The case was prompted by Brussels' push for the so-called 'digital switchover', which will replace analogue broadcasting with much more efficient digital transmission.
As a consequence of the transition, frequencies will be freed up for allocation to new operators and new services. The business opportunities are very promising and competition to acquire new frequencies and channels is fierce in most European countries.
In Italy, the terrestrial digital platform is already dominated by Mediaset, which belongs to Prime Minister Silvio Berlusconi. The company is the only operator to offer digital pay TV services, including football matches and top movies.
Public broadcaster RAI is also present on the digital platform, but exclusively with free channels. However, most digital revenue in Italy comes from users' fees rather than from advertising, in contrast to what happens in other EU countries.
Italian peculiarity on pay-TV
According to a recent report, almost 88% of digital TV revenues in Italy come from subscription fees, which therefore go directly to Berlusconi's Mediaset. In France, only 38.7% of the revenues originate from subscriptions. Spain and the UK present similar figures to France.
Indeed, pay TV in Europe is mainly offered through satellite and cable. Only in Italy is there a strong pay TV offer on terrestrial TV broadcasting, which is generally free of charge elsewhere in the EU.
This Italian peculiarity was developed as a way to challenge the pay TV monopoly of Rupert Murdoch's Sky Italia, which offers paid content through satellite and cable.
To challenge this monopoly, Berlusconi's government allocated €110 million in 2004 and 2005 to subsidise the purchase of digital decoders by Italian households. The alternative Mediaset pay TV service stems from that broad injection of public money.
In 2007, the Commission rejected the operation as illegal state aid and required Italy to reimburse the funds, of which Mediaset has been the main beneficiary. The European Court of Justice will issue its ruling on an appeal by Mediaset in mid-June.
Commission's early role
Murdoch's initial monopoly had been authorised by the European Commission in 2003, when the then antitrust commissioner, Italian Mario Monti, sought to break the de facto duopoly of politically-led public television and Berlusconi's channels.
Monti allowed Murdoch to gain a foothold in the Italian TV market via the nascent pay TV sector, while imposing a number of conditions on the Australian tycoon, including forbidding him from using platforms other than cable and satellite to offer his services until the end of 2011.
The current dispute between Berlusconi's government and Murdoch's Sky originates from this EU decision. Murdoch asked the Commission to anticipate the end of these limiting conditions in order to allow Sky to enter the newly profitable market of terrestrial digital TV.
However, Rome wants to stop Sky from entering the new market amid fears that it could damage other competitors.
"We want to give freed frequencies to new operators, not to monopolists," argued Italian Deputy Minister for Communications Paolo Romani after this week's EU Telecoms Council in Brussels.
A consultation of Italian market operators revealed that they share Romani's views. Likewise, this is the line repeated by Mediaset.
Awaiting Commission response
Brussels finds itself in the difficult position of having to make a decision which is likely to favour one tycoon over another in the highly politicised Italian media landscape.
That is why Competition Commissioner Joaquin Almunia is regularly postponing his decision, considered imminent within "a matter of few days" since as early as April. The last deadline set by his spokesperson was the end of May, but no decision has been taken yet.
Italian Europe Minister Andrea Ronchi said that the decision would come in "a few weeks" after meeting Almunia in Brussels last week.
One likely outcome is to allow Sky to access the digital terrestrial market but only with a free channel, rather than a new pay TV offer. This would please Mediaset, which fears losing its pay TV revenues, and might not displease Murdoch in case the ban on pay TV is only temporary.