue of their television license. The conditions that users must accept include the owning of a valid television license and the limitation of the use of these services to the United Kingdom. TVC website has a system that verifies the place where the user is, in order to refuse the access if the geo-localization falls out of the United Kingdom territory.

Many broadcasters have opposed to the activity put in place by TVC, because it distributes their programs on the Internet, and does that almost live. Thus the broadcasters have started a legal battle against TVC before the High Court of Justice (England and Wales) (Chancery Division) for the violation of their copyright, put in place by the communication to the public, prohibited both by the national legislation and the Directive 2001/09.

The national judge asked to the European Court of Justice if an operator, such as TVC, realizes a communication to the public, as intended by Directive 2001/09. Specifically, the British judge asks if an operator can distribute on the Internet contents that people should have the right to watch through the original signal broadcasted on their television sets.

First of all, the Court has determined the notion of “communication” and has verified whether or not the activity of TVC is an act of communication. According to Directive 2001/29, the right of communication to the public includes every transmission or retransmission of a content to the public, which is not present in the original place of that communication. Furthermore, if a communication to the public with respect of a work is authorized, it does not mean that another communication of the same content cannot be prohibited. Thus, according to the Court, every retransmission of the same work must be individually authorized by its author. So, since the retransmission of these contents on the Internet is made by a specific devise, different from the original one, it must be considered a new act of communication. Then such a retransmission is subject to the authorization of the authors of the retransmitted works. Successively, the Court has verified if these works have really been communicated to a public. According to the Court’s jurisprudence, the notion of public relates to an indeterminate number of potential recipients, and include a considerable number of people. Thus, in the Court’s opinion, it is important to take into account how many people have had access simultaneously and subsequently to the same contents. The Court underlines that in this case, the retransmission of the contents via Internet regards people living in the United Kingdom who have an internet connection and who declare to be in possession of a license television in this State. These people can simultaneously access to the protected works through the live streaming of television programs on the Internet. Thus, this retransmission regards a considerable potential number of viewers. With these considerations, the Court concludes that through this retransmission, the protected works are effectively communicated to the public in the sense of the Directive. So the Court has stated that the notion of “communication to the public” in the sense of the Directive 2001/29 must be interpreted by meaning that it relates to the retransmission of works included in a terrestrial television radiodiffusion. It is made by an operator other than the original one, through an Internet stream that subscribers can receive by connecting to the server. Nevertheless, these subscribers are in an area of reception of this terrestrial radio-diffusion and could legally receive with a normal television set.

Anyway, after the decision of the Court of Justice, the case returned to the national Judge, which stated on 7th October 2013 that TVCatchup should cease retransmitting the “digital channels” of ITV, Channel 4 and Channel 5, but not also the principal channels. TVCatchup was moreover ordered to cease retransmission by mobile broadband. TVCatchup appealed this decision and, in the meanwhile, reception through WiFi remained permissible. On 26th March 2014, the Court of Appeal dismissed TVCatchup’s appeal, and stated that PBS channels may only be streamed through WiFi.

5.1.4. Belgian broadcasters v. the Kingdom of Belgium

The question related to the interpretation of Article 49 EC, and the combined provisions of Articles 86 and 82 EC. The reference has been made in the course of proceedings brought by United Pan-Europe Communications Belgium SA (‘UPC’), Coditel Brabant SPRL, Société Intercommunale pour la Diffusion de la Télévision (Brutélé) and Wolu TV ASBL against État Belge relating to the obligation imposed on them by the latter to broadcast, in the bilingual region of Brussels-Capital, television programs transmitted by certain private broadcasters designated by the authorities of that State. The operators contested the obligation imposed by the State to diffuse some television programs in the Region of Brussels.

The national legislation regarding the transmission of broadcasts in the Region of Brussels provides that those cable operator which are entitled to manage a network of television transmissions in the Region of Brussels must simultaneously and integrally transmit the following television programs: a) of the public broadcasting service regarding the French-speaking Community and the Flemish-speaking Community; b) of any other broadcaster regarding the French or the Flemish-speaking Community, decide by the competent Minister. This legal provision has been executed by the Ministerial Decree of 17th January 2001, which in the preambular clauses, underlines the importance of the must-carry rule, both for the public and the private televisions. These latters can, in a certain way, offer a public service. Furthermore, the Decree considers that the must-carry rule is crucial to guarantee the pluralism in the distribution of television programs. Lastly, it must be considered that many broadcasters could not afford the costs of the distribution. Then the Decree provides a list of the broadcasters whose channels must be carried. Among these there is also TV5, of which we will speak later on. The plaintiffs are cable operators which grant the distribution of programs of a lot of broadcasters, especially from the Region of Brussels. They proposed an appeal before the Belgian Conseil d’État to ask the annulation of the Decree of 17th January 2001. The Conseil d’État declared non-receivable the appeal of Société Intercommunale pour la Diffusion de la Télévision (Brutélé), for merely formal reason. As regards the other appeals, the Judge rejected the most part of their plaints. However, the Conseil d’État annulled the Decree of 17th January 2001, in the part where it provides the concession of a must-carry status to TV5-Monde. In fact, this broadcaster is a society established in France, and, even if the PBS of the French-speaking Belgian Community owns some shares in TV5-Monde, the link is too weak to grant a must-carry status. For the rest, the Conseil d’État stated that the appeals that it had received needed an interpretation of the European Law.

The plaintiffs-cable operators argued that the private broadcasters benefitting of a must-carry had a special right that violated antitrust principles. The violations regarded Articles 3, n.1, lett. g), 10, 82 and 86 of TEC. It is true that these provisions would put foreign broadcasters which would like to be distributed in the Region of Brussels in a less favorable situation with respect to those national broadcasters having a status of must-carry. Thus the Conseil d’État decided to suspend to the proceedings and asked to the European Court of Justice the following prejudicial questions: a) if the imposed must-carry obligation to a cable operator has to be interpreted in the meaning that it grants to the authors of these programs a special right in the sense of Article 86 TEC; b) if the must-carry rule constitutes an obstacle to the free market with respect to foreign broadcasters; c) if there is a violation of Article 49 TEC since the must-carry status is only granted to national undertakings.

The Court of Justice stated that Member States should not adopt any measure in violation of the Treaty with respect to public undertakings or undertakings to which they grant special rights. The combined provision of Articles 82 and 86 TEC does not prohibit the mere creation of a dominant position deriving from special rights granted by a Member State. In fact, a violation exists when the mere granting of these rights to these undertakings generates an abuse of dominant position. The Court of Justice then affirmed that the factual elements that it received from the national Judge was not sufficient to state if there is an abuse of dominant position in the sense of Article 82 TEC. In particular, the national Judge has not indicated in which relevant market and in which way the mentioned broadcasters would have a dominant position. That is why the question related to the abuse of dominant position was declared not receivable. The other questions regarded the conformity of the must-carry rule to Article 49 TEC. Firstly, the Court observed that Directive 2002/22/CE cannot apply to this case. Article 22 of this Directive authorizes Member States, under certain conditions, to impose a must-carry for the transmission of television programs. Nevertheless this Directive cannot be used for the resolution of this case, because it did not exist on 17th January 2001. According to the well-established case-law of the court, the transmission of television programs is a service in the sense of Article 49 TEC. As regards the violation of Article 49 TEC, it should be pointed out that the freedom to provide services requires not only the elimination of every discrimination towards a foreign service provider. A Member State cannot prohibit, impede or render less advantageous the activities of a provider of services established in another Member State where it lawfully provides similar services. In other occasions, the Court has affirmed that Article 49 TEC is an obstacle to any national law having the effect to render the exchange of services between Member States harder than in the merely internal market [50]. In pursuance of those rules, the freedom to provide services may be recalled by an undertaking against the Member State in which it is established where the services are provided to recipients established in another Member State, and, more generally, whenever a provider of services offers services in a Member State other than the one in which he is established [51]. So, in the present case, it must be held that foreign broadcasters cannot benefit of a must-carry rule, and that is a disadvantage with respect to the national broadcasters which instead benefit of this status. During the Hearing, the Kingdom of Belgium alleged that no foreign broadcaster had asked for a must-carry status. This was considered not relevant. Then, the questioned national law determined a discrimination against foreign operator, and created a burden for the broadcasters not coming from Belgium. Such legislation is accordingly liable to hinder the provision of services between Member States. Moreover, the Conseil d’État had annulled the concession of the must-carry status to the only non-Belgian organism (TV5-Monde). Having said that, it must be considered that the questioned national law constitutes a burden to the provision of services in the sense of Article 49 TEC. According to the Court case-law, such a restriction can be justified only in cases of public reasons. Nevertheless, these burdens must secure the attainment of the objective that it pursues and does not go beyond what is necessary in order to attain it. In this case, the Kingdom of Belgium considered that the public service was the access to all the citizens of the Region of Brussels to pluralist and diverse programs. Specifically, the public reason was related to the fact that it is a bilingual region, and its culture must be protected. In that regard, it must be pointed out that a cultural policy can constitute an overriding requirement that may justify a restriction of the freedom to provide services. The protection of pluralism that this policy aims to safeguard is related to the freedom of expression, protected by Article 10 of the European Convention on Human Rights and Fundamental Freedoms, signed in Rome on 4th November 1950 [52].

Thus, the Court admitted the general interest of the questioned national law. Moreover, following to the considerations of the Advocate General, also the attainment of the objective was evaluated positively. This law guarantees the access to the information to the French-speaking Community, in their language, and with their cultural background.

So, the concession of a must-carry status must be subject to transparent procedures based on criteria known in advance by broadcasters. This is important to avoid that power is used arbitrarily by the States. Any broadcaster must be in the conditions to know in advance which are the requirements and what are the eventual public service obligations.

Finally, the Court concluded that Article 49 must be interpreted in the sense that it is not an obstacle for a national legislation that imposes to cable operators to diffuse under a must carry obligation. This is true as long as it exists a general interest and the procedures are transparent, non-discriminatory and known in advance. Thus, using the words of the Court, in this case. On those grounds, the Court (Third Chamber) ruled:

«Article 49 EC is to be interpreted as meaning that it does not preclude legislation of a Member State, such as the legislation at issue in the main proceedings, which requires, by virtue of a must-carry obligation, cable operators providing services on the relevant territory of that State to broadcast television programs transmitted by private broadcasters falling under the public powers of that State and designated by the latter, where such legislation pursues an aim in the general interest, such as the retention, pursuant to the cultural policy of that Member State, of the pluralist character of the television programs available in that territory, and is not disproportionate in relation to that objective, which means that the manner in which it is applied must be subject to a transparent procedure based on objective non-discriminatory criteria known in advance. It is for the national court to determine whether those conditions are satisfied» [53].

5.2. Retransmission fees in Italy

5.2.1. Rai v. Sky case

On 11th of March 2015, AGCOM (the Italian Telecommunications Authority) gave an important decision related to retransmission fees. Prior to this decision, the public television RAI used to encrypt some transmission, making impossible for Sky to retransmit it. With a communication to AGCOM, Sky maintained that RAI Television had failed to comply with Article 22 of the Service Contract 2010-2012, by not allowing Sky the integral vision of all its general-interest and public service programming. Specifically, Sky complained of the different treatment received with respect to another platform, called Tivù, and affirmed that it was a unjustified discrimination. Then AGCOM started a procedure on the basis of article 48, d.lgs. 177/2005 in order to verify the respect of the service contract. According to Article 22, fourth paragraph, of the current service contract, the contractual behavior towards the commercial broadcasters must be fair, transparent and non-discriminatory.

Beginning from February 2014, there were several negotiations between RAI Television S.p.A. and Sky S.r.l. regarding the cession of the retransmission right on the public service programming. The most important questions regarded the duration of the cession of the retransmission rights on RAI’s programming to Sky, and the extinction of some disputes between the two broadcasters.

In their allegations RAI, first of all, claimed its compliance to Article 22, paragraph 4 of the Service Contract. The Italian PBS affirmed that actually this article only prohibited the non-justified denial of any sort of agreement. In this case, RAI underlined that they proposed a consideration related to the cession of the retransmission rights on the programming, and Sky refused. RAI affirmed that this cession had an economic value, and that for this reason they needed to be remunerated, also because RAI channels had a huge audience share on the Sky platform. Furthermore, RAI used the example of the United States and the United Kingdom. In the former country, retransmission fees have been allowed for a long time, and, in the latter, the debate about this topic is very strong, because they are reconsidering the original choice of allowing the free retransmission of the public channels to the cable operators. Moreover, RAI affirmed that the carrying of its channels by the cable operators was irrelevant, because the digital coverage of RAI channels was already of around 99% of the national territory. RAI concluded by saying that, practically, Sky claimed the reintroduction of a must-offer obligation, which had been overcome in the passing from the Service Contract 2007-2009 to the 2010-2012 one. Besides, RAI claimed that there was no discrimination between Sky and Tivù, due to the ontological difference between these two systems. On one hand, Sky clients must pay a subscription to have access to the programming, and, of course, the costs of the installation. On the other hand, Tivù does not have clients, because people only pay the installation of the decoder, and then they have free access to all RAI’s offer. In short, Tivù is a simple supplier of technical services to free-to-pay operators, whereas Sky is a pay-TV broadcaster that has a pay offer, and that may take advantage of RAI’s programming to enrich its commercial offer.

The first allegation of Sky, in response of what RAI had affirmed, was that the negotiations only regarded the settlement of some disputes between the two companies, and that there was no mention of the public service obligation. Therefore, these negotiations were beyond the scope of Article 22 of the Service Contract. Then Sky explained how the proposals of the public broadcaster were inadequate to solve the main question underlined by Sky, regarding the encryption of some RAI channels suffered by the Sky platform (and not also by the Tivù platform), to the detriment of viewers. Moreover, Sky explained that, in fact, RAI had never showed the availability to freely assign the retransmission rights to Sky. During the negotiations, RAI had proposed a clause to guarantee third parties rights. This point was evaluated as inacceptable by Sky, mostly for the potentially unlimited encryption that IT could cause, in violation of the principle of universality and neutral competitiveness of the public service.  Moreover, as said by the Consiglio di Stato, the fact of being carried by a pay-TV operator, does not change the nature of transmissions, which remain free-to-pay. These public transmission, thus, do not become pay only because they are carried by a satellite operator. Furthermore, in fact, the programs were encrypted without a coherent scheme, which lead to exclude a juridical impediment on the nature of these rights.  In the intentions of Sky there was no availability to accept a simple reduction of the encryptions, because Sky required the same treatment as Tivù.

RAI’s behavior needs to be evaluated in the light of Article 22, paragraph 4, of the Service Contract, which regulates the relations between the public broadcasting service and the commercial broadcastings in compliance with the principles of fairness, transparency, and non-discrimination. In its judgment regarding this case, AGCOM  evaluated  the aim and the meaning of these norms, and recalled a previous decision of the Administrative Judge about Article 22 of the Service Contract, which was, in fact, Article 26 in the 2007-2009 Service Contract. The content was the same, namely the cession of the retransmission rights on the programming of the public broadcasting service. It must be pointed out that, at that time, Sky had requested the cancelation of AGCOM deliberation n. 732/09/CONS regarding the interruption of the irradiation of the programming by the PBS, only on the Sky platform, and not also on the Tivù-Sat platform. In that occasion the Authority had concluded that the requirement regarding the free-to-pay programming had to be interpreted only in relation with the final users, and not only with the other broadcasters. Actually, Article 26 of the 2007-2009 Service Contract contained a clause to guarantee the third parties rights and the related commercial agreements. This decision of AGCOM was contested before the Administrative Judge, which considered that Article 26 of the 2007-2009 Service Contract needed to be interpreted as meaning that the PBS must guarantee the largest access and distribution of its programming. Furthermore, that judge affirmed that in a functional approach the PBS had to make available its programming on all the platforms. It was a clear must-offer obligation, but, then the Judge concluded that all the broadcasters had to spread RAI’s programming always for free. Moreover, the Administrative Judge allowed the possibility of commercial exclusivity agreements on some specific programs. Pending the judgment, the 2010-2012 Service Contract was signed, and the Administrative Judge arrived to the following conclusion: the new Article 22 of the Service Contract between the PBS and the State did not provide an obligation of free provision, but only a duty of making available its programming through at least one platform out of each technological platform. Nothing was said about the conditions of such provision. It was a very flexible statement, but it was clear that the PBS had the obligation of negotiating the cession of the retransmission rights on its programming to all the broadcasters, including pay-TV operator such as Sky, in compliance of the principle mentioned above of fairness, transparency and non-discrimination. RAI tried to argue that this was not in line with its own business interest. This statement was judged irrelevant, because this interest had been already evaluated in a positive way during the negotiation of the service contract. Moreover, even if Article 22 set a duty of contracting with at least one operator for each technological platform, it did not forbid the cession of the programming to more than one operator for each technological platform. That is why it was hardly justified a denial to negotiate with Sky, and, according to deliberation 128/2015/CONS of AGCOM, there was no reason for the encryption policy, with respect of Sky, being different than the one adopted for Tivù. It is also important the statement by which AGCOM specifies that the clause to guarantee the third parties rights regards only geo-blocking exigencies, that is to say the territorial protection of the audio-visual rights. That clause does not regard the difference between pay and free. The channels diffusion can be free to air and free to view, with the only difference that in the first case there is no need of a device to decode the signal, such as decoders or smartcards. In both cases it is a free programming, regardless of the way the signal is propagated. So the encryption system of geo-blocking does not change the nature of transmissions which remains free and does not become pay for the mere fact of being carried by a satellite operator. As regards the remuneration, the Administrative Judge clarified that the gratuity of the must offer obligation has been overcome, leaving to the parties the negotiation on the conditions of the cession of the programming, always in compliance of the principles of fairness, transparency and non-discrimination. Eventually, AGCOM deliberation stated that the negotiations between the PBS and Sky, regarding the cession of its programming, was not compliant with Article 22 of the Service Contract, in particular with respect to the non-discrimination. The protection clause for the third parties was not capable to justify the encryptions made by RAI. Thus, AGCOM decided that RAI had to negotiate a new contract with Sky for the retransmission of its contents and this new contract must not provide protection clauses for the third parties. Having said that, the Authority specified that, as regards to the remuneration of these rights, the two broadcasters could negotiate a payment for the carriage, always in compliance of the principles of fairness, transparency and non-discrimination.

We can conclude that in Italy retransmission fees are allowed and the public broadcasting service seems to have a perfect freedom to contract with cable/satellite operators remuneration for the retransmission of their contents.

5.2.2. Sky v. Mediaset

Sky and Mediaset are currently the main cable operators in Italy. Prior to the entering of Sky in the Italian television market, Mediaset was a mere commercial television, and remunerated itself through advertisement. Then Mediaset decided to enter the market where Sky was substantially the monopolist, and created its own pay-TV: Mediaset Premium. Nevertheless, Mediaset maintained its free-to-air channels, on which it still remunerates through advertising. Some of these channels, and specifically the main three ones (Rete 4, Canale 5 and Italia 1) were retransmitted (more precisely: their signal was freely received) by Sky, on some privileged position. They were respectively at the fourth, fifth and sixth position of the Sky commercial offer (Channel 104, 105, 106 on the Sky decoder). For years this situation has generated benefits both for Sky and Mediaset. On one hand, Mediaset benefitted of the carriage by Sky, which augmented the viewers of their channels, and more viewers mean higher revenue on advertising. On the other hand, Sky benefitted of three generalist channels, which were part, in fact, of its commercial offer. It was a “win-win” situation that for years has satisfied both parties. However, in the last two years, the relations between Sky and Mediaset has become particularly tense, mostly because of the rights on the main sports events. Competition between these two operators of the Italian television market has become particularly sharp. This has led to the decision of Mediaset to encrypt their three channels on the Sky platform. Actually, Mediaset asked Sky for the payment of retransmission fees. After the refusal, Mediaset decided to encrypt its channels, and Sky’s response has been to remove them from the privileged position of being number 104, 105, 106 of the decoder.

Some people has tried to say that the Sky-Mediaset case can be solved in the same way as the RAI-Sky case. On this point AGCOM commissioner Antonio Nicita has intervened by releasing an interview to the online magazine “Key4biz”. He clarified that RAI-Sky and Mediaset-Sky are two different cases and that, so far, the Authority has not taken any decision about the must-carry and the must-offer yet. In the RAI v. Sky case, AGCOM has intervened to guarantee the respect of a norm contained in the Service Contract between the State and the Public Broadcasting Service. Nicita underlined that this decision [54] only applies to the PBS and not also to the other broadcasters. Furthermore, he said that the must-carry obligation and retransmission fees make sense in a monopoly situation, for example, of a cable/satellite operator. So he argued that a regulatory obligation of retransmission fees can only be shaped as a remedy to a dominant position of the platform to which the payment is imposed.

In the last months, a member of Mediaset management board, Gina Nieri, had declared the intention to reach a commercial agreement with Sky. She affirmed that Mediaset free-to-view channels, if retransmitted by a pay-TV operator, generate an economic advantage for the operator itself. So she concluded for the need to ask for a remuneration of this diffusion/retransmission.

However, no commercial agreement has been achieved, because Sky and Mediaset did not agree, and currently do not still agree, on a fundamental point. Whereas Mediaset points out that Sky puts in place a retransmission of its channels, Sky CEO, Andrea Zappia, has clarified that Sky has never retransmitted any signal. He underlines that Sky has simply received a free signal, and that in the rest of Europe, like in the United Kingdom, no payment request has ever been proposed successfully.

Then Mediaset encrypted all its channels on the Sky platform. The reaction of Sky was not particularly vehement, and Sky CEO affirmed that: «It is a free choice of Mediaset that does not surprise us. We are already setting the necessary modifications. Today viewers are used to watch TV on different platforms. They will do that in this case too».

This statement reveals a great confidence towards technology and towards the capability of people to use it. Actually, the satellite encryption of free-to-air channels is a false problem, since viewers can always switch off the satellite and watch TV through the normal terrestrial.

In the meanwhile, Sky has concluded an agreement with RAI for the retransmission of RAI 4, that takes the place of Rete 4 on the Sky decoder (number 104). It is a privileged position that has significantly increased the number of the viewers of RAI 4.

Since RAI is a public broadcasting system, some experts of this matters maintain that actually we must not talk about retransmission. In fact, what Sky does with respect to RAI is the simple reception of a free-to-air channel signal. However, the difference between retransmission and mere reception of a free-to-air signal is not so relevant. In any case, as clarified by the Decision 128/15/CONS, Sky and RAI should conclude a commercial agreement for the diffusion by the Sky platform of RAI channels.

The retransmission fees is a difficult issue. When in July Mediaset declared that a commercial agreement with Sky was necessary for their channels to remain on that satellite platform, it quoted AGCOM decision 128/15/CONS. This was published on 23rd March 2015 and stated on a dispute between RAI and Sky (anyway this decision has been appealed by Sky, and the proceedings are still pending. I’m currently dealing with this case, among others).

A few considerations must be made about this question. First of all, AGCOM has declared that the quoted decision did not regard commercial televisions, but only the specific case of RAI, as a public broadcasting service, and Sky. However, it must be underlined, as mentioned before, that we do not know if it is correct to talk about retransmission about Mediaset channels. In fact, since they are free-to-air channels, they are simply transmitted by the satellite platform, and are not part of the commercial offer, as it happens in the United Kingdom or in Germany. The demonstration is that these channels are available on the Sky platform even without the smart card. In this case, thus, Sky acts as a mere technical transmitter. Conversely, in Germany and in the United Kingdom, the free-to-air channels are part of the commercial offer of the respective pay-TVs.

In the light of these considerations, Mediaset’s pretentions appear to be not so easy to justify. Mediaset free-to-air channels are receivable by every satellite decoder, including Sky. In other words, Sky does not retransmit the signal, by transferring it from a platform to another, but it simply receives it on air. So Mediaset can always encrypt the on air signal, and that is exactly what it did. Actually Mediaset has never been obliged to do that, but, on the other hand, there is no obligation to pay to receive an on-air signal. At this point it is worth wondering why Mediaset made this choice. It is a two sided broadcaster: on one hand it acts as a commercial television, and, on the other hand as a pay-TV. As a commercial television, the broader the audience, the higher the income. Notwithstanding, as a pay-TV, Mediaset is a direct competitor of Sky, which makes us understand that this choice is maybe part of a wider strategy against its main competitor.

Furthermore, it is worth underline an AGCOM press release which clarifies this question and which is in line whith the declarations of Mr Nicita mentioned above. The Authority has clarified that with Decision n. 128/15/CONS, AGCOM has exclusively evaluated the compliance of RAI. On one hand the decision stated the faculty for RAI to ask a fair compensation for the cession of its programming; on the other hand it forbade third parties clauses for the encryption of some contents. AGCOM affirmed that the decision, thus, only regards the public service, and rights of viewers to have free access to PBS contents.

The Authority concludes that its decision only produces effects towards the public broadcasting service. Then, commercial televisions’ pretentions with respect to retransmission fees have no relation with Decision n. 128/15/CONS.

5.3. Retransmission fees in the United Kingdom: PBSs v. Sky and Virgin

In 2010 BBC director general, Mark Thompson, during the Mac Taggart memorial lecture [55], claimed the billions invested by the public broadcasting service channels in the original productions, and pointed out that Sky had spent a very little budget in original contents. Furthermore, Thompson affirmed that, as in the United States, public channels whose channels happen to be the most popular, should receive payments from distributors. But since BBC was a public television, he said that it would have been available from every platform without the need of the payment of retransmission fees. Nevertheless, he argued that the BBC should not have to pay for platform fees either. However, Thompson concluded that for private commercial funded televisions, the payment of retransmission fees could have been a valuable source of additional funding, by which these televisions could have improved their production of original contents.

In 2012 the UK Government showed its support to Public Broadcasting Service channels for them to receive retransmission fees from the platform who wanted to retransmit them. The Department for Culture Media and Sport (DCMS) published an independent report committed to Mediatique  in which it was clear that the current situation benefitted platform operators more than the public channels that were retransmitted. This report calculated that if there were only a must carry obligation for platforms operators, and not also a must offer obligation for PBSs, the broadcasters could receive from £10m to £190m a year. However, this report remained on paper only, because eventually, the DCMS decided to propose a compromise of «zero net charges, where the fees for access to the main platforms and for PSB channels cancel each other out». This proposal was appreciated by both BBC and Sky, at least because it was an attempt to solve the retransmission fees question without the need of a strong regulation. From 2012, Sky significantly reduced the platform charges for both BBC (from £10m to £6m and then to £4.4m) and the commercial PBSs. Then, most recently, Sky concluded a “zero net charges” agreement to retransmit BBC and ITV’s offer. However, the Government proposal was not able to completely satisfy the commercial PBSs. For example, Channel 4’s CEO, David Abraham, affirmed that commercial PBSs could earn £200 m every year through retransmission fees charged on pay-TV platforms. Of course, this claim was strongly rejected by Sky and Virgin Media. It is interesting to see, however, that Liberty Global, Virgin Media’s parent company, bought 6.4% of ITV stakes for £481m. This move can be seen in the path of a future duty to pay retransmission fees to ITV. Furthermore, Ofcom is concerned about the destination of the revenues coming from the payment of retransmission fees, and is not sure that they will be invested in increasing the program production. According to Ofcom, there would be the risk that PBSs could return these revenues to shareholders.

When we talk about cable TV operators, of course, we talk about cable or other multichannel video programming outlet operators. What is important is to know that these TV operators always provide multiple channels to their subscribers. Normally, these channels are specifically created to be transmitted through the cable operator. Nevertheless, there are some channels which are already transmitted over the air. Sometimes, cable operators may want to retransmit these channels in order to supply them to their subscribers, and so improve their commercial offer. For cable TV operator the main source of revenue is represented by fees paid by subscribers. In order to gain more subscribers, they are obliged to improve the quality and the variety of programming in the different and various packages that constitute their offer. On the other side, for commercial broadcasters the main source of revenue is made by the sale of advertising space. So, when a cable television system operator carries a broadcaster’s signal on its system, apparently both benefit of this carriage. It seems to be a “win-win” situation. The “must-carry rule” is substantially a way to subsidize broadcasters. Thanks to the platform which carries its channels, they can gain more audience and sell more advertising space. The costs are borne by the cable operators, but its remuneration, when it is not the payment of a given amount, is the fact that the cable operator can improve its offer by adding new channels. «An interesting economic question about the carriage of a broadcast signal on a cable system is who should pay whom and how much for the carriage. Common sense would tell us that the direction of payment could go either way. On the one hand, a broadcast signal is freely available over the air, and thus a cable operator would, in the absence of any restriction, include the signal in its service menu if there is sufficient demand for it and exclude the signal otherwise, for channel capacity is limited. On the other hand, a broadcaster […] whose signal is carried on the cable system would say: ‘Here is an opportunity to capture some revenue from my viewers directly rather than indirectly through advertisers. I should get some compensation for the carriage’». Of course, a broadcaster […] whose signal is excluded from cable service might say: ‘It is unfair that my signal is excluded. There are people who would have installed antennas to receive my signal if there were no cable service’. This issue is particularly important in relation to the quality of the television offer. One of the principles to guarantee that this offer will remain of high quality is pluralism, and to guarantee pluralism it is necessary to supervise on the creation of a dominant position that might cause harm to competition, and, eventually to the consumers/viewers. In the western countries some have tried to regulate this issue since ever, some has only recently decided to do that, and some are still uncertain.

Anyway, the aim of this paper is to underline the social importance of the retransmission consent. This is not only about the private contractual relation between two different television stations, but it is also a social issue with important welfare implications. Signal broadcast over the air is a good example of public good and it generates externalities, and free rider effects. We could say that the retransmission consent defines property rights on transmissions of which an entire community could benefit, so, the cost of bargaining is a deadweight loss to the society. Actually an advantage for the community could exist if the revenue coming from the payment of retransmission fees were used to improve the broadcaster programming. Nevertheless, the need of improving the quality of programming only relies on competition in a given market.

5.4. Retransmission fees in Germany 

It is important, first of all, to make a net distinction between the transmission as mere reception of a signal in respect of a cable retransmission. A flexible interpretation of the retransmission right is necessary: if it regards a very small number of households it cannot be considered as retransmission. There is no legislative or jurisprudential reference, but following a GEMA’s (German collecting society for musical works) proposal, the small number should be no more than 75 households. In spite of the lack of legislation on this issue, many agreements have been concluded following this criterion.

On 30th June 2011 the Oberlandesgericht München (Munich District Appeal Court - OLG) gave a decision which is particularly interesting for the present papers. The German court stated that hotel operators and cable companies must pay a reasonable compensation to broadcasters for the use of their television and radio programs.

The hotel operator and the news broadcaster argued that, in fact, a remuneration was not due, because the signal was over the air. Nevertheless, it is interesting to notice that the Munich District Appeal Court considered that the hotel’s own distribution equipment was actually a retransmission of the signals belonging to the broadcasters. That constituted thus a second exploitation, which was subject to copyright law and compensation obligations. Then the Court concluded that the hotel took an advantage by the retransmission of those channels, because they could charge more on the price of the rooms in reason of the supplying of those channels. Furthermore, the Court stated that the cable companies should pay a remuneration to broadcasters for the retransmission of television programs.

Another case in Germany is a legal dispute between a cable operator and the Verwertungsgesellschaft Media (Media collecting society - VG). The Kammergericht (Supreme Court) in Berlin decided on 25th January 2010 that cable operators are obliged to pay broadcasters when they retransmit their programs. In this case the cable network argued that its retransmission activity was a mere reception mechanism and was not covered by the definition. The Supreme Court affirmed that the cable retransmission was an exploitation governed by the copyright law. Thus cable operators where not performing a service for broadcasters by retransmitting their contents, but it was the contrary. That is why the Supreme Court stated that the cable operators must conclude a contract with Verwertungsgesellschaft Mediafor the exploitation of the rights of retransmission. Following to this decision the RTL Deutschland broadcasting group announced on 11th March 2010 that with respect to its private channels it will no longer ask protection to the German Media collecting society, and that it will rather autonomously negotiate the retransmission of its contents [56].

Another decision which is interesting for the purpose of the present paper is a ruling of 14th March 2013 given by the Landgericht Köln (Cologne District Court). That court rejected an action filed by the cable operator Kabel Deutschland AG regarding the cancelation of the agreement with the PBSs ARD and ZDF. For decades Kabel Deutschland AG had carried the transmissions of ARD (German public broadcaster association) and ZDF in return for a fee but, in its action before the Cologne District Court, Kabel Deutschland only went against WDR, which was only one of the broadcasters gathered by ARD. The plaintiff argued that the cancelation of their agreement was invalid because the PBSs had to distribute their programs via the cable network, otherwise the entire population would not be reached.

First of all, the Court affirmed that Kable Deutschland could not take action only against one broadcaster. Moreover, in that case, the cancelation was valid because the PBSs were not obliged to broadcast via cable. Under Article 19 of Rundfunkstaatsvertrag (Inter-State Broadcasting Agreement – RStV), the broadcaster could decide which transmission methods to use, and the criteria of the economic efficiency was completely legitimate. Notwithstanding, the Court did not pronounce on whether there was or not a “must-offer obligation” in this case.

It is also interesting mentioning a recent case of the German media authority, the Kommission für Zulassung und Aufsicht der Medienanstalten (Commission on Licensing and Supervision – ZAK). During the 69th session of 23rd June 2015 in Sarrebruck, the Commission stated about some important issues concerning platform integrity. The case regarded the so called “red button”, the HbbTV signal. The Commission underlined that platform are not obligated to retransmit this red button, since this signal is not an integral part of the program. The function of the HbbTV is to activate this red button, which allows the viewer to participate in votes or to select additional contents offered by the broadcaster. This decision followed a complaint lodged by ARD against the filtering out of the HbbTV signal by Kabel Deutschland Vertrieb und Service GmbH (KDG). The main argument of the complaint was that this filtering constituted a violation of the principle of integrity of the signal as provided by Article 52a, paragraph 3 of Rundfunkstaatsvertrag (inter-Länder treaty on radio diffusion – RStV). The Commission on Licensing and Supervision decided that term “program”, mentioned by Article 52a, paragraph 3, phrase 1 of RStV only referred to the radio diffusion program itself, and not also to the merely annexed services. Furthermore, it pointed out that a modification to the signals of the programs could be possible to adapt it to the platforms. It did not imply any modification of the program.

Then the ZAK dealt with the question if Sky Box home screen constituted an obstruction to other channels. So Sky modified its user interface, in such way that a home screen is now displayed when the box is switched on, giving an overview of directly accessible Sky channels. The other programs can be selected by activating a specific button of remote control. Nevertheless, the user can opt out, and choose the previous configuration, without home screen. With this configuration, the viewer is required a two-step process to access to whole range of available channels, and that creates a difference of treatment between Sky and the other operators. So the ZAK has concluded that the viewer can easily modify the new interface. Moreover, all the radio diffusion services are accessible. The two steps process does not constitute an unreasonable obstruction to other offers. It must be considered the fact that Sky subscribers pay for the Sky offer, and for this reason, it is clear that they want to watch Sky channels for first. The ZAK also decided that the current model for the payment of feed-in fees to Kabel Deutschland Vertrieb und Service GmbH (KDG) was incompatible with the principle of equal opportunities, since it made economic sense for providers with a strong market position and it was an obstruction for small and new providers. So KDG was urged to change its feed-in model to stop the inequality of the treatment.

5.5. Retransmission fees in Belgium

In Belgium, television is a matter whose competence is entrusted to the single communities. So in the Belgian French-speaking Community, must-carry status is granted by the 27th February 2003 Decree, not only to some nationals channels which fulfill with some given criteria, but also to another kind of channels. Specifically, cable operators must distribute international television channels in which RBTF (the Belgian French-speaking Community main PBS) has a share. For years, then, the French TV5 has benefitted of the must-carry rule in Belgium. But on 17th May 2006 the Belgian Council of State stated that: «TV5 is a company, which proceeds of a collaboration with the RTBF, governed by the law of France. In a world where the international co-operation takes more and more importance, it cannot reasonably be considered that any undertaking in which an institution of the French Community takes a limited participation, would thus automatically fall under the competence of the Belgian French-speaking Community. In the case of TV5, the link with the Belgian French-speaking Community is too loose and the fact that it has been granted a must carry status does not imply that this status has been given on a well-founded basis» [57].

As regards to retransmission fees in Belgium, cable operators has always tried not to pay them, at least with respect to the channels falling under the must-carry rule, mentioned above.

On the subject, Belgian jurisprudence is always been very coherent. For example, in a decision of 4th July 1997 (RTBF, BRT v. RTD), the Brussels Court of First Instance stated that the existence of a must-carry rule did not exempt cable operators from obtaining authorization from the right-holders and from paying them a fee. The arguments presented by the Court refer to the fact that whereas the must-carry obligation falls under the administrative law, the negotiations between cable operators and broadcasters are regulated by the private law. Furthermore, the cable retransmission constitutes a new act of communication, and, as such, it is subject to the authorization of the right-holders.

Thus, cable operators has asked at least the compensation for the costs connected with the technical retransmission of their signals. Nevertheless, the Belgian legislator has ignored this claim. Actually, it must be considered that the cable operators do not deliver any service to broadcasters, because the cable operators themselves use these channels. It means that these channels become, after all, part of the commercial offer of the cable operators. Thus they are not a mere technical service. Moreover, as confirmed by the Coditel judgment, under the Belgian law, cable operators are right users.

In the Flemish Community, on the other hand, the Decree on radio and television of 4th March 2004 provides that no obligatory payment is due for the must-carry transmission. Nevertheless, such obligation is not excluded. To conclude, in the Belgian Copyright Law, the cable retransmission is compared to the wire retransmission. It means an opening to the new technologies.

5.6. Retransmission fees in the Nordic Countries

In Denmark the national television channels benefit of a must-carry obligation from cable operators, and there are similar provisions in the other Nordic countries. For example, in Denmark, Norway and Iceland cable operator are not only obliged to carry the national channels, but they are also obliged to pay retransmission fees.

In Sweden the Public Broadcasting Service (SVT) has paid until 2009 the remuneration to the collecting societies on behalf of the cable operators as regards to retransmission by wire.

Like in other countries, in Denmark cable operators has tried not to pay retransmission fees with respect to channels that they had the duty to carry. But both the Copyright License Tribunal and the courts have confirmed many times that cable operators have to pay retransmission fees. It is interesting to cite the Copyright License Tribunal’s decision n. 16 of 27th June 1987, which stated that there is no distinction between national must-carry channels and other channels with respect to the tariffs.

In another decision (Copyright License Tribunal n. 19 of 6th July 1987) the cable operators claimed the exemption from the payment of retransmission fees because they only retransmitted DR’s channels (DR is the main Danish PBS). The tribunal stated that, even in this case they had to pay. In Denmark, then, as well as in other countries, it has been recognized the principle according to which retransmission fees must be paid also in cases of must-carry. Then, in the Copyright License Tribunal’s decision n. 70 of 16th December 1997, cable operators had accepted to pay retransmission fees even for must-carry channels. Nevertheless, they claimed at least to pay less for the retransmission of these particular channels. The Tribunal rejected this claim on the ground that national television channels had to receive the same treatment as the foreign ones: «In support of the claim that the basic tariff should comprise six television channels instead of three against a simultaneous increase of the basic tariff from 55.45 DKK to 60.00 DKK the defendants have stated that the remuneration for cable retransmission of national television channels should be essentially smaller than the remuneration for cable retransmission of foreign television channels. However, as well the preparatory works to the amending act of 1985 as the preparatory works to the amending act of 1996 have expressly dissociated from the proposal that national television channels should be kept outside the regulation of cable retransmission entitled to copyright and thus be free, and the Tribunal finds that these preparatory works should be understood in the way that it has also been a condition that national television channels should be comprised on equal terms with the foreign ones by the stipulation of the remuneration scheme. This has also expressly or conditionally been made the basis as well in the Compulsory License Tribunal's [now the Copyright License Tribunal's] decision of 27 June 1986 and 6 July 1987 as in the Western division of the High Court's judgment of 17 May 1991. To this comes that the defendants' proposal would imply an essential reduction of the total remuneration, which the Tribunal finds unreasonable». A more recent decision of the Eastern division of the High Court, 23rd section, in the case n. B-648-04 of 20th January 2005 confirmed this approach. The Court declared that: «As stated it follows from the Copyright Act that cable retransmission of as well Danish as foreign television broadcasts are subject to copyright, and that the provisions in the Radio and Television Act does not aim at any limitation in the rights holders' right to remuneration according to the Copyright Act to the extent unchanged and simultaneous cable retransmission is effected with authority in the Copyright Act, S.35(2) or subject to permission from the Copyright License Tribunal.

The cable remuneration scheme in the Copyright Act is not contrary to article 11bis in the Berne Convention, which is no hindrance to copyrights being protected to a greater extent than stipulated in the provision. Likewise there is no reason to maintain that the stipulation is contrary to the EU directives claimed by the defendant».

In Norway the same thing has happened. Thus cable operators have opposed against the need to pay for the retransmission of must-carry channels, but the Norwegian Copyright License Tribunal has stated that they must pay retransmission fees also for these channels. This approach has been confirmed by the district Court of Nord-Trom on 24th November 2006.

As regards to new technologies the Copyright Acts of Nordic Countries applies to all forms of retransmission, including cable, IPTV, DVB-T, satellite and mobile television retransmission.

Thus all the agreements with collecting societies are technologically neutral.

In Denmark, Section 50 of the Copyright Act states: «(1) Extended collective license according to sections 13, 14, and section 16 b, section 17(4), section 23(2) and sections 30, 30 a and 35 may be invoked by users who have made an agreement on the exploitation of works in question with an organization comprising a substantial number of authors of a certain type of works of the same nature although the authors of those works are not represented by the organization.

(2) The extended collective license gives the user right only to exploit the works of the

unrepresented authors in the manner and on the terms that follow from the agreement made with the organization and from the provisions mentioned in subsection (1).

(3) Right-holder organizations who make agreements of the nature mentioned in subsection (1), shall be approved by the Minister for Culture. Only one organization can be approved for each type of works. The Minister may decide that an approved organization in certain fields shall be a joint organization comprising several organizations which meet the conditions of subsection (1)». Furthermore, the Danish Copyright Act section 48 provides that if a broadcaster, a collecting society or a cable operator unreasonably refuses to consent to retransmission, the Copyright License Tribunal may grant the necessary permission and establish the conditions, if requested.

In Norway the Copyright Act when a user covered by an agreement negotiates with a right-holder who is not covered, these agreements can apply if it is about the same kind of rights. Moreover, if negotiations fail, or does not conclude within six months, each of the parties may demand a binding decision to a special commission. In Norway, then, the King can intervene for the supervision of the organizations and funds that receive remuneration for distribution of signals.

In Sweden, the Copyright Act, Article 42a, regarding the collecting licenses provides that an extended collective license applies in a specific manner when an agreement is concluded with an organization representing a substantial number of Swedish authors. Specifically, the user has the right to exploit works of the kind referred to in the agreement even if the authors of those works are not represented by the organization. As regards to remuneration deriving from the agreement and with respect to other benefits, the author must be treated in the same way as those authors who are represented by the organization. However, the author has always the right to be remunerated for the exploitation within a period of three years. In case authors are not paid, they can directly send their requests to the organization.

In Iceland there is only a collecting society, called IHM. In Iceland the law does not distinguish between foreign and national channels. All channels are must-carry, and there is no distinction between large cable systems and small cable systems.

It is now interesting to mention some figures in order to understand the television market in the Nordic Countries.

Denmark has a population of 5.5 million and about 2.5 million television households. The cable market covers around 1.6 million households.

Norway has a population of 4.5 million and the cable market covers about 950.000 households.

Sweden has a population of 9 million the cable market covers about 2.5 million households.

Iceland has a population of only 300.000 and the cable operators cover around 18.000 households.

Conclusions

In the light of what exposed above, it is necessary to make some considerations.

Television is in some way a public good, even private television. That is why broadcast retransmission is subject to constant regulations, both at the European and at the national level. For the past, the broadcasting matter was strongly regulated by the State, and television was a State monopoly everywhere. Around the ’80s and the ‘90s television was deeply deregulated, and that gave private broadcasters the possibility to develop. Then, the legislators have considered the public consequences that television broadcast has, and a process of regulation started again. This is proven by all the Directives enacted by the European Union.

I have tried, then, with the present paper, to understand what is the degree of contractual freedom for broadcasters, since they are subject to strong regulations. I found that focus on the topic of retransmission fees was the best way to try to give an answer to this question. On one hand, we have the right of people to access information of audiovisual contents, and, on the other hand, we have the relations between broadcasters, networks operators and right holders. The balance between all these interests is not always easy to carry out. The most interesting case regards the United Kingdom and Italy, and they always involved Sky. The approach that the British and the Italian Telecommunications Authorities have had is different.

Ofcom has substantially said that, even if it can be considered that the PBSs’ request to be paid retransmission fees could be legitimate, it cannot decide in the absence of a regulation. Then the British Authority said that it was a competence of the Parliament and a legislation is waited for 2016. In other words the British Telecommunications Authority has “decided not to decide”. The Italian regulator has had a different approach. It has decided that broadcasters can ask retransmission fees for the cession of their channels, but only public broadcasters. For the moment, there is no decision with respect to private broadcasters, even if AGCOM has clarified that the affirmed principle only regards the public service broadcasting.

The British Authority has certainly chose the easiest solution, but it is maybe the fairest one too. In this moment of epochal changes in television, due to the incredibly quick development of technologies, it is the competence of the legislator to regulate such a complicated matter.

The evolution of Internet is a big challenge for broadcast retransmission and, even if the Directive 2002/21/EC predicts the technology neutrality in retransmission, it is not enough with respect to the changes that the television market is facing. New operators such as Netflix, that recently started offering its services also in Italy, will obviously benefit of the uncertainties that  today exist about retransmission of contents on the Internet.

Thus we can conclude by trying to answer to the question contained in the title of the present paper. The contractual freedom of broadcasters is very limited and depends on deep regulations and on the decisions of Authorities. Nevertheless, this is true with respect of the traditional networks. With respect to Internet retransmission platforms that is still not clear what are the limits of the contractual freedom. It is still not clear what are the duties and the right of these new operators. The needs of users are changing, and it is changing the way to consume audiovisual contents. The traditional television is slowly disappearing, and legislators, at the European and at the national level, should intervene with a clear regulation on the Internet distribution of audiovisual contents. Today it is maybe not opportune to distinguish the free-to-air market from Pay-TV market or the over-the-top market. Due to convergence, it would be fair today to talk about an “All-TV market”, including all the ways to access to audiovisual contents. However, the technology neutrality is not enough to face the constant and rapid changes that the mentioned market is facing. For the moment, we can answer to the question if broadcasters are completely free to contract, by saying that it depends on the distribution platform. For the moment, traditional distributors are less free than the new one. However, this is a very open issue, and it will be interesting to analyze its future developments.

Footnotes:

[1] Marketline Database

[2] T. Evens; K. Donders, Television distribution: Economic dimensions, emerging policies, in Telematics and Informatics, 2015, p. 1

[3] Ibid.

[4] S. Park; C. H. Davis; F. Papandrea; R. G. Picard, Domestic content policies in the broadband age: a four countries analysis, News and Media Research Center, University of Canberra, January 2015

[5] C. Robertson, Introduction: Thinking about Archives, Writing about History, in Media History and the Archive, Routledge, 2011, p.1

[6] The Nielsen March 2013 Cross-Platform Report: Free to Move Between Screens. Reports and Insights:  http://www.nielsen.com/us/en/reports/2013/the-nielsen-march-2013-cross-platform-report--free-to-move-betwe.html

[7] http://henryjenkins.org/2006/06/welcome_to_convergence_culture.html

[8] HIS Screen Digest

[9] See Premier League Case

[10] See Report from the European commission on the application of Council Directive 93/83/EEC on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission.

[11] See http://www.copyrightcode.eu/

[12] M. J. Ficsor, The hurried idea of a “European Copyright Code” in the light of the EU’s (desirable) cultural and copyright policy.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] M. Michalis; P. Smith, The relation between content providers and distributors: Lessons from the regulation of television distribution in the United Kingdom, in Telematics and Informatics, 2015, p. 1

[18] K. Donders; T. Evens, Power conflicts between broadcasters and distributors: developing a framework for assessing regulatory intervention, Paper presented at the IAMCR 2013 Conference, 25-29 June, Dublin, Ireland.

[19] Ofcom, Ofcom’s second full analysis of the UK’s communication infrastructure, in Infrastructure Report 2014

[20] Mediatique, 2014

[21] M. Michalis, P. Smith, op. cit., p. 4

[22] See Ofcom, Provision of Technical Platform Services, Guidelines and Explanatory Statement, published 21/09/06.

[23] See OFT Press Release, 24th July 1996.

[24] See Ofcom, Pay TV statement, 31/03/10

[25] See Ofcom, Consultation on pay TV regulation, 19 December 2014

[26] Ibid.

[27] M. Michalis; P. Smith, op. cit., p. 8

[28] B. Braverman; D. Frappier, Digital must-carry and forced access: Government-mandated access to cable distribution networks in the US and the EU, in Communications and Strategies, 2003, pp. 43-66.

[29] N. Van Eijk, B. van der Sloot, Must-carry Regulation: a Must or a Burden?, in Iris plus 2012-5

[30] Ibid.

[31] For the purposes of this Directive, cable retransmission means the simultaneous, unaltered and unabridged retransmission by a cable or microwave system for reception by the public of an initial transmission from another Member State, by wire or over the air, including that by satellite, of television or radio programs intended for reception by the public.

[32] D. J. Brennan, Fair price and public goods: a theory of value applied to retransmission, in International Review of Law and Economics 22, 2002, pp. 347-375.

[33] S. Ricketson, The Berne Convention for the Protection of Literary and Artistic Works, 1886-1986, Kluwer, 1987.

[34] P. A. Samuelson, Aspects of Public Expenditure Theories, 40 Rev. Economy & State 332 (1958), p. 335; and McGraw-Hill, Economics: An Introductory Analysis, (6th ed., 1964), p. 45.

[35] S. Schmanske, Public Goods, Mixed Goods and Monopolistic Competition, Texas A & M University Press (1991), p. 3

[36] A. Samuelson, Public Good and Subscription TV: Correction of the Record, (1964) 7 J. Law & Econ. 81, p. 83.

[37] J. A. Ordover; W. J. Baumol, Antitrust Policy and High-Technology Industries, (1988) 4 in Oxford Review of Economic Policy 13, p. 14

[38] R. H. Coase, The Problem of Social Cost, (1960) 3  in J. Law & Econ. 1

[39] J. A. Ordover; W. J. Baumol, Antitrust Policy and High-Technology Industries, (1988) 4 in Oxford Review of Economic Policy 13, p. 14

[40] S. Schmanske, op. cit

[41] D. J. Brennan, op. cit

[42] Ibid.

[43] See Report of the Broadcasting Committee, pp. 49-50

[44] D. J. Brennan, op. cit.

[45] C. Shapiro; H. R. Varian, op. cit

[46] In 1969, 50 kronor were evaluated around 10 U.S. dollars

[47] P. Bohm, Estimating Demand for Public Goods, (1972) 3 European Economic Review, 111

[48] Ibid.

[49] D. J. Brennan, op. cit.

[50] See De Coster, paragraph 30; Mobistar and Belgacom Mobile, paragraph 30; Cipolla and a., point 57; Schwarz and Gootjes-Schwarz, p. I-6849, paragraph 67

[51] See Case C-381/93 Commission v France [1994] ECR I‑5145, paragraph 14, and ITC, paragraph 56

[52] See Case C-288/89 Collectieve Antennevoorziening Gouda [1991] ECR I‑4007, paragraph 23; Commission v Netherlands, paragraph 30; Case C-148/91 Veronica Omroep Organisatie [1993] ECR I‑487, paragraph 10; and TV10, paragraph 19

[53] See Case C-250/06

[54] See AGCOM Decision n. 128/15/CONS

[55] It is the name of a speech given during the Edinburgh Television International Festival

[56] See http://merlin.obs.coe.int/iris/2010/4/article15.en.html

[57] See UPC Belgium, Coditel, Brutele and Wolu TV, no. 158.928

1 agosto 2016