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Author: Alexei Lazarov, Capital Date: Fri, Sep 17 2010 3951 Views
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It is a long and complicated story, but an important one, with potentially very serious repercussions and it is about who has access to the TV spectrum in Bulgaria and how they got it. After all, the question of who you let into your house to tell you the news and pick the points of view in opinion pieces is hardly a trivial one.

It is a twisting and turning saga that happened during the last months of the tripartite coalition's government when, after a series of lightning-quick changes in two laws, tenders to issue TV spectrum throughout the country were held. Most of the licences were awarded to one channel, TV7, which thus gained the status of a "national television".

That is important because of the switch to digital broadcasting, as the same legislative changes gave national broadcasters a guaranteed place in the post-analogue terrestrial television landscape. Furthermore, the broadcasters with nationwide coverage, like bTV and Nova, would have the right to air five additional channels – again, without tender.

The owners of those broadcasters have their own arguments in favour of the changes, but the outcome is not necessarily a good one for everyone involved.

Digital switch
The digital signal allows a lot more terrestrial channels to be broadcast – more than 50, depending on quality. It is a good thing because it creates serious competition and increases the variety of the opinions that viewers have access to. In the last months of the tripartite coalition, however, the hopes for more voices on the air were dashed.

Instead, it appears as if the current balance of power will be maintained after the switch to digital broadcasting.

The news now is that the European Commission has stepped into the administrative and legal mess, investigating the tenders to award the analogue TV licences and the requirement for the current national broadcasters to broadcast several digital channels.

The investigation was launched after a complaint was lodged by Hristo Grozev from RadioCorp BV. He is the former president of Metromedia Radio Group, which owns 36 radio stations in eight European countries, and chairperson of Dutch-registered media group RadioCorp.

"Honestly, I was enraged by the helplessness of courts and prosecution [in Bulgaria] and decided to contact the European Commission, which can competently and without bias analyse whether the process did indeed breach EU directives and if so, help Bulgaria revise it before it is too late," Grozev told Capital.

First steps
The investigation is at an early stage, with the EC collecting information from Bulgarian authorities. At the start of August, the Commission's directorate-general for competition sent a letter to the Bulgarian representation in the EU, asking for more details on the tenders and the reasons for giving national televisions free access to broadcast digitally.

In its letter, the EC reminded Bulgaria about several passages in European directives that might contradict the decisions taken by the tripartite coalition. Specifically, it refers to article 4 of the directive on competition, which says that the awarding of radio frequencies for electronic communications should be based on objective, transparent, undiscriminating and proportional criteria.

This is done so that member states do not impede competition on those markets by giving an advantage to any party, as well as prevent the management of spectrum frequency in such a way as to limit the freedom to offer broadcasting services, the letter said. It is done so that the markets are accessible to new entrants and offer consumers a freedom of choice and innovative services.

The EC asked Bulgaria to justify why the operators of the rebroadcasting networks will be required to air five extra channels of national televisions. According to the European directive on universal service, mandatory access should only be used to achieve clearly-defined goals of general interest that are proportional and transparent.

Regional frequencies
The Commission also asked why the tenders for awarding regional frequency spectrum were held in the way they were in 2009. At that time, during its last months in power, the tripartite coalition voted for amendments to the Electronic Communications Act and the Radio and Television Act. Prior to that, part of the regional frequencies had been set aside for use after the switch to digital broadcasting, but the changes allowed the use of the frequencies until 2012.

Mere days after the amendments were passed, the Communications Regulation Commission (CRC) called a tender, giving potential bidders only six days to prepare and submit their bids. Since that was clearly not enough, the criteria were extremely detailed and included numerous technical requirements for their equipment.

A large number of frequencies were then awarded to TV7. Formally, the channel is owned by a Cypriot company, but the majority owner of Corporate Commercial Bank Tsvetan Vassilev is acting as the Cypriot company's consultant. Having been awarded the frequencies, TV7 received the status of national broadcaster and guaranteed access to broadcast digitally after 2012.

In its letter, the European Commission said that bidders were required to present proof of advertising receipts and the use of digital equipment for live broadcasts, among others. "It appears that these rules limited potential bidders to existing television operators with significant advertising revenue and prevented new entrants from participating in the tender," the letter said.

Multiplex operators
The subject of multiplex operators, which would ensure the re-broadcasting of the digital signal, was not bypassed either. Bulgaria now plans to have six such multiplexes, the facilities where multiple channels are compressed to fit in one broadcast frequency, with four licences awarded to Latvian firm Hannu Pro and two other to the local subsidiary of Slovak firm Towercom, which has been bought by NURTS Bulgaria, a joint venture between Bulgarian Telecommunications Company (BTC) and Mancelord Limited. The latter is a Cypriot firm represented in Bulgaria by Tsvetan Vassilev. NURTS Bulgaria owns the analogue infrastructure now used by Bulgarian terrestrial televisions to broadcast their signal.

Tsvetan Vassilev is the man most likely behind TV7 and that did not escape the European Commission's notice, which referred to reports about the "consolidation of interested parties in the area of terrestrial digital broadcasting, leading to the vertical integration of a multiplex operator (who owns radio frequency licences) and a company that operates a re-broadcasting network and might be connected to a television operator," the letter said.

If the story seems straightforward so far, it is about to become less so, with the Constitutional Court becoming involved next.

Court orders
In its rush to pass laws fixing the game of transition to digital TV, it passed one specific injunction – namely that content providers could not operate any re-broadcasting infrastructure. The goal was to prevent Austrian firm ORS from buying BTC's analogue re-broadcasting subsidiary, NURTS. At the time, ORS wanted to bid for a licence and use the existing infrastructure to cut time and costs. The legal ban achieved its goal and ORS, in which Austrian broadcaster ORF owns 60 per cent, withdrew its interest.

Companies linked to Tsvetan Vassilev then used the same blueprint, buying half of NURTS and then Towercom Bulgaria, along with their licences for two multiplex facilities.
The Constitutional Court repealed other, equally important, provisions in the laws, which stipulated how the tenders were to be organised, because they stifled competition and encouraged corruption. Three tenders were held – for two, three and one licence, respectively – and the law stipulated that any given tender could have only one winner. But the court's decision proved meaningless, the telecom regulator awarding the winners in the first two tenders three days before the ruling went into force, also duly noted by the European Commission in its letter.

The formal recipient of the letter, Bulgaria's Transport Ministry, told Capital that "the official position of the Bulgarian state will be finalised after receiving the answers of all competent institutions", namely CRC, the Council on Electronic Media and the Commission for the Protection of Competition.

Lawmakers' response
Under Bulgarian laws, should the Constitutional Court declare any legislation unconstitutional, the body that issued the regulation is also charged with applying changes, which means that Parliament must fix its earlier faux pas on tenders. An official inquiry by the Transport Ministry to Parliament to that end remains unanswered.

"Should Parliament find legal consequences that need to be additionally legislated, the state would be put in a very difficult practical quandary," the Transport Ministry said. With the licences already awarded, holding new tenders could threaten the transition to digital broadcasting by 2012, the EU-wide deadline.

Actually, this complicated story has not just an administrative side, but a moral and political one too. The transition to digital broadcasting in Buglaria began in an unconstitutional manner, with the procedures appearing to have breached EU law as well. The Commission's letter could be the first step in a very unpleasant journey that could end in finding contradictions between Bulgarian and EU law.

If that is the case, Bulgaria will have to retroactively fix not only the laws, but also their legal consequences, which would mean holding new tenders. The later that happens, the larger the damages. 

While the inaction of Bulgarian authorities can be understood, since the matter is complicated and requires time to be properly assimilated, a decision will have to be made at some point. That could be either as a thought out policy to fix media regulations or under pressure from the EU. If the latter is chosen, a lot of precious time will have been wasted and Bulgaria's transition to digital broadcasting would be back to square one because of pointless machinations and secret deals.

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