Television and Radio Broadcasting
By Inna Kiziridi-Kostrytska
Gide Loyrette Nouel
While the European
broadcasting market
is extremely saturated,
the television and radio media is
only emerging in Ukraine and,
therefore, appears to be very attractive
for foreign investors.
Ukraine is still not a party to the
European Convention on Transfrontier Television of 5 May 1989. Although
it was signed by Ukraine in 1996, it has not yet been ratified
by the Ukrainian Parliament.
The major source of Ukrainian laws in the area of TV and
radio broadcasting is the Television and Radio Broadcasting Act
of Ukraine of 21 December 1993 No.3759-XII, as entirely restated
on 12 January 2006 (Broadcasting Act). The Broadcasting Act appears
to be quite cumbersome, contradictory and poorly drafted.
Besides, a number of by-laws and regulations have not been
brought into conformity with the Broadcasting Act. All of these
circumstances complicate analysis and often cause confusion.
Depending on the technologies used, the Broadcasting Act
differentiates between the following types of broadcasting: satellite,
on-air, cable, wire, and multi-channel broadcasting. Digital
broadcasting is viewed as multi-channel broadcasting. However,
such a modern and widely used type of broadcasting as satellite
broadcasting is still very poorly regulated in Ukraine.
The Broadcasting Act designates the National Council of
Ukraine for Television and Radio Broadcasting (Television
Council) as the sole government body empowered to conduct
state regulation in the area of TV and radio broadcasting, irrespective
of the method of dissemination of TV and radio programs
and broadcasts.
Generally, the Broadcasting Act and by-law regulations differentiate
between 3 principal types of entities, which may carry
out business activities in the field of TV and radio broadcasting
or related areas:
• a television and radio organisation (TRO);
• a provider of a program service (Provider);
• a distributor of television and radio programs (Distributor).
TRO. According to the Broadcasting Act, a TRO is defined
as a registered legal entity acting on the basis of a broadcasting
license, which:
(i) creates, or assembles and/or packages TV and radio programs;
and
(ii) disseminates them through technical broadcasting facilities.
The Broadcasting Act often uses the term “broadcaster”,
which appears to be a synonym for the term “TRO”.
Therefore, a company performing at least one type of activities
indicated in item (i) and the activity mentioned in item (ii) shall
qualify as a TRO. However, the issue of qualification as a TRO
often causes difficulties because laws do not provide for a clear
meaning of the terms “creation”, “assembling”, “packaging”,
and “dissemination”. Under a fair interpretation of the abovementioned
definition, the Broadcasting Act does not require creation
of programs as a mandatory part of the activity of a TRO.
Provider. The Broadcasting Act defines a Provider as a registered
business entity acting on the basis of a license of the provider
of a program service, which provides subscribers with the
opportunity to view program packages on a contractual basis via
the use of multi-channel television networks for the transfer of
these programs.
Distributor. A Distributor is defined as a legal entity performing
commercial activity in the area of TV and radio broadcasting,
which consists of the transfer (disposal) of property rights of
broadcasting organizations (local and/or foreign) to Ukrainian
TROs and/or Providers, on the basis of an agreement, for their
further distribution by the use of broadcasting networks and/or
multi-channel networks of Ukraine.
Ukrainian laws do not establish any particular restrictions on
the direct participation of foreign investors in the share capital of
Providers and Distributors. However, TROs are, in this regard,
subject to specific regulation.
Prior to 1 March 2006, the date of the coming into force
of amendments to the Broadcasting Act, there was a 30% cap
on foreign ownership in broadcasting companies. The amendments
cancelled this restriction. However, for the time being, the
Broadcasting Act provides for a prohibition on incorporation of
TROs by foreign companies and individuals. Thus, TROs cannot
be directly established by foreign entities.
At the same time, it is not directly prohibited for a foreign
investor to own a shareholding in a TRO. The Broadcasting Act
states that the participation of foreign individuals and/or legal
entities in TROs is regulated by the Commercial Code of Ukraine.
However, the latter is silent in this regard. Therefore, for the time
being there are no prohibitions on foreign control over TROs,
except for direct establishment thereof.
Consequently, if one were to read the Broadcasting Act literally,
control over a TRO can be obtained by a foreign investor by
means of:
• a two-tier structure, providing the establishment of a TRO
via a Ukrainian special purpose vehicle; or
• acquisition of an existing TRO.
The first option is supported in general by the Television
Council. The use of the second appears to be risky in the medium
and long-term prospect. It appears that lawmakers wanted to establish
a certain limit on foreign participation in TROs. Therefore,
there is a risk that amendments establishing such a limit
could be adopted in near future.
It is also worth mentioning that, according the Broadcasting Act,
neither an individual nor a legal entity may by any means, either by
influence upon the establishment of governing and/or supervising
bodies of a TRO, control more than 35% of the total volume of the
respective territorial TV and radio information market.
The Broadcasting Act provides for the mandatory licensing of
TROs and Providers only, while it is enough for Distributors to
be registered by the Television Council as subjects of information
activity. Broadcasting licenses and licenses for performance of
provider’s activity are issued by the Television Council.
On the basis of the territory covered by the broadcasting,
broadcasting licenses can be issued for national, regional, local,
or foreign broadcasting. The licensing of foreign TROs is prohibited.
According to the Broadcasting Act, a broadcasting license is
the only document which provides the right to broadcast and use
broadcasting channels according to the terms and conditions of
the license.
The Broadcasting Act envisages two types of procedure for
granting a broadcasting license: the tender procedure (on the basis
of an open tender) and the non-tender one (on the application
basis). The tender procedure is used for the issuing of licenses for
broadcasting connected with the use of radio frequency resource
and broadcasting in vacant channels of multi-channel networks.
The license is issued for a period of 7 or 10 years depending
on the type of broadcasting. Upon receipt of the broadcasting
license a TRO should start broadcasting activity within one year
from the date of issue of the license. In the event that broadcasting
does not begin within a year, as provided for by the broadcasting
license, the license can be cancelled by the Television
Council.
The provider’s license is issued by the Television Council
without a tender for a period of 10 years.
The Broadcasting Act establishes the ratio between Ukrainian
and other languages as well as the ratio between broadcasts of
Ukrainian production and of foreign production.
Languages ratio. The languages of programs and broadcasts
of TROs are defined by the terms of the broadcasting license.
However, as a general rule, Ukrainian TROs should perform
broadcasting on the territory of Ukraine in the state language, i.e.
in Ukrainian. It is also allowed to broadcast for certain regions
of Ukraine in the language of national minorities residing there.
In the event that the language of the original or the dubbing of
the film and/or other program (broadcast) is not Ukrainian, such
films and programs (broadcasts) shall be broadcast in the Ukrainian
sound translation over the original language.
The Broadcasting Act currently requires from companies
broadcasting for the whole territory of Ukraine at least 75% of
broadcasts to be in the Ukrainian language. Broadcasting for foreign
audiences should be performed in Ukrainian and a respective
foreign language.
Productions ratio. Generally, all Ukrainian TROs shall broadcast
not less than 50% of Ukrainian audio-visual productions or
music productions of Ukrainian authors or performers.
Moreover, for all types of broadcasting other than satellite
broadcasting, the Broadcasting Act requires that TROs observe
the following requirement: between 7 a.m. and 11 p.m. the portion
of broadcasts of European production shall constitute at least
80% of the general scope of broadcasts, including at least 50% of
broadcasts of Ukrainian production.
According to the Broadcasting Act, the act applies to organizations
located beyond Ukraine and acting under the laws of foreign
countries with regard to regulation of the procedure for distribution
of their programs and broadcasts in the territory of Ukraine,
unless otherwise provided for by international treaties to which
Ukraine is a party. Although foreign broadcasters are not licensed
in Ukraine, at the same time it is not quite clear which activity is
covered by the term “distribution”. This often confuses foreign
broadcasters coming to the Ukrainian market.
The long-expected ratification of the European Convention on
Transfrontier Television and amendment of the Broadcasting Act
in this regard will definitely improve the situation.
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