The Latvia report in the Mapping Digital Media series is now available in Latvian. You can download the Latvian version – like all the reports in the series – as a PDF on soros.org, or read it as an close its case against the telecommunications company Lattelecom (as referenced in the report) for abuse of its dominant market position, due to insufficient evidence. In its report (pdf), the Competition Council stated that the currently available base of evidence does not allow it to draw conclusions on whether the broadcasting tariffs of free-to-air TV channels are unfair. Lattelecom’s competitors in the pay-TV, free-to-air and cable markets had presented a complaint to the Council in 2010 that these digital terrestrial TV tariffs – which Lattelecom (whose main shareholder is the Latvian state) won the exclusive right to offer in a 2009 government tender – are unreasonably high.
The Council has also highlighted several shortcomings in how the government has regulated the implementation of digital terrestrial TV in Latvia. The Council concluded, inter alia, that because the government didn’t set clear parameters at the beginning of the digital switchover process:
- there are no principles for determining broadcast tariffs in advance, and therefore no cap on the amount that free-to-air TV channels have to pay, regardless of the actual market situation;
- Lattelecom was not – in its role as rights holder for digital terrestrial TV – obliged to optimize costs and reduce the price-cost margin – and was not told the maximum amount of profit it was permitted to make for the duration of its gatekeeping monopoly. This impacted adversely on the free-to-air channels, who, since they were not told what the maximum cost of digital switchover might be, were unable to plan financially, and have been faced with what they feel are prohibitively high costs.
To safeguard proper competition, the Council suggests several further changes in how digital terrestrial TV is regulated after Lattelecom’s license term expires in 2013.
In line with these suggestions, the government is proposing to amend the Electronic Media Law to separate provision of free and pay-TV channels. One proposal already on Parliament’s agenda is for the State Radio and Television Centre (Latvijas Valsts Radio un Televizijas Centrs, or LVRTC), a state joint-stock company which manages the terrestrial broadcasting transmission network, to distribute free-to-air digital terrestrial TV channels – though as yet, the government has not made public how it plans to calculate the tariffs. Pay-TV channels will be distributed for an as-yet-unspecified term by one or more merchants selected through a tender.
In the same 2010 complaint presented by Lattelecom’s competitors, they argued that Lattelecom used income gained from free-to-air broadcasting tariffs to cross-subsidise its own pay-TV services (as referenced in MDM Latvia: 5.1.1/p.57). The Competition Council has indicated that it cannot currently determine whether there is a case to answer, and will only be able to do so once Lattelecom’s license expires in 2013.
In reference to Section 5.1.2 (p.59)
In a separate ruling in August 2011, the EU Directorate for Competition has concluded that there are insufficient grounds for further investigation of a complaint brought by cable operator Baltcom against Lattelecom. Baltcom had alleged that the government tender process for selecting a digital terrestrial TV provider – which Lattelecom won – was not transparent and was conducted too hastily. Baltcom claimed that this constituted unlawful state support, and gave Lattelecom an unfair market advantage.