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January 27, 1998

EC MOVES TO BLOCK KIRCH-BERTELSMANN DIGITAL TV ALLIANCE

By CBR Staff Writer

The European Commission has pounced to block a proposed digital TV alliance between German media companies Kirch Gruppe and Bertelsmann AG to share joint ownership of pay-TV channel Premiere (CI No 3,189), accusing the companies of trying to foreclose competition in the German Pay-TV market. The move is the latest blow to the ambitions of the two media giants who have had several similar proposed joint ventures blocked on competition grounds. Back in 1994 the European Commission banned the establishment of Media Service GmbH, a three-way venture between Kirch, Bertelsmann and Deutsche Telekom AG, declaring it incompatible with the common market (CI 2,541). In an angry reaction to the latest venture, Willy Helin, a spokesperson for the EU’s competition commissioner Karel Van Mier commented: this is an ongoing thing?t is not the first time Bertelsmann and Kirch have been doing things that are not entirely kosher. Should the alliance go ahead as planned, Beta Research, a proposed four way venture between Bertelsmann, Deutsche Telekom, Kirch and Audiofina, would own the rights to the Beta-access technology being used for digital distribution. The EU’s main concern is that this access platform would become de facto standard and that specifications for the d-box signal decoder, running a proprietary encryption system, and would not be made freely available to potential rivals. Responding to criticism that the new move is overly interventionist Helin said: we have nothing against alliances, digital TV or exclusive rights. We do have something against people who try to foreclose markets. He added: In Scandinavia we don’t have this gatekeeper problem. They have an open platform that everyone can use: why can’t we have that everywhere else? The new enquiry was launched after the German Federal Cartels Office sent a report to the EU regulator expressing concerns over the ownership of the access platform for receiving encoded signals and suggesting that it be made freely available. The EU Commission document stated: it must be feared that after the merger Premiere could become permanently the only pay-TV broadcasting and marketing platform in Germany. It also referred to a concern that BetaDigital could attain a lasting dominant position on this market [technical services for Pay-TV] for the satellite sector in Germany. Concerns have also been expressed over the pooling of film and sports programming rights. Under terms of the deal Kirch has agreed to transfer assets of the only other pay-TV channel, DF-1, and Sports-TV-channel DSF into Premiere, which would become the sole Pay-TV provider. The EU says it expects to give a verdict on the latest probe in around four months

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