BUSINESS OPINION: RTÉ finds itself in an awkward position every year when it presents its financial results writes Emmet Oliver.

If it boasts too large a surplus, the Minister responsible for the station is likely to re-examine the level of licence fee it is able to raise from the public.

However if the station reports a sizeable deficit, the stations critics will accuse RTÉ of financial incompetence.

Against such a background the top brass at the station last week announced a surplus of €2.2 million on turnover of €312 million for 2003.

The chairman of RTÉ Paddy Wright said the €2.2 million surplus represented a "major turnaround" from the large deficits of recent years. It certainly was. As recently as 2001, RTÉ was reporting an annual deficit of almost €71 million. So what part did the licence fee (now at €152) play in this year's performance?

RTÉ brought in revenue of €155 million in 2003, while its costs ran to over €310 million. In other words, without the public support the station would be sitting on a staggering deficit of more than €155 million.

But that is where the licence fee comes in. Licence fee income in 2003 of €157.4 million was able not just to plug the gap, but leave the station with a small €2.2 million surplus.

These figures might leave the impression that everything RTÉ does is of a public service nature and needs licence fee support. But a closer look at the figures reveals that RTÉ is highly commercial in certain areas. The most obvious of these would appear to be 2 FM.

In 2003 it took €16.8 million in advertising, sponsorship and merchandising sales. With costs running at just over €13 million the station managed to post a profit of €3.6 million. Obviously if the Taoiseach announced tomorrow morning the licence fee was being abolished 2 FM would have more than a fair chance of survival.

Based on what was paid for Today FM a few years ago (€80 million), 2 FM could be reasonably worth the same, if not a whole lot more.

While the station does offer more than just pop, that remains its core offering and in terms of content there is little difference between 2 FM and Today FM. Which leads to the inevitable question does 2 FM need to be retained in the ownership of RTÉ?

The answer probably depends on how you define this awkward phrase "public service broadcasting". Many commentators lean towards the idea that public service broadcasting is broadcasting that would never see the light of day without some form of public assistance.

Based on this definition, 2 FM has no obvious need to be in the ownership of RTÉ. Why? One because there is a plethora of commercial stations offering mainstream pop music and secondly because the station is clearly profit making without a need for public assistance.

Even 2 FM's additional public service type programmes, like Dave Fanning in the evening, are replicated on stations like Today FM, which has Tom Dunne. While Gerry Ryan's highly successful mid-morning show is similar in content to shows on NewsTalk.

This debate about what is public service broadcasting extends well beyond 2 FM. The idea of a public service broadcasting remit, at least in Britain and Ireland, was first developed by the first director general of the BBC, Lord Reith. Based on his thinking the BBC took as its mission to "inform, educate and entertain", with entertain very much in third position.

Lord Reith disagreed strongly against commercial broadcasting and to this day BBC does not take advertising on its radio or television services. In RTÉ's case a dual funding model has been used instead - a combination of licence fee revenue and advertising.

This model is deeply unpopular with the commercial broadcasters who argue that RTÉ should be one or the other: either a licence fee funded public service broadcaster concentrating on expensive valued added areas like education, documentary and drama or a private entity competing in the market place like everyone else.

For years the Government ignored this whole debate, but in December 2002 Dermot Ahern made a radical shift. He ring fenced 5 per cent of the licence fee and decided to make it available to commercial broadcasters in an open competition. While he did not rule out RTÉ from getting some of the money too, a major principle was conceded - that commercial broadcasters could for the first time receive licence fee money. The money has yet to be allocated, but the BCI is working on a scheme to allow it to happen.

While this whole idea has been attacked by some commentators, commercial broadcasters like NewsTalk, Today FM and TV3 can convincingly argue that at least some of their programming (examples could include Today FM's The Last Word, Agenda on TV3 or David McWilliams on NewsTalk) have "public service" characteristics.

While governments tread warily around the broadcasting landscape, there is no doubt that RTÉ's dual funding model is quietly being chipped away at. For some this is a good thing, for others it is a dangerous development.

Either way it does seem rather curious to have a profit-making wholly commercial radio service like 2 FM in State ownership. Why not let 2 FM takes its chance in the radio market against the commercial broadcasters?

Many will feel that last week's disclosures in the RTÉ annual report will bring such a change about. But ownership changes for other parts of RTÉ services are not on the cards. This is because other RTÉ services can make the public service argument easily.

RTÉ Radio One, for example, is a mainly speech-driven service providing many programmes that nobody in the commercial sector wishes to make. The same goes for RTÉ Television to some degree. Are commercial broadcasters really queuing up to broadcast Oireachtas Report for instance?