The European Commission on Wednesday threatened action over a controversial Italian media law passed when former premier and media mogul Silvio Berlusconi was in power.
The EC criticised the part of the 2004 law regulating the switch from analogue to digital broadcasting, saying it favoured existing players and hampered new operators entering the digital market.
The Italian TV system has long been dominated by state broadcaster RAI and Berlusconi's private network Mediaset, both of which have three nationwide channels.
In a previous letter of formal notice sent to Italy a year ago, the EC warned that the media law appeared to clash with European competition rules and demanded clarification.
It said the law had introduced "unjustified restrictions" on broadcasting services to the "unjustified advantage" of existing operators, namely Mediaset, RAI and the small, two-channel La 7, owned by telecommunications giant Telecom Italia.
Mediaset and RAI together account for some 90% of Italy's audience share and take 93% of money spent on TV advertising, with 66% going to Publitalia, the lucrative advertising arm of Berlusconi's business empire.
The EC said on Wednesday that no action had been taken to address the problems raised in its 2006 letter.
It noted that the centre-left government headed by Premier Romano Prodi had presented a media reform bill which would remedy the situation but said it had not yet been approved by parliament.
Brussels gave Italy two months to act, threatening to haul it before the European Court of Justice if it failed to do so.
BILL READY BUT BERLUSCONI ALLIANCE OPPOSED.
Italian Communications Minister Paolo Gentiloni said the EC's line was "indisputable" and urged parliament to speed up passage of his media reform bill, which is currently stalled in the House.
"The 2004 law is incompatible with European regulations. The government's bill will abolish the law and reintroduce the fundamental principles of pluralism and competitiveness," Gentiloni said.
Critics of the law alleged at the time that it had been tailor-made to boost Berlusconi's media interests, strengthening Mediaset's position and profits.
The legislation sidestepped a Constitutional Court ruling which ordered the Berlusconi channel Rete 4 to close down or move to satellite.
Although the law prevented broadcasters from accounting for more than 20% of the national advertising pie, it expanded definition of the market, lifting its total value to some 26 billion euros.
Critics say the reform has allowed Berlusconi's companies to sell as much as 2 billion euros annually in extra advertising.
The then president Carlo Azeglio Ciampi sent a first draft back to parliament for modification, complaining that it failed to guarantee media pluralism and favoured the creation of dominant positions in the advertising sector.
But Berlusconi's centre-right coalition insisted the law would throw the market open to competition, protect minor players and regulate the switch to digital.
Premier Prodi vowed to overhaul the broadcasting system in his election programme.
But Prodi's weak majority could make it extremely difficult for him to pass legislation perceived as damaging to Berlusconi's interests.
Prodi's government hangs by a thread in the Senate, where it has only two more seats than the Berlusconi-led opposition.
Gentiloni's reform bill would force both Mediaset and RAI to move one of their three terrestial channels to digital within 15 months of its approval, with the freed-up airwaves being sold to competitors.
It would introduce a 45% cap on any given broadcaster's share of the TV advertising market and reduce the amount of advertising permitted per hour of programming from 18% to 16%, with in-show advertising included in the calculation.
The bill sets a deadline of November 2012 for terrestrial networks to make the transition to digital.
Mediaset Chairman Fedele Confalonieri has protested that the reforms would deprive Mediaset of a third of its turnover.
The opposition has vowed to battle the bill, accusing the government of trying to damage the opposition chief by targeting his business interests.
Antonio Tajani, a Euro MP and leading member of Berlusconi's Forza Italia party, said on Wednesday that "Gentiloni has done everything possible to exploit the EU with the purpose of undoing the 2004 media law and penalising one of the biggest private companies in the country".
Communications Undersecretary Luigi Vimercati, meanwhile, said that it would be difficult to get the Gentiloni bill passed within the two month deadline set by the EC.
"Not even the German Bundestag could pass a law in two months. But we if we can push the bill along before parliament's summer break then it would be a sign to Brussels that we agree with their position," Vimercati said.
