A European Commission group on audiovisual policy, chaired by Commissioner Marcelino Oreja of Spain, has produced a report on how Europe should improve its competitiveness in the complex digital broadcasting market of the future.

Among other things, it sets out suggestions for EC policy on state funding for public service broadcasters.

Peter Feuilherade of BBC Monitoring's Foreign Media Unit reports: On several occasions this year, European Commission officials have complained that public broadcasters are spending a disproportionate amount of money on sports and entertainment programming, to the detriment of more educational programmes.

EC Competition Commissioner Karel van Miert has told broadcasters funded even partly by a licence fee to pay more attention to their public service remit, which should include programming expressly related to social issues, education, public information and culture.

The latest EC report says the "dual system" of private and public broadcasters is a distinctive feature of Europe's broadcasting landscape.

This should not be questioned, it recommends, saying it should be left up to individual member states primarily, as well as to market forces, to determine the respective importance of the public and private sectors in each country.

It adds that the two main criteria for evaluating funding systems for public service broadcasting should be proportionality and openness: "The first implies that public funds are provided exclusively for public service activities and do not go beyond what is necessary in this respect." Subsidies should not be used to undercut private broadcasters, for example by offering lower advertising rates on state channels.

Public service activities should be funded mainly from public sources, it recommends.

The second "implies that member states provide a clear definition of the public service remit, that financial openness is ensured and that, where public sector operators engage in purely commercial activities, separate accounts are kept" , the report specifies.

On 27th October, the day after the EC report was published, Europe's public TV broadcasters said governments must continue to support public service broadcasting in the digital era, to ensure viewers had access to high-quality domestic programmes.

A survey by the European Broadcasting Union (EBU) showed that despite increased competition, Europe's television channels had not increased the proportion of revenues they spend on programming.

The EBU survey, which covered 47 broadcasters, found that revenues rose by 17 per cent in real terms between 1992 and 1996 - from 30.7 to 35.8 billion dollars.

However, the percentage of revenues devoted to programming declined slightly from 59 to 58 per cent.

The survey added that TV stations in Europe were devoting a growing share of their budgets to cheaper US programmes, films and sports rights rather than to programmes they produced themselves.

The growth of digital TV would increase this trend, EBU Secretary-General Jean-Bernard Muench predicted.

"Like analogue pay-TV, digital television will undoubtedly generate more money for programming... But the amount of money that will flow into new production - notably of higher-cost, more risky programmes - will be limited.

Most new channels will be filled with imports and repeats.

And repeats of the imports," he said.

The EC report's guidelines on state aid for national public service broadcasters may eventually become European Union policy.

But even before the report was published, most of the EU's 15 member-states took the view that complaints from private broadcasters about unfair competition from their subsidized public rivals would be better handled on a case-by-case basis.