EC resistant to Channel 4 campaign
Euro Commission could halt U.K. co.'s subsidiary
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A 17-page letter from EC competition commissioner Neelie Kroes suggests that the government's decision to divert $26.6 million from BBC license fee income to pay Channel 4's digital switchover costs could breach state aid rules aimed at halting unfair competition.
"The commission doubts whether the notified measure is compatible with the common market," the commissioner writes in the letter to U.K. Foreign Secretary David Miliband.
Kroes questions whether the coin pledged for Channel 4, which is lobbying for an annual subsidy of $285 million because it insists its business model is unsustainable following digital switchover, "is necessary and proportional."
She adds: "The mere fact that the switchover may affect its profitability (but not its viability) does not constitute a valid reason for claiming state funding."
The EC official pointed out that a recent report commissioned by U.K. regulator Ofcom examining the broadcaster's finances highlights "the prospect of declining profits (at Channel 4), not the loss of its ability to deliver its public service remit or, indeed, maintain its current schedule."
Kroes adds: "Far from indicating any financial difficulties or challenges ... it will also invest in new media, launch some nonpublic service channels and invest in new video-on-demand."
She asks why the web's nonpublic service commercial activities should benefit from state aid and points out that Channel 4 has "substantial" reserves of $275.5 million.
