30.9.2009   

EN

Official Journal of the European Union

C 235/7

1.

Broadband connectivity is a key component for the development, adoption and use of information and communication technologies (ICT) in the economy and in society. Broadband is of strategic importance because of its ability to accelerate the contribution of these technologies to growth and innovation in all sectors of the economy and to social and territorial cohesion. The Commission actively supports the widespread availability of broadband services for all European citizens as laid down in the Lisbon strategy and subsequent Communications (1).

2.

On 26 November 2008, the Commission adopted a European Economic Recovery Plan (the ‘Recovery Plan’) (2) as a means to drive Europe's recovery from the financial and economic crisis. The broadband strategy is an important part of the Recovery Plan (3). In particular, the aim of the plan is to boost EU investment in defined strategic sectors, such as broadband, that can help support the economy in the short run and over the longer term create essential infrastructures for sustainable economic growth.

3.

As part of the Recovery Plan and with the aim of achieving 100 % high speed Internet coverage for all citizens by 2010, the Commission decided to inject EUR 1,02 billion into the European Agricultural Fund for Rural Development (EAFRD). Part of this amount will be used for deploying broadband infrastructures in rural areas to help rural areas get online, create new jobs and help business grow further (4). In addition, a number of Member States have already announced plans to support investment not only in high-speed broadband infrastructure for rural and underserved areas, but also to accelerate the deployment of very high speed, next-generation access (‘NGA’) (5) networks in large areas of their territories, including urban areas or areas already served by basic broadband infrastructures.

4.

It should be recalled that in the ‘State aid Action Plan — Less and better targeted State aid: a roadmap for State aid reform 2005-2009’ (6), the Commission noted that State aid measures can, under certain conditions, be effective tools for achieving objectives of common interest. In particular State aid can correct market failures, thereby improving the efficient functioning of markets and enhancing competitiveness. Further, where markets provide efficient outcomes but these are deemed unsatisfactory from a cohesion policy point of view, State aid may be used to obtain a more desirable, equitable market outcome. In particular, a well targeted State intervention in the broadband field can contribute to reducing the ‘digital divide’ (7) that sets apart areas or regions within a country where affordable and competitive broadband services are on offer and areas where such services are not.

5.

At the same time, it must be ensured that State aid does not crowd out market initiative in the broadband sector. If State aid for broadband were to be used in areas where market operators would normally choose to invest or have already invested, this could affect investments already made by broadband operators on market terms and might significantly undermine the incentives of market operators to invest in broadband in the first place. In such cases, State aid to broadband might become counterproductive to the objective pursued. The primary objective of State aid control in the field of broadband is to ensure that State aid measures will result in a higher level of broadband coverage and penetration, or at a faster rate, than would occur without the aid, and to ensure that the positive effects of aid outweigh its negative effects in terms of distortion of competition.

6.

It should be recalled that the regulatory framework for electronic communications also deals with issues related to broadband access (8). Thus wholesale broadband markets are to date subject to ex ante regulation in all Member States. In this regard, the Commission (9) and the national authorities (10) have already taken a number of initiatives that aim to address the new challenges that NGA networks raise from a regulatory point of view, in particular regarding access issues.

7.

The present Guidelines summarise the Commission's policy in applying the State aid rules of the Treaty to measures that support the deployment of traditional broadband networks (Section 2) and also address a number of issues relating to the assessment of measures aiming to encourage and support the rapid roll-out of NGA networks (Section 3).

8.

The Commission will apply the Guidelines set out in this Communication in the assessment of State aid to broadband, thereby increasing legal certainty and the transparency of its decision-making practice.

9.

The Commission has taken an overwhelmingly favourable view towards State measures for broadband deployment for rural and underserved areas, whilst being more critical for aid measures in areas where a broadband infrastructure already exists and competition takes place. Where State intervention to support broadband deployment satisfied the conditions of State aid within the meaning of Article 87(1), its compatibility has been assessed so far by the Commission mainly under Article 87(3). The Commission State aid policy towards State measures to support broadband network deployments can be summarised in Sections 2.2 and 2.3 below.

10.

According to Article 87(1) of the Treaty establishing the European Community, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market’. It follows that in order for a measure to qualify as State aid, the following cumulative conditions have to be met:

11.

As the Commission's State aid decision-making practice in the broadband field shows, public support for broadband projects often involves the presence of State aid within the meaning of Article 87(1) of the Treaty (11).

12.

First, the measures typically involve State resources (for instance, where the State supports broadband projects through subsidies, tax rebates or other types of preferential financing conditions) (12).

13.

Second, as regards support granted for an economic activity, State measures supporting broadband deployment projects usually address the exercise of an economic activity (such as building, operating, and enabling access to broadband infrastructure including backhaul facilities and ground equipment, such as fixed, terrestrial wireless, satellite-based, or a combination thereof). However, in exceptional cases where the network thus financed is not used for commercial purposes (e.g. the network only provides broadband access to non-commercial websites, services and information) (13), such state intervention would not involve the granting of an economic advantage on undertakings, and consequently would not constitute State aid within the meaning of Article 87(1) of the Treaty.

14.

Third, as regards the granting of an advantage, the aid is usually granted directly to investors (14) of the network, which in most cases are chosen by means of an open tender (15). While the use of a tender ensures that any aid is limited to the minimum amount necessary for the particular project, the financial support might enable the successful bidder to conduct a commercial activity on conditions which would not otherwise be available on the market. Indirect beneficiaries might include third party operators that obtain wholesale access to the infrastructure thus built, and also business users who get broadband connectivity under terms and conditions that would not apply without State intervention (16).

15.

Fourth, as regards the selectivity criterion, State measures supporting the deployment of broadband networks are selective in nature in that they target undertakings which are active only in certain regions or in certain segments of the overall electronic communications services market. Moreover, concerning the distortion of competition, the intervention of the State tends to alter existing market conditions, in that a number of firms would now choose to subscribe to the services provided by the selected suppliers instead of existing, possibly more expensive alternative market-based solutions (17). Therefore, the fact that a broadband service becomes available, either at all or at a lower price than otherwise would have been the case, has the effect of distorting competition. Moreover, State support to broadband might reduce profitability and crowd out investment by market players that would otherwise be willing to invest in the targeted area or parts of it.

16.

Finally, insofar as the State intervention is liable to affect service providers from other Member States, it also has an effect on trade since the markets for electronic communications services (including the wholesale and the retail broadband markets) are open to competition between operators and service providers (18).

17.

Where the State supports the roll-out of broadband by way of an equity participation or capital injection into a company that is to carry out the project, it becomes necessary to assess whether this investment involves State aid. Article 295 of the Treaty provides that ‘[t]his Treaty shall in no way prejudice the rules in Member States governing the system of property ownership’. According to the case-law of the Court of Justice of the European Communities (‘the Court’), it follows from the principle of equal treatment that capital placed by the State, directly or indirectly, at the disposal of an undertaking in circumstances which correspond to normal market conditions cannot be regarded as State aid.

18.

When equity participation or capital injections by a public investor do not present sufficient prospects of profitability, even in the long term, such intervention must be regarded as aid within the meaning of Article 87 of the Treaty, and its compatibility with the common market must be assessed on the basis solely of the criteria laid down in that provision (19).

19.

The Commission has examined the application of the principle of the market economy private investor in the broadband field in its Amsterdam decision (20). As underlined in this decision, the conformity of a public investment with market terms has to be demonstrated thoroughly and comprehensively, either by means of a significant participation of private investors or the existence of a sound business plan showing an adequate return on investment. Where private investors take part in the project, it is a sine qua non condition that they would have to assume the commercial risk linked to the investment under the same terms and conditions as the public investor.

20.

In some instances, Member States may consider that the provision of a broadband network should be regarded as a service of a general economic interest (‘SGEI’) within the meaning of Article 86(2) of the Treaty (21).

21.

According to the case-law of the Court, provided that four main conditions (commonly referred to as the Altmark criteria) are met, State funding for the provision of an SGEI may fall outside the scope of Article 87(1) of the Treaty (22). The four conditions are: (a) the beneficiary of a State funding mechanism for an SGEI must be formally entrusted with the provision and discharge of an SGEI, the obligations of which must be clearly defined; (b) the parameters for calculating the compensation must be established beforehand in an objective and transparent manner, to avoid it conferring an economic advantage which may favour the recipient undertaking over competing undertakings; (c) the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of the SGEI, taking into account the relevant receipts and a reasonable profit for discharging those obligations; and (d) where the beneficiary is not chosen pursuant to a public procurement procedure, the level of compensation granted must be determined on the basis of an analysis of the costs which a typical undertaking, well run, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit.

22.

In two decisions (23) concerning measures taken by regional authorities to award a (subsidised) public service concession (24) to private operators for the deployment of basic broadband networks in underserved regions, the Commission came to the conclusion that the notified support schemes were in line with the four criteria laid down in Altmark, and did not therefore fall under Article 87(1) (25). In particular, in both cases, the successful bidder was chosen on the basis of the lowest amount of aid requested and the amount of compensation granted was established on the basis of pre-determined and transparent criteria. Moreover, the Commission found no evidence or risk of overcompensation.

23.

Conversely, the Commission has ruled that the notion of an SGEI and the subsequent reliance on the Altmark case-law could not be accepted where the provider had neither a clear mandate nor was he under any obligation to provide broadband access to and connect all citizens and businesses in underserved areas but was more oriented towards connecting businesses (26).

24.

Moreover, according to the case-law, although Member States have wide discretion to define what they regard as services of general economic interest, the definition of such services or tasks by a Member State can be questioned by the Commission in the event of a manifest error (27). In other words, although the determination of the nature and scope of an SGEI mission falls within the competence and discretionary powers of Member States, such competence is neither unlimited nor can it be exercised arbitrarily (28). In particular, for an activity to be considered as an SGEI, it should exhibit special characteristics as compared with ordinary economic activities (29). In this respect, the Commission will consider that in areas where private investors have already invested in a broadband network infrastructure (or are in the process of expanding further their network infrastructure) and are already providing competitive broadband services with an adequate broadband coverage, setting up a parallel competitive and publicly-funded broadband infrastructure should not be considered as an SGEI within the meaning of Article 86 of the Treaty (30). Where however it can be demonstrated that private investors may not be in a position to provide in the near future (31) adequate broadband coverage to all citizens or users leaving thus a significant part of the population unconnected, a public service compensation may be granted to an undertaking entrusted with the operation of an SGEI provided that the conditions set out in paragraphs 25 to 29 are met. As a preliminary point, it should be stressed that the considerations set out in those paragraphs are based on the specificities of the broadband sector and reflect the experience gained so far by the Commission in this area. Thus, the conditions set out in those paragraphs although they are not exhaustive, are however indicative of the Commission's approach in assessing on a case-by-case basis whether the activities in question can be defined as an SGEI, and whether the public financing granted in this regard complies with the State aid rules of the Treaty.

25.

With regard to the definition of the scope of an SGEI mission for the purposes of ensuring widespread deployment of a broadband infrastructure Member States are required to describe the reasons why they consider that the service in question, because of its specific nature, deserves to be characterised as an SGEI and to be distinguished from other economic activities (32). They should further ensure that the SGEI mission satisfies certain minimum criteria common to every SGEI mission and demonstrate that those criteria are indeed satisfied in the particular case.

26.

These criteria include, at least, (a) the presence of an act of the public authority entrusting the operators in question with an SGEI mission and (b) the universal and compulsory nature of that mission (33). Thus in assessing whether the definition of an SGEI for broadband deployment does not give rise to a manifest error of appreciation, Member States should ensure that the broadband infrastructure to be deployed should provide universal connectivity to all users in a given area, residential and business users alike. Moreover, the compulsory nature of the SGEI mission implies that the provider of the network to be deployed will not be able to refuse access to the infrastructure on a discretionary and/or discriminatory basis (because for instance, it may not be commercially profitable to provide access services to a given area).

27.

Given the state of competition that has been achieved since the liberalisation of the electronic communications sector in the Community, and in particular the competition that exists today on the retail broadband market, a publicly-funded network set up within the context of an SGEI should be available for all interested operators. Accordingly, the recognition of an SGEI mission for broadband deployment should be based on the provision of a passive, neutral (34) and open access infrastructure. Such a network should provide access seekers with all possible forms of network access and allow effective competition at the retail level, ensuring the provision of competitive and affordable services to end-users (35). Therefore, the SGEI mission should only cover the deployment of a broadband network providing universal connectivity and the provision of the related wholesale access services, without including retail communication services (36). Where the provider of the SGEI mission is also a vertically integrated broadband operator, adequate safeguards should be put in place to avoid any conflict of interest, undue discrimination and any other hidden indirect advantages (37).

28.

Given that the market for electronic communications is fully liberalised, it follows that an SGEI for broadband deployment cannot be based on the award of an exclusive or special right to the provider of the SGEI within the meaning of Article 86(1).

29.

In complying with its universal coverage mission, an SGEI provider may need to deploy a network infrastructure not only in areas which are unprofitable but also in profitable areas, that is areas in which other operators may have already deployed their own network infrastructure or may plan to do so in the near future. However, given the specificities of the broadband sector, in this case any compensation granted should only cover the costs of rolling out an infrastructure to the non-profitable areas (38). Where an SGEI for the deployment of a broadband network is not based on the deployment of a publicly-owned infrastructure adequate review and claw back mechanisms should be put in place in order to avoid that the SGEI provider obtains an undue advantage by retaining ownership of the network that was financed with public funds after the end of the SGEI concession. Finally, the SGEI compensation should in principle be granted through an open, transparent, non-discriminatory tender requiring all candidate operators to define in a transparent manner the profitable and non-profitable areas, estimate the expected revenues and request the corresponding amount of compensation that they consider strictly necessary, avoiding any risk of overcompensation. A tender organised under such conditions should guarantee that the fourth condition set out in Altmark is fulfilled (see paragraph 21).

30.

Where the four criteria set out in Altmark are not met, and if the general criteria for the applicability of Article 87(1) of the Treaty are fulfilled, public service compensation for the deployment of a broadband infrastructure will constitute State aid and will be subject to Articles 73, 86, 87 and 88 of the Treaty. In this case, State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (see paragraphs 25-29 above) could be regarded as compatible with the common market and exempt from the requirement of notification laid down in Article 88(3) of the Treaty if the requirements set out in the Commission Decision of 28 November 2005‘on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest’ are met (39).

31.

Where a notified measure has been found by the Commission to constitute aid within the meaning of Article 87(1) of the Treaty, the compatibility assessment has so far been based directly on Article 87(3)(c) (40).

32.

The areas covered by a broadband State aid project may also be assisted areas within the meaning of Article 87(3)(a) and (c), and the Regional Aid Guidelines (41). In this case, aid to broadband may also qualify as aid for initial investment within the meaning of Regional Aid Guidelines. However, in many of the cases examined so far by the Commission there were also other areas targeted by the notified measures which were not ‘assisted’, and as a result the Commission's assessment could not be carried out under the Regional Aid Guidelines (42).

33.

Where a measure falls within the scope of the Regional Aid Guidelines (‘RAG’), and where it is envisaged to grant individual ad hoc aid to a single firm, or aid confined to one area of activity, it is the responsibility of the Member State to demonstrate that the conditions of the RAG are fulfilled. This includes in particular that the project in question contributes towards a coherent regional development strategy and that, having regard to the nature and size of the project, it will not result in unacceptable distortions of competition.

34.

In assessing whether an aid measure can be deemed compatible with the common market, the Commission balances the positive impact of the aid measure in reaching an objective of common interest against its potential negative side effects, such as distortions of trade and competition.

35.

In applying this balancing test, the Commission will assess the following questions:

36.

The individual steps of the balancing test in the field of broadband are set out in further detail in Sections 2.3.2 and 2.3.3.

37.

As indicated in the introduction, widespread and affordable access to broadband is of great importance because of its ability to accelerate the contribution of these technologies to growth and innovation in all sectors of the economy and to social and territorial cohesion.

38.

The economics of broadband provision are such that the market will not always find it profitable to invest in it. Due to economics of density, broadband networks are generally more profitable to roll-out where potential demand is higher and concentrated, i.e. in densely populated areas. Because of high fixed costs of investment, unit costs increase strongly as population densities drop. As a result, broadband networks tend to profitably cover only part of the population. Likewise, in certain areas, it may only be profitable for a single provider to set up a network, not for two or more.

39.

Where the market does not provide sufficient broadband coverage or the access conditions are not adequate, State aid may play a useful role. Specifically, State aid in the broadband sector may remedy a market failure, i.e. situations where individual market investors do not invest, even though this would be efficient from a wider economic perspective, e.g. due to the positive spill-over effects. Alternatively, State aid for broadband may also be viewed as a tool to achieve equity objectives, i.e. as a way to improve access to an essential means of communication and participation in society as well as freedom of expression to all actors in society, thereby improving social and territorial cohesion.

40.

From the outset it is useful to introduce a fundamental distinction between the types of areas that may be targeted, depending on the level of broadband connectivity that is already available. The Commission has consistently made a distinction between areas where no broadband infrastructure exists or is unlikely to be developed in the near term (white areas), areas where only one broadband network operator is present (grey areas) and areas where at least two or more broadband network providers are present (black areas) (44).

41.

As a matter of policy, the Commission has always considered support for broadband network deployment in rural and underserved white areas to be in line with existing Community policies, since it promotes territorial social and economic cohesion and addresses market failures. In almost all of its decisions in this field, the Commission has underlined that broadband networks tend to profitably cover only part of the population, so that State support is needed to achieve ubiquitous coverage.

42.

The Commission accepts that by providing financial support for the provision of broadband services in areas where broadband is currently not available and where there are no plans by private investors to roll out such an infrastructure in the near future, Member States pursue genuine cohesion and economic development objectives and thus, their intervention is likely to be in line with the common interest (45). The term in the ‘near future’ should be understood as referring to a period of three years. In this regard, investment efforts planned by private investors should be such as to guarantee that at least significant progress in terms of coverage will be made within the three-year period, with completion of the planned investment foreseen within a reasonable time frame thereafter (depending on the specificities of each project and of each area). Public authorities may require the submission of a business plan, together with a detailed calendar deployment plan as well as proof of adequate financing or any other type of evidence that would demonstrate the credible and plausible character of the planned investment by private network operators.

43.

When in a given geographical zone at least two broadband network providers are present and broadband services are provided under competitive conditions (facilities-based competition), there is no market failure. Accordingly, there is very little scope for State intervention to bring further benefits. On the contrary, State support for the funding of the construction of an additional broadband network will, in principle, lead to an unacceptable distortion of competition, and the crowding out of private investors. Accordingly, in the absence of a clearly demonstrated market failure, the Commission will view negatively measures funding the roll-out of an additional broadband infrastructure in a ‘black zone’ (46).

44.

The existence of a network operator in a given area does not necessarily imply that no market failure or cohesion problem exists. Monopoly provision may affect the quality of service or the price at which services are offered to the citizens. On the other hand, in areas where only one broadband network operator is present, by definition, subsidies for the construction of an alternative network can distort market dynamics. Therefore State support for the deployment of broadband networks in ‘grey’ areas calls for a more detailed analysis and careful compatibility assessment.

45.

Although a network operator may be present in the zone targeted by the State intervention, certain categories of users may still not be adequately served in the sense that either some broadband services requested by the users were not available to them or, in the absence of regulated wholesale access tariffs, retail prices were not affordable compared to the same services offered in other more competitive areas or regions of the country (47). If, in addition, there are only limited prospects that third parties would build an alternative infrastructure, the funding of an alternative infrastructure could be an appropriate measure. This would remedy the absence of infrastructure competition and thus reduce the problems arising from the de facto monopoly position of the incumbent operator (48). However, the granting of aid under these circumstances is subject to a number of conditions that would have to be met by the Member State concerned.

46.

Accordingly, the Commission may declare compatible, under certain conditions, State aid measures that target areas where the provision of a broadband infrastructure is still a de facto monopoly provided that (i) no affordable or adequate services are offered to satisfy the needs of citizens or business users and that (ii) there are no less distortive measures available (including ex ante regulation) to reach the same goals. For the purpose of establishing the above, the Commission will assess in particular whether:

47.

When broadband coverage is considered insufficient, State intervention may be necessary. A first question to be asked is whether State aid is an appropriate policy instrument to address the problem or whether there are other, better-placed instruments.

48.

In this respect, the Commission has noted in previous decisions that whilst ex ante regulation has in many cases facilitated broadband deployment in urban and more densely populated areas, it may not be a sufficient instrument to enable the supply of broadband service, especially in underserved areas where the inherent profitability of investment is low (49).

49.

Likewise, demand-side measures in favour of broadband (such as vouchers for end users) although they can contribute positively to broadband penetration and should be encouraged as an alternative or a complement to other public measures, they cannot always solve the lack of broadband provision (50). Hence, in such situations there may be no alternative to granting public funding to overcome the lack of broadband connectivity.

50.

Regarding the incentive effect of the measure, it needs to be examined whether the broadband network investment concerned would not have been undertaken within the same timeframe without any State aid.

51.

In assessing the proportional character of the notified measures in ‘white’ or ‘grey’ areas, through its decision-making practice, the Commission has highlighted a number of necessary conditions to minimise the State aid involved and the potential distortions of competition. The lack of any of the following conditions in (a) to (h) would require an in-depth assessment (51) and most likely it would lead to a negative conclusion on the compatibility of the aid with the common market.

52.

To date, a number of Member States are turning their attention towards support for broadband networks that can deliver services at very high speeds and support a multitude of advanced digital converged services. These NGA networks are mainly fibre-based or advanced upgraded cable networks that are intended to replace in whole or to a large extent the existing copper-based broadband networks or current cable networks.

53.

NGA networks are wired access networks which consist wholly or in part of optical elements and which are capable of delivering broadband access services with enhanced characteristics (such as higher throughput) as compared to those provided over existing copper networks (60).

54.

In essence, NGA networks will have the speed and capacity to deliver in the future high definition content, support on-demand bandwidth hungry applications as well as bring to business affordable symmetrical broadband connections generally available today only to large businesses. Overall, NGA networks have the potential to facilitate the improvement of all aspects of broadband technology and broadband services.

55.

The Commission has already dealt with some State aid notifications that involved support for the roll-out of fibre-based networks. These cases involved either the construction of a regional ‘core’ NGA network (61) or the provision of fibre connectivity for a limited number of business users only (62).

56.

As with the so-called ‘first generation’ roll-out of basic broadband networks, State, municipal and regional authorities justify their support for a rapid roll-out of fibre networks on the grounds of a market failure or cohesion objective. If for the roll-out of basic broadband infrastructure, examples of state intervention have mainly related to rural communities/areas (low density, high capital cost) or areas which are economically underdeveloped (low ability to pay for services), this time the economics of NGA networks model is said to discourage deployment of NGA networks not only in sparsely populated areas, but also in certain urban zones. In particular, the main issue affecting the rapid and wide deployment of NGA networks, appears to be costs and to a lesser extent density of population (63).

57.

For public authorities, direct intervention may thus be warranted in order to ensure that areas which are deemed by network operators as being unprofitable will still benefit from the substantial spill-over effects that NGA networks may bring to the economy and will not suffer a new digital, ‘NGA divide’. Thus, Member States may wish to foster NGA network developments in areas where investments by existing broadband network operators in such networks would take several years to arrive because they are financially less attractive than certain major urban zones. In certain cases, Member States may decide to invest themselves or provide financial support to private operators in order to obtain NGA network connectivity, or to obtain connectivity earlier than anticipated, in order to ensure that employment and other economic opportunities are leveraged as quickly as possible.

58.

Any public intervention seeking to support the provision or acceleration of NGA network deployment must ensure that it is compatible with the State aid rules.

59.

Member States may choose different degrees of market intervention in order to foster or accelerate deployment of NGA networks. In this respect, the considerations set out above in Section 2.2.1 and 2.2.2 (application of the market economy investor principle, public service compensation and the Altmark criteria) apply mutatis mutandis with regard to State interventions in the field of NGA network deployment. Depending on the nature and effects of the intervention chosen a different analytical approach may be warranted under the State aid rules.

60.

In areas where private investors are expected to roll out in the future NGA networks, Member States may decide to adopt a set of measures to accelerate the investment cycle and thus encourage investors to bring forward their investment plans. These measures do not necessarily need to involve State aid within the meaning of Article 87(1). Given that a large part of the cost of deploying fibre networks is in civil work (for instance digging, laying down cables, in-house wirings, etc.), Member States may decide in accordance with the Community regulatory framework for e-communications, for instance, to ease the acquisition process of rights of ways, require that network operators coordinate their civil works and/or share part of their infrastructure (64). In the same vein, Member States may decree that for any new constructions (including new water, energy, transport or sewage networks) and/or buildings a fibre connection should be in place.

61.

Likewise, public authorities may decide to undertake some civil works (such as digging of the public domain, construction of ducts) in order to enable and accelerate the deployment by the operators concerned of their own network elements. However, such civil works should not be ‘industry or sector specific’, but should in principle be open to all potential users and not just electronic communications operators (i.e. electricity gas, water utilities etc.). Provided that such public interventions aim to create the necessary pre-conditions for the deployment by utility operators of own infrastructure without discriminating in favour of a given sector or a company (by lowering in particular the capital costs of the latter), they fall outside the scope of Article 87(1).

62.

Similar measures may also be adopted by the NRAs in order to provide for equal and non-discriminatory access to poles or sharing of ducts owned by utilities or existing network operators.

63.

As the Commission’s decision-making practice in the area of basic broadband illustrates, in most cases, State aid for broadband networks is granted by local or regional authorities that aim to either remedy the region’s lack of broadband connectivity or to increase the region's competitiveness by improving further the existing broadband coverage and network connectivity. To achieve these two objectives public authorities have so far either tendered out the construction and management of a publicly-owned broadband infrastructure or have financially supported the construction of a privately-owned broadband network (65).

64.

If public interventions constitute State aid pursuant to Article 87(1) EC, they have to be notified to the Commission, which will assess their compatibility with the common market in line with the principles set out in Sections 3.3 and 3.4s (66).

65.

As recalled in paragraph 40, the Commission has assessed the compatibility of State aid for the development of traditional broadband by reference to the distinction between ‘white’, ‘grey’ and ‘black’ areas. The Commission considers that this distinction is still relevant for assessing whether State aid for NGA networks is compatible under Article 87(3)(c), but requires a more refined definition to take account of the specificities of the NGA networks.

66.

In this respect, one should bear in mind that in the longer term NGA networks are expected to supersede existing basic broadband networks. To the extent that NGA networks imply a different network architecture, offering significantly better quality broadband services than today as well as the provision of services that could not be supported by today’s broadband networks, it is likely that in the future there will be marked differences emerging between areas that will be covered and areas that will not covered by NGA networks (67).

67.

At present, some advanced basic broadband networks (for instance ADSL 2+ (68)) can, up to a certain point, also support some of the types of broadband services that in the near future are likely to be offered over NGA networks (such as basic triple play services). However, and without prejudice to the imposition of ex-ante regulation, it should be noted that novel products or services which are not substitutable from both demand and supply side perspectives may emerge and will require broadband speeds in excess of the upper physical limits of basic broadband infrastructure.

68.

Accordingly, for the purposes of assessing State aid for NGA networks, an area where such networks do not at present exist and where they are not likely to be built and be fully operational in the near future by private investors should be considered to be a ‘white NGA’ area (69). In that regard, the term ‘in the near future’ should correspond to a period of three years (70). Public authorities should be entitled to intervene, under certain conditions, in order to address social cohesion issues, regional development or a market failure when it can be demonstrated that private investors have no intention to deploy NGA networks in the coming 3 years. The investments efforts planned by private investors should be such as to guarantee that at least significant progress in terms of coverage will be made within the three-year period, with completion of the planned investment foreseen within a reasonable time frame thereafter (depending on the specificities of each area and of each project). It would not be appropriate to take a longer time horizon as this may risk damaging the interests of underserved regions relative to other parts of a country that are adequately served by such advanced broadband networks. Public authorities may require the submission of a business plan, together with a detailed calendar deployment plan as well as proof of adequate financing or any other type of evidence that would demonstrate the credible and plausible character of the planned investment by private network operators.

69.

In the same vein, an area should be considered to be ‘NGA grey’ where only one NGA network is in place or is being deployed in the coming three years and there are no plans by any operator to deploy a NGA network in the coming three years (71). In assessing whether other network investors could deploy additional NGA networks in a given area, account should be taken of any existing regulatory or legislative measures that may have lowered barriers for such network deployments (access to ducts, sharing of infrastructure etc.).

70.

If more than one NGA network exists in a given area or will be deployed in the coming three years, such an area should, in principle, be considered to be ‘NGA black’ (72).

71.

As mentioned in paragraphs 66 and 67, although NGA networks are qualitatively far more advanced than existing traditional copper-based broadband networks, in assessing the compatibility of State aid for the deployment of a NGA network with the State aid rules, the Commission will also look into the effects of such aid on existing broadband networks given the degree of substitution that at present appears to exist with regard to broadband services offered over broadband and NGA networks alike. Moreover, in assessing the compatibility of State aid to NGA networks, the Commission will also apply the balancing test (see paragraph 35). In particular, in assessing the proportional character of a notified measure the Commission will look into whether the conditions set out in paragraph 51 are fulfilled (detailed mapping exercise and coverage analysis, open tender process, best economic offer, technological neutrality, use of existing infrastructure, mandated wholesale open access, benchmarking exercise and claw-back mechanism). The following points, however, are specifically relevant in the context of the assessment of NGA networks.

72.

As with basic broadband services, subject to a set of conditions that should be met by Member States (see paragraphs 51 and 71), the Commission will consider as being compatible with the State aid rules of the Treaty measures that support the deployment of NGA networks in areas where no broadband infrastructure currently exists or for areas where existing broadband operators consider it unprofitable to deploy NGA networks.

73.

In white NGA areas where one basic broadband network already exist (traditional grey area), the grant of aid for NGA networks is subject to the demonstration by the Member State concerned (i) that the broadband services provided over the said networks are not sufficient to satisfy the needs of citizens and business users in the area in question (also taking into account a possible future upgrade); and that (ii) there are no less distortive means (including ex ante regulation) to reach the stated goals.

74.

In areas where one private investor has already deployed a NGA network or may be in the process of deploying it in the next three years (see also paragraph 68) and there are no plans by any private investor to deploy a second NGA network in the coming three years, the Commission will need to carry out a more detailed analysis in order to verify whether State intervention in such areas can be considered compatible with the State aid rules. In fact, State intervention in such areas risks crowding out existing investors and distorting competition.

75.

For the Commission to make a finding of compatibility, Member States should be able to demonstrate firstly, that the existing or planned NGA network is not or would not be sufficient to satisfy the needs of citizens and business users in the areas in question and, secondly, that there are no less distortive means (including ex ante regulation) to reach the stated goals. In the context of its detailed assessment the Commission will in particular assess whether:

76.

In areas where there already exists more than one NGA network or private investors may be in the process of deploying competing NGA networks, the Commission will consider that state support for an additional publicly-funded, competing NGA network is likely to seriously distort competition and is incompatible with the State aid rules.

77.

The Commission considers that traditional black areas, that is areas where current broadband services are being delivered by competing broadband infrastructures (xDSL and cable networks), are areas in which existing network operators should have the incentives to upgrade their current traditional broadband networks to very fast NGA networks to which they could migrate their existing customers. In such areas no further State intervention should in principle be necessary.

78.

However a Member State can rebut such an argument by showing that existing basic broadband operators do not plan to invest in NGA networks in the coming three years by demonstrating for instance that the historical pattern of the investments made by the existing network investors over the last years in upgrading their broadband infrastructures to provide higher speeds in response to users′ demands was not satisfactory. In such cases, state support for the deployment of NGA networks would be subject to the detailed analysis paragraph 75 and to the fulfilment of the set of conditions discussed in more detail in Section 3.4.5.

79.

As with the policy followed with respect to basic broadband deployment, State aid in favour of NGA network deployment may constitute an appropriate and justified instrument, provided that a number of fundamental conditions are complied with. With the exception of white NGA areas which are also white areas with regards to basic broadband (where no additional requirements are needed), the Commission considers that, in addition to the safeguards set out in Section 2.3.3 and in particular in paragraph 51 (detailed mapping exercise and coverage analysis, open tender process, best economic offer, technological neutrality, use of existing infrastructure, mandated wholesale open access, benchmarking exercise and claw-back mechanism), the following conditions need also to be met:

80.

These Guidelines will be applied from the first day following its publication in the Official Journal of the European Union.

81.

The Commission will apply these Guidelines to all notified aid measures in respect of which it is called upon to take a decision after the Guidelines are published in the Official Journal, even where the projects were notified prior to that date.

82.

In accordance with the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid (74), the Commission will apply these Guidelines in the case of non-notified aid granted after its publication.

83.

No later than 3 years from the publication of these Guidelines the Commission will review the present Guidelines on the basis of future important market, technological and regulatory developments.