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The regulatory framework

Financial year 2009 was characterized by legislative intervention concerning the regulation of the broadcasting industry, as detailed below.

Code on the matter of representing judicial events in broadcasts

The public and private broadcasters at national and local level and the suppliers of radio and television content who have signed code or adhered to associations which have signed it, the National Order of Journalists and the Italian National Press Federation adopted on 21 May 2009 the code of self-regulation on the matter of representing judicial events in broadcasts, undertaking to ensure that: the differences between documentation and portrayal of news and comments, between persons subject to investigation, charge and sentence, between public prosecutor and judge, between prosecution and defence, between defined and undefined character of the provisions and decisions in the evolution of the phases and degrees of proceedings and judgements are clear; to disseminate information which, assuming that those subject to investigation and charge are innocent until proven guilty, satisfies the public demand for immediate knowledge of important social facts such as the perpetration of serious crimes; to adopt communicatively expressive and technical methods which offer viewers an adequate understanding of the event, through the portrayal and explanation of the various positions of the parties implicated, taking into due consideration the informative and explanatory effect of the television media which, while amplifying.the dialectics between those involved in the case, may cause a risk of altering the perception of the facts; to respect the principle of cross-examination of the sides, ensuring the presence and equal opportunity of both sides in the dialectic confrontation.

The promotion of distribution and production of European programmes

In compliance with Articles 6 and 44 of the Consolidated Broadcasting Law (legislative decree 177/2005), television broadcasters and suppliers encourage the development and distribution of European audio-visual products and reserve most of their national broadcasting time, excluding that allocated to sport, TV quizzes, news, advertising, Telextex services, debates and television sales, to such European products. With resolution no. 66/09/CONS on the regulation of programming and investment obligations in favour of European programmes made by independent producers, adopted in compliance with articles 6 and 44 of legislative decree no. 177 of 31 July 2005, the AGCOM emphasized Rai's duty to allocate to European programmes at least 15% of its comprehensive annual revenues from licence fees relating to broadcasting and advertising revenues linked to it, net of income from associations with the public authorities and the sale of goods and services, and the obligation to reserve, on all networks and distribution platforms, regardless of the encoding of the broadcasts, to European programmes produced in the last five years a minimum of 20% of broadcasting time, 10% for original Italian films wherever they may be made.

AGCOM resolution no. 60/09/CSP, on the approval of the Regulations concerning the criteria for the attribution of shares of residual rights deriving from the time limits applicable to television rights acquired by broadcasters, adopted in compliance with article 44, paragraph 4 of legislative decree no. 177 of 31 July 2005, which abrogates the previous regulations, established restrictive criteria to regulate relations between independent producers and communications operators, and also envisages the application of sanctions in the event of failure to observe the code of conduct to be implemented by broadcasting operators within six months of the entry into force of such Regulations.

After clarifying the fact that "residual rights" are the television rights remaining after the initial period of use by broadcasters � established as three years for documentaries, seven for cartoons and five for all other types of programme � the Authority establishes that any rights remaining unused after two years from the delivery of the product will return to the independent producer and the residual rights will be assigned by the broadcaster to the independent producers in proportion to the participation in the phases of development and creation of the audiovisual products.

Furthermore, the Regulations state that all rights must be quantified separately and that negotiations with the independent producers must be transparent and be completed in reasonable times, and that, within six months of entry into force of the present regulations, each broadcaster must draw up a code of conduct aimed at regulating relations with producers, in order to guarantee equal and transparent negotiations, separate for each individual entitlement.

Digital Terrestrial Television

Article 8-novies of law no. 101 of 6 June 2008, converting law decree no. 59 of 8 April 2008, containing urgent instructions for the implementation of EU obligations and the execution of the rulings of the European Community Court of Justice, in view of the censorship of the European Commission with regard to the management of broadcasting frequencies, with the motivated opinion issued within the sphere of breach procedure no. 2005/5086, amended article 15 of legislative decree no. 117 of 31 July 2005 (regulating the supply of broadcasting content on terrestrial frequencies).

The main elements of the new law are:
a) the envisaging of the general authorisation for the activity of network operator, also during the switchover from analogue to digital terrestrial technology;
b) the definition of a calendar for the switch-off of analogue television by territorial areas, to gradually digitalise the television networks, to be completed by the end of 2012;
c) the definition, by the AGCOM, of the procedures for assignment of rights to use the frequencies for digital television networks.

The above to be carried out in observance of the laws in force, in accordance with which the AGCOM is the Authority appointed to draw up the National plan for the assignment of broadcasting frequencies and to approve the procedures for assignment of the relative rights to use them. Said Plan is to be drawn up on the basis of the National plan for the distribution of frequencies, prepared by the Ministry of Economic Development. With the Decree of the Ministry of Economic Development of 10

September 2008, the national calendar for the final passage to the broadcasting of DTT was defined, indicating the territorial areas implicated and the respective deadlines. With the Decree of the Ministry of Economic Development of 13 November 2008, the new National plan for the distribution of frequencies was also approved, reserving the VHF-III, UHF-IV and UHF-V bands for television broadcasting. This also allowed the assignment to the broadcaster Europa 7, implementing the order of the Government Council, the frequency relating to channel 8 of the III-VHF band for its operation in analogue and digital modes.

The current rules governing the use of DTT already contain certain provisions aimed at accessing the DTT market through the regulatory model which is based on three separate systems of authorisation for operation for the DTT broadcasting sector (content provider, service provider, network operator), the limit of 20% for DTT programmes that can be distributed by any one content provider at national level, the reserve, until the nationwide switch-off, of 40% of the broadcasting capacity of the DTT networks used by the existing operators through the so-called frequency trading, in favour of content providers independent from the network operators. On the basis of this system, a company does not have to be "vertically" integrated to operate on the DTT market, as proven by the entry into the sector by companies which also operate as network operators. According to the existing regulatory system, the rights to use frequencies are assigned to the network operators who are, usually, the owners of broadcasting sites and infrastructures, although the law allows them to rent these infrastructures from other companies (known as tower companies). The latter activity requires no authorisation as it does not implicate the provision of electronic communication services. In the case of vertically integrated national operators (authorised both to manage the network and to provide programmes), the law states that the service provider and network operator must be structurally separate, i.e.: managed by separate companies, albeit belonging to the same corporate group. This separation is envisaged for DTT only and does not regard other broadcasting platforms such as satellite and cable. In this context it its necessary to highlight that the system in force since 2001 envisages, for all analogue operators who have invested in the digitalisation process, the right to convert each analogue network to digital on a "oneto- one" basis (with one analogue network corresponding to one digital network). This right has been a fundamental factor in encouraging the companies in operation to invest in a new and consequently risk technology, and has been the factor that has drawn the digitalisation process of the Italian television networks.

Criteria for the complete conversion of the terrestrial television networks to digital

The AGCOM intends to introduce a strict limit to the number of television networks that can be obtained by existing operators in order to ensure the same development opportunities to all potential participants in the competition and to make the equality of treatment effective, respecting the principle of proportionality and non-discrimination.

Digital terrestrial radio broadcasts

On 26 November 2009, in view of the National Plan for the distribution of the frequencies approved with decree of the Ministry of Economic Development of 13 November 2008, the AGCOM, taking into account the technological innovations that have been made with regard to the standard of digital terrestrial radio, adopted, in compliance with article 24, paragraph 1 of law no. 112 of 3 May 2004, the new regulations for the launch of terrestrial radio broadcasts using digital technology.

Further regulatory provisions

On 31 January 2009, resolution no. 666/08/CONS was published in the Official Gazette. With this resolution the Authority approved new Regulations for organizing and keeping the Register of communications operators (R.O.C. - Registro degli operatori di comunicazione). On 14 May 2009, the guidelines for the sale of sports broadcasting rights in accordance with article 6, paragraph 6 of legislative decree no. 9 of 9 January 2008, on the "regulation of ownership and sale of sports broadcasting rights and relative distribution of resources", in the final version transmitted by the Lega Nazionale Professionisti on 28 April 2009. With resolution no. 405/09/CONS, the AGCOM adopted the regulations for the exercise of audiovisual reporting rights and with resolution no. 406/09/CONS, those to exercise radio reporting rights, in view of legislative decree no. 9 of 9 January 2008, on the "regulation of ownership and sale of sports broadcasting rights and relative distribution of resources".