Italy's PM in TV conflict

February 20, 2002 Posted: 1035 GMT

ROME (CNN) -- In a nation fixated with television, Italians will be closely watching this week's decision on who will run the state-owned broadcasting network.

The government of Silvio Berlusconi -- Italy's prime minister and the country's most powerful media baron -- is set to appoint a new board at RAI, which oversees three government-run channels.

For Berlusconi, who controls three of Italy's biggest private TV stations through his company Mediaset, the decision is seen as a test of his election pledge to avoid any conflicts with his business interests.

His political opponents, however, are concerned Berlusconi will use this opportunity to stack the deck in his favour -- installing a RAI board that reflects his political views and will ensure they receive wide coverage on state-run television.

The five-member board wields enormous power, choosing who heads each of the three state channels and who directs their news programming. These decisions also have an impact on advertising, where RAI and Mediaset compete directly and where RAI already feels it loses out due to government-set limits on selling airtime.

Mediaset, a publicly listed group controlled by the Berlusconi family through holding company Fininvest, attracts 43 percent of Italian viewers. Together, Mediaset and RAI command 90 percent of the TV audience.

Berlusconi, who led a conservative coalition to power last June, promised to deal with the conflict of interest problem during his first 100 days in office, which past in September with no resolution.

However, instead of selling his media assets as many have demanded, Berlusconi has proposed a conflict of interest bill that would set guidelines for how government members should run their business activities. The bill is expected to be introduced next week.

A self-made billionaire, Berlusconi's business activities also include publishing, advertising, financial services and sports. But for many Italians, the most alarming and politically sensitive is television -- a medium that reaches into the homes, hearts and minds of every Italian.

"Berlusconi is the head of a system of information that is completely skewed to his advantage and which cannot guarantee the pluralism a democracy needs," Francesco Rutelli, leader of the centre-left opposition, told reporters. "The conflict... is fundamental to everyone's freedom."

But for many investors the issue is "an interesting side show" but not significant to the television sector as a whole, said Sarah Simon, an analyst at Morgan Stanley Dean Witter.

"Anything that results in less competition would be good [for Mediaset]," she said. "Anything that makes RAI more aggressive would be bad."

Regardless of the outcome, she said there will still be room for two dominate TV networks in Italy. "This is a highly profitable business."

Italy's advertising market has turned in a better-than-expected performance so far this year. Simon said sales growth is running in the high single-digits, rather than in the low double-digits which "is down but not too bad."

Still, financial interests aside, Berlusconi's political opponents appear far more concerned about who will dominate the airwaves on each network.

An independent survey of media coverage conducted from June 2001, when Berlusconi took office, through to January 10, showed Mediaset gave its owner more coverage than its state-run competitor, Reuters reported.

On RAI's three channels, the government received an average 46 percent of all news coverage and the opposition 26 percent. On Mediaset's three channels, the government received an average 67 percent of coverage and the opposition 15 percent.

During the same period, RAI gave Berlusconi's government 388 minutes of airtime and Rutelli and the opposition 155 minutes. On Mediaset, Berlusconi received 675 minutes of airtime and Rutelli 39 minutes.