Connected Research

Union policy research in the 21st century

Commission adopts aid guidelines for broadband

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In its second intervention this week regarding state aid,  the European Commission has issued guidelines concerning how the public funding of broadband networks might co-exist with the EU’s rules on what constitutes state aid to industry.

The guidelines are intended to provide a clear and predictable framework and to provide a ‘comprehensive and transparent tool’ to help member states accelerate and extend broadband deployment via public investment without creating undue distortions of competition and in the knowledge that they conform to EU rules on state aid. The guidelines have been the subject of public consultation and are also based on 40 individual decisions which the Commission has made in the past five years.

The underlying principle is one of continued ‘primary’ reliance on competition and the private sector to deliver high speed and very high speed broadband networks within the context of a fully liberalised industry, but that state aid can play a crucial role in extending broadband coverage in areas where market operators have no plans to invest.

The guidelines establish ‘black areas’ (competitive areas where no state aid is necessary) and ‘white’ and ‘grey’ areas where state aid may be legally justified where conditions are met. Member states are required to take account of existing NGA infrastructure and the investment plans of established operators, with a number of safeguards (including detailed mapping, open tender, open access obligations, technological neutrality and claw-back mechanisms) set down in order to promote competition and avoid the ‘crowding out’ of private investment. Where state aid is granted to private operators, it must still seek to foster competition by requiring the operator concerned to provide open access to third party operators to the networks built with public funds.

There is little that is surprising in the guidelines, but it is disappointing that, in the current economic conditions and given the recognised role of the communications industry in assisting with short-term economic recovery and in the long-term competitiveness of Europe, a more imaginative and less dogmatic approach could not have been found. Perhaps a continued reliance on a fully liberalised market should not be so surprising – authorities spend a lot of time telling us how beneficial this has been for consumers (although I do have a reluctance to equate ‘beneficial’ with ‘cheap’ in the context of broadband, not least given the scale of investment and the required rate of returns necessary to deliver high speed broadband in a market-based environment set against the market-driven more-width-at-ever-cheaper-cost which has come to characterise the UK market). At the same time, expecting a significant level of public investment is to live in la la land when the major parties in the UK are showing signs of beginning to engage in a debate about who can make the ‘best’ cuts to public spending with more than one eye on the election.

Perhaps what is key about the guidelines, however, is that they do exist: essentially, that governments do have the authority to invest to deliver high speed networks in areas where they otherwise would not. That certainly fits with Connect’s desire to see high speed broadband delivered on a socially equitable and cohesive, nations-wide basis and, to this end, they are welcome.

Nevertheless, the definition of ‘white’ areas (no broadband network operators), ‘grey’ ones (one operator) and ‘black’ ones (two or more) is interesting. State aid is clearly possible for ‘white’ areas but why state aid can also be directed to areas where there is already one network operator is, outside of setting down another altar to the god of competition, a mystery. We can thus expect the notion of ‘grey’ areas to play a fundamental role in the decisions of incumbent operators concerning where exactly to locate their network investment.

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Written by Calvin

18/09/2009 at 12:50 pm

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