Unlocking public infrastructures?

A

Unlocking public infrastructures? State aid and the common European data space

Authors

Toni Prug
Faculty of Humanities and Social Sciences, University of Rijeka, Croatia
Email: toni.prug@uniri.hr

Paško Bilić
Institute for Development and International Relations, Zagreb, Croatia
Email: pasko@irmo.hr

(Accepted version, for published page numbers see European Journal of Communication)

INTRODUCTION

The transformation of European media systems over the last hundred years was characterised by a long shift from a public service media policy to a dual broadcasting system of public and commercial producers and finally to a liberalised system of numerous commercial producers in a digitalised market. A liberalised broadcasting market was believed to bring more pluralism in a rigid national broadcasting space, easily susceptible to political influence and engineering. The increasing uptake of digital technologies further multiplied and segmented the public sphere. Digital technology was initially viewed as bringing more democratisation and consumer choice. The market realities, however, soon settled in, displaying increasing commercialisation and leading to a full-blown digital oligopoly (Bilić, Prug, and Žitko 2021; Smyrnaios 2018) controlling access points and information flows. The role of public service media is pivotal in supporting the cultural resources, social relations and personal capacities that sustain a social order based on equity, justice, recognition, respect and care (Murdock 2021:70). In this paper, we approach public broadcasting systems as producers of public wealth (Prug and Žitko 2024:3–4) of a peculiar kind whose activities and goals are defined by their public purpose, rather than the imperatives of capital and profit-making. Transfers aside, about one-fifth of all annually produced wealth in advanced capitalist social formations comes from publicly funded production through plans and budgets. These public production outputs, public wealth as we call them, typically do not take the commodity form. Older forms of public wealth, such as the military, police and legal system, are collectively consumed and historically present in various social formations. Today, they are capital-centric as they create conditions for the capitalist mode of production to thrive and develop within and between nation states. While public health, education and care are produced to meet the needs according to criteria, often in an egalitarian spirit free of charge at the point of use, public broadcasting systems occupy a peculiar position in the spectre of public wealth. We focus on macro dynamics that determine the European media’s framework, regardless of EU member states’ national and regional specificities. On the one hand, internally, the EU directly and indirectly regulates the media through a complex maze of actors, regulatory instruments, and interests (Donders, Loisen, and Pauwels 2014). On the other hand, the EU is geopolitically shaped by competing with the United States and, increasingly, China (Bradford 2023). These initiatives affect the governance of the profit and public production in terms of new challenges posed by the European Strategy for Data (European Commission 2020a) and the creation of the so-called common European data spaces (CEDS) (European Commission 2022a). CEDS is an EU strategic initiative to create data access and reuse spaces for citizens and businesses in health, agriculture, manufacturing, energy, mobility, finance, public administration, science, and the media. Significant state aid, one of the main competition policy mechanisms of the European Union, is strategically allocated to fund the development of data space infrastructures. State aid had a problematic history of implementation in public broadcasting. It was used to remove state interventions from fully liberalised and competitive markets. Due to high expectations of data’s impact on economic and social transformation, state aid is now gaining a proactive role in building European data infrastructures. Previously used negatively to stifle the cross-border expansion of the public service media, the positive interpretation of state aid as an investment mechanism is now used to fund private actors developing digital infrastructures.

THE ROLE OF STATE AID IN CAPITALIST SOCIAL FORMATIONS

From the start of the integration of European national markets, the agreements between the states had to account for the existing socio-economic character of capitalist social formations (Giubboni 2009:13). The rights of states to continue producing wealth and developing their internal affairs by public non-market solutions, historically based on principles of solidarity and equality in access to wealth (Baldwin 1992), had to be respected. The first three decades after the Second World War, often considered the ‘golden age’ of Western capitalism, demonstrated further the importance of national states’ active role in producing wealth. Hence, the treaties had to enable further integration into a single market whilst allowing for the continuation of existing national activities. EU state aid rules are part of the EU’s competition policy (Aydin and Thomas 2012:537), a form of soft law ‘developed out of necessity after the refusal of Member State governments to adopt Council legislation back in 1966 and 1972’ (Cini 2021:3). They provided ‘an empirical entry point to consider the normative, technical and de facto limits of markets and market principles’, including ‘various legal and technical provisions which permit states to intervene in market processes, in conformity with law and economic rationality’ (Davies 2013:33–34). Put differently, by providing a new type of legal mechanism for decisions on boundaries between markets and states, between profit-driven production of commodities and planned production of public wealth; state aid rules altered the composition of capitalist social formations. While the rules were rarely enforced until the late 1980s (Davies 2013:43), in the last thirty years, case law decisions on state aid became perhaps the most important instance where the Commission decides on the appropriate division between capitalist and public solutions to production and allocation of wealth, both on a case-by-case basis and with broader regulatory actions. Since the early 1990s, the regulatory balance has tilted towards the capitalist production of commodities. It was driven by the newly applied ‘variant of economics which incorporates certain biases’, ‘favours free competition, minimal government regulation, short term economic efficiency … and a faith in market outcomes’ (Wilks 2009:272). Although the changes imposed limits on industrial policies and led to large reductions in subsidies to market producers, the new wave of state aid in Europe was prompted by the crisis of the financial sector in 2008 (Cini 2021:4, 13; Wilks, M. 2016:153–54), the new green transition goals, the COVID crisis and the unsatisfactory digital infrastructure (Bardt 2020).

INADEQUACY OF CONTEMPORARY MARKET FAILURE AND PUBLIC GOODS THEORIES

The changing concepts of market failure and public goods have been central to theorising the role of the state in economic activities. Classical economists supported the markets, but ‘it was not a theoretical support for an abstract market … there was no blanket proposition that the market was the best option or that government should or should not intervene in the market’ (Colander 2015:262– 63). The social and economic crisis around the end of the nineteenth century gave birth to the idea that free markets cannot produce satisfactory outcomes on their own and that political interventions are necessary. This brought economists to the forefront as the key experts, often with differing visions of what the state and markets are and what should be the character of state interventions (Leonard 2015). Continental European economists started developing the concept of public goods in the late nineteenth century to affirmatively capture the conditions under which the state was intervening in the production of wealth (Musgrave 1996). Without a broad consensus on the affirmative theory of the state, the economists formulated the idea that the main role of the state is to ensure healthy competition in markets. The twentieth-century idea of market failure, driven by further instabilities in the leading capitalist economies, reinforced the belief that governments should engage in market corrections (Marciano and Medema 2015). Despite immense state interventions and investments in the decades after the Second World War, the Keynesian period also gave birth to a new theoretical development in economics, favouring the expansion of markets. The redefined concept of market failure (Bator 1958), now interwoven with a new definition of public goods (Samuelson 1954), appeared in a strictly mathematical form within the neoclassical school of economics. While the works of continental authors and earlier neoclassical economists contained ethical and other policy-relevant considerations (Desmarais-Tremblay 2017b, 2017a; Sturn 2010), only mathematised aspects were retained, leading economics to evolve into a mathematical science, while ‘the nuance faded’ (Colander 2015:263). The case of Bator, where realworld phenomena hardly featured and ‘the exercise was almost wholly along the lines of probing the world in the model’ (Marciano and Medema 2015:4), was representative of the new approach. In redefined concepts, authors such as Samuelson ignored the continental tradition’s emphasis on the need for political processes, making public goods theory ‘somewhat of a scholastic exercise’ (Musgrave 1983:6–7). Developed in the image of an idealised market production that bore little resemblance to existing economic phenomena, the new concepts became dominant in theorising state activities in economics and beyond (Fine 2002; Musgrave 1983:13). No accompanying theory captured public production according to its specific social and economic character. Instead, markets were treated as the natural state of economic activities, and it was posited that the state should intervene only when markets cannot operate. The criteria for state intervention were narrowed down to instances when specific consumption characteristics make profit-driven production impossible. The typical examples are lighthouses and the military. Since these products are not exhausted by consumption (non-rivalry), and it is impossible to exclude individuals from consuming them (nonexcludability), profit-driven commodity production cannot occur. Such situations are termed ‘market failures’. Only in these cases should government production take place, producing public goods outputs (Marciano and Medema 2015:10–17). While some aspects of the theory do contribute to conceptual thinking about collectively consumed public services such as the military, police, the legal system, regulatory institutions, and government bodies, most state activities in an economy remain outside of these criteria. The largest government activities, according to the number of employees and budgets, are public health, education, and care. According to contemporary theories, they should be classified as public goods and instances of market failure. However, they do not fit into those categories as the consumption of products in those sectors is both rival and exhaustible. Throughout most of history and worldwide, these products were, and in many cases still are, commodities produced for profit and distributed in markets. This lack of fit between the definition of market failure and public goods and the actual largest sectors in which government activities occur renders these contemporary theories unequipped to grasp their object under investigation (Hammond 2015; Mirowski 2004:507). Legal scholars have pointed out the inadequacy of the concept of market failure by studying the variety of justifications used by governments to produce public services (Prosser 2005:28–38). This is especially prominent in public service broadcasting, where extensive debates have demonstrated ‘non-economic’ justifications in order ‘to secure a wide range of social goals’ (Prosser 2006:369). The studies that looked at how such a deficient theoretical framework (Bos 2009:12; Sekera 2014) became a de-facto standard, not only in economics but also in parts of social sciences (Fine and Milonakis 2009), argued that the outcome was the result of Cold War theoretical battles won by the proponents of markets against the proponents of planning and government activities, where the latter were perceived to represent socialist and communist values (Amadae 2003; Varoufakis, Halevi, and Theocarakis 2011:227–54). The theory of market failure occasionally gets used to construct arguments in favour of state involvement (Latsis and Repapis 2015). However, this is done based on negative reasoning: markets are idealised to start with, assuming ‘that in principle market solutions are always the first-best outcomes’ (Prosser 2006:369). Since the contemporary economic cannon is based on narrow definitions which cannot be utilised to study state activities (Colm 1965:213–14), alternative approaches, government as a producer (Sekera 2020), public value (Mazzucato 2018) and the production of public wealth (Prug and Žitko 2024) have to be considered. What is required is an approach that captures the social specificities of publicly financed activities, not in the image of market productions, but according to their own social character. All European countries have developed a public service with a set of defined objectives: to guarantee each inhabitant the right to access certain types of wealth (education, health, security, transport, communication, etc) and to ‘build solidarities’ and social cohesion (Bauby 2011:21–22).The existence of such sectors is most explicitly specified in France through the legal concept of ‘Public service’ (service public), with the recognition that ‘service public is essentially non-economic and distributive in nature’, and that in its essence it is a means to consolidate social solidarity, contributing to equality by ‘ensuring equal access to [public] services’ (Prosser 2000:76). For most individually consumed types of public wealth, solidarity is present in public financing and distribution. Wherever such public wealth is present and capacities available, citizens will get it regardless of their income: they can equally use elementary and high school education, a public library or a sports ground. Capitalist production of commodities introduces inequalities in access to wealth, while egalitarian public production tends to equalize it. These are just a few attributes by which their social and economic form differs. Furthermore, although the public production of wealth in sectors such as education, health, sport, culture, infrastructure, and housing has been historically premised on creating more equal access to wealth, since the penetration of the capitalist production in those sectors in EU countries (Burchardt 2013), this egalitarian effect has been greatly diminished (Therborn 2006:39–40).

STATE AID IMPLEMENTATION IN THE MEDIA SECTOR

The European Commission’s media policy has predominantly been leaning on competition law considerations, leaving the fulfilment of public service responsibilities to the member states. Even though the Commission had no explicit powers over national PSBs, it exposed them to interventions through state aid investigations (Michalis 2014:134). Legally, public service broadcasters produce a peculiar social form of wealth for the common good, aiming to ensure democracy, pluralism, social cohesion, and cultural and linguistic diversity: ‘Broad public access, without discrimination and based on equal opportunities, to various channels and services is a necessary precondition for fulfilling the special obligation of public service broadcasting’ (Council of the European Union and the representatives of the governments of the member states of the European Community 1999). State aid implemented in the media sector vividly depicts the fault lines between the ‘liberalisation’ and ‘social Europe’ visions of European integration (Craufurd Smith 2021:75). Many cases illustrate the Commission’s commitment to the liberalisation perspective since the 1980s and 1990s and its contradictory effects on the national PSMs’ ability to perform their societal role. As problematised by multiple authors (e.g. Bardoel and Vochteloo 2012; Bilić and Švob-Đokić 2016; Donders and Moe 2014), expanding public services digitally was occasionally interpreted by private interests and political actors as a distortion of competition. Public media are funded chiefly through license fees, yet they produce content in the same attention space as private companies with marketbased funding models (sales, advertising, subscriptions, etc.). The notion of public value, initially developed as a critique of new public management – reforming the public sector in the image of the private sector – has been modified and re-defined in national contexts for two purposes: to argue for the continuation of operations of public PSBs, and to limit their expansion into digital sphere (Collins 2011; Humphreys 2010). Many public broadcasters had to undergo tests of their public value to show whether their new services fulfilled the social, democratic, and cultural role adequately (Donders 2015). This imposition of state aid rules and public value tests has been interpreted as disciplining the PSMs to neoliberal management logic (Freedman 2013), with the focus still firmly on market distortions (Donders 2015:84). Recent EU policy developments seem to move in new directions, acknowledging the important role of the media in democracy, emphasising media freedom and media pluralism (Holtz-Bacha 2024), and loosening the liberalisation and competition agenda, if ever so slightly. Mechanisms such as the annual Rule of Law reports since 2020 and the European Media Freedom Act (EMFA) (2024) emphasise the ‘common European values’, democracy, media independence, pluralism, and the societal role of news as a public good. Comparably, the digital sphere also shifted from full liberalisation and Digital Single Market goals towards a more proactive policy of competition enforcement and infrastructure development in light of increasing dependency on American and Chinese technologies. Sovereignty becomes an essential concept in these policies. In the Digital Services Act and the Digital Markets Act passed in 2022, the Commission policy transitioned from an inefficient ex-post approach to digital competition to a proactive ex-ante approach (Cini and Czulno 2022). The development of the single market remains strong. It is, however, increasingly balanced with other considerations such as data management, technological sovereignty, human rights, skills, environmental protection, and public administration development through increasing public interventions (Heidebrecht 2024). 

FROM CLEAR SEPARATION TO A FUZZY BOUNDARY

Digital transformation is one of the priorities of the European Union. The European Commission is particularly keen on establishing rules in the data economy based on the European strategy for data (European Commission 2020a), the Data Act and the Data Governance Act (European Parliament and the Council of the European Union 2022, 2023). Within the scope of this sweeping intent to ‘transform business and society’, one of the initiatives is to develop so-called ‘common European data spaces’ (CEDS) in strategic economic sectors and domains of public interest for data storage and sharing (European Commission 2022a). To fund the development of digital transformation, significant state aid is strategically allocated to execute important, multi-country projects of common European interest. For example, the Commission recently approved €1.2 billion of state aid for cloud and edge computing technologies (European Commission 2023). The media sector has a clear role within a broader scope of digital transformation, as emphasised in the European Media and Audio-visual Action Plan (MAAP) (European Commission 2020b). State aid speeds up the private media industry recovery following COVID-19 (including press, music, and audiovisual sectors). Long-term transformative measures for the media sector include ‘Unleashing innovation through a European media data space and encouraging new business models’: ‘The data infrastructure should be available to both public service media and commercial media operators, whether large or small, start-ups or established players.’ (European Commission 2020b).infrastructures will be funded through various mechanisms such as the Digital Europe program (€7.5 billion), Horizon Europe, Connecting Europe Facility, Recovery and Resilience Facility, Structural funds and other means such as state aid in member states. 

Interestingly, the structural diversity of the media sector is not addressed in MAAP and related documents. Insufficient consideration is placed on the internal differences between private and public media, contrary to the previously clear separation of the public service mission and the competitive logic of the capitalist private media sector. There is no consideration of developing existing public institutions that already fulfil the societal roles that the market cannot produce. A predominantly technical discourse runs through different EU documents and, surprisingly, position papers by major public stakeholders such as the alliance of public service media organisations or the European Broadcasting Union (EBU). The EBU states that the journalistic sector is part of the cultural and creative industries (CCI), such as content creation, audio-visual, publishing and radio (EBU 2022:8). In their position paper, they define a data space as ‘an ecosystem of exchange, processing, sharing and provision of data between trusted partners, for a fee or not. It is not about copying or repatriating data centrally but about ensuring that each data holder has full control over the conditions (e.g., who, when, and under what conditions) of access to their data’ (EBU 2022:16).

Data-sharing challenges include market readiness, competition between companies and online platforms, regulatory compliance complexity, source identification, data structure and quality, large file transfer and computing, interoperability, and ethical considerations (2022:13, 14). Potential scenarios where data infrastructures could be helpful include newsroom use cases, production and publishing use cases, and distribution use cases. They include the entire production, distribution and consumption chain of all types of media content, including journalistic work. While it is noted that both French public broadcasting and BBC developed their own standards for handling content and data (2022:18), the logic of production, be it profit-driven production of commodities or public and civic production, is entirely missing. The EBU does not mention the public service remit in the position paper. One of the first funded media data space projects is the Trusted European Media Data Space (TEMS), funded by the Digital Europe program, in which the EBU is one of the stakeholders. The project aims to ‘redefine how the media sector will be able to share and extract value from data. This will lead to the economic development and growth of local and regional media ecosystems across Europe. Data is the new currency, and data-driven businesses will shape the future’ (TEMS 2024).

Following similar changes in the EU during the last few decades (Sauter and Schepel 2009:19– 21), a noticeable blurring of societal roles is visible in projects such as TEMS. The private media actors increasingly position themselves to foster media pluralism and cultural diversity by creating data services. In contrast, the public media takes on the industry discourse of innovation, consumer choice, and user-centric development. This seems to be a recurring trend in data infrastructure development, where sectoral transgressions between public and private roles are increasingly prominent (Taylor et al. 2023). While media data spaces operate in the background of the public communicative activity of the media, it is hard to overcome a general sense of a missed opportunity. In light of these changes, CEDSs could be leveraged for developing the public service remit in the EU data strategy, especially in the context of universal access, equal opportunity and non-discrimination, but also expanding to potentially new definitions of public value concerning data justice in areas such as (in)visibility, (dis)engagement with technology, and anti-discrimination (Taylor 2017).

Stepping into the PSM regulation role from an EU level is a highly sensitive political issue of direct political interference and control of public service and other media in countries such as Hungary and Poland. Following pre-digital EU media policies, intervening in the member states’ capacity for organising the public service remit is a line that the European Commission does not cross. The European Media Freedom Act (European Parliament and the Council of European Union 2024), despite introducing some safeguards for the political and financial independence of public service media, does not interfere with Member States’ competence to provide funding so that public service media can fulfil their remit, nor does it restrain from applying state aid rules on a case-by-case basis.

With significant funding available for developing CEDSs, there seems to be an implicit agreement on shared interests between public and private stakeholders in establishing data infrastructures. Croatian’s Centre for Shared Services (Government of Croatia 2019) is an example of produced public wealth for services that were available from capitalist producers. However, in the feasibility study on establishing a digital European platform of quality providers, one of the takeaways from discussions with different media stakeholders is the difficulty of ‘bridging the gap between private and public players’. Some argue for building concrete use-case scenarios with different players in one common data space, and others argue for bringing together a small subset of players before extending the initiative to the entire ecosystem (European Commission 2022b).

CONCLUSION

Just as the role of the media in Europe was re-envisioned by the national regulators in the 1980s and 1990s due to private actors’ interests in growing capitalist production in satellite and cable television, and again in the 2010s due to the growth of on-demand audio-visual platforms, the new expectation is that data is inevitably transforming society and the economy and that the media should find a role in that transformation. However, beyond the proclaimed urgency of the Commission and member statesto establish better data governance with sovereign infrastructures in recent strategic initiatives, what is being digitally transformed is not entirely legible. Is it just the efficiency of markets and public administration, or is there more to it? Transforming public service media beyond the reductive role of filling in where the markets fail is clearly not among the main goals. Despite the inadequacy of contemporary theories of market failure and public goods, the approach in EMFA and MAAP might bring more accountability to commercial media actors. Nevertheless, it will fail to develop the PSM’s role, whose public mission is organised beyond the market through democratic institutional procedures and, in principle, accountable governance. 

It remains to be seen whether the latest round of state aid for data and infrastructure will stifle further PSM development or whether it will be used to improve the socially designed functions of the PSMs through new public investments. The EU is continuing a balancing act between the private and public interests in many CEDSs, with business interests capturing the development in the media data space. The history of this balancing act between the markets and the state, between the capitalist production of commodities and forms of public wealth, is full of lessons for the contemporary EU battles around data and digital infrastructure. The public productions of wealth in member states, such as public health, education, and care, are expressions of solidarity and equality resulting from historical compromises between labour and capital. Unifying data spaces with too many design decisions conceded to capitalist production runs the risk of further neglecting these public and social foundations of member states. Continuing with the single market enthusiasm and geopolitical competition will exacerbate the existing competition policy and the market failure paradigm problems. Perhaps the desired digital transformation would be more successful if it moved towards affirmative approaches to public services, recognising the historical contribution of the production of public wealth and public media in member states.

FUNDING STATEMENT

This work was supported by the Croatian Science Foundation under the project number [HRZZ-IP2022-10-2780] ‘Digital infrastructures, data, and development’ [DEVELOPER].

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