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State aid for rapid broadband deployment

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State aid for rapid broadband deployment

SUMMARY OF:

Communication from the Commission — EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks

WHAT IS THE AIM OF THIS COMMUNICATION?

These guidelines summarise the principles of the Commission’s policy in applying the State aid rules of the Treaty on the Functioning of the European Union to measures that support the deployment of broadband networks.
The purpose of State aid control in the broadband sector is to ensure that public interventions will result in a higher level or a faster rate of broadband coverage and penetration* than would be the case without public funding, while supporting higher quality, more affordable services and pro-competitive investments.
The guidelines are based on the principle that public interventions in broadband networks should only take place where private investments are not sufficient – therefore in market failure areas (i.e. areas where the market/private sector cannot be relied upon to invest sufficiently). This aims to avoid that public funding undermine private investments in areas where market operators would normally choose to invest or have already invested and thus to protect competition as a key driver for better prices and quality of services for consumers and businesses.
The guidelines follow the principles of the State Aid Modernisation (SAM) initiative of the European Commission, which aims to facilitate well-designed aid targeted at market failures to achieve priorities which can enhance growth, while simplifying the rules for faster decision-making.

KEY POINTS

Consultation

The 2013 guidelines were produced following a 2-stage public consultation and intensive dialogue with all stakeholders (EU countries, national telecoms regulators, aid granting authorities, telecommunications operators, business associations, consumer associations and citizens), with the aim to frame public interventions in fast moving technology markets and facilitate pro-competitive public investments.

Context

Better, faster broadband is of strategic importance for European growth and innovation in all sectors of the economy, as well as for social and territorial cohesion. The Digital Agenda for Europe (DAE), a flagship initiative of the Europe 2020 Strategy, sets as objectives for broadband infrastructure development, to bring basic broadband to all Europeans by 2013 and ensure that, by 2020, all Europeans have access internet speeds above 30 Mbps download, with at least 50% of European households having internet connections above 100 Mbps download.
In 2016, the DAE was complemented by the Gigabit Communication, which defines as strategic objectives for 2025 100% coverage of all households with download speeds of at least 100 Mbps, upgradeable to 1 Gbps, 1 Gbps symmetric for all main socio-economic drivers, and uninterrupted 5G coverage for all urban areas and all major terrestrial transport paths.

State aid

The broadband sector is very dynamic and generates significant private investment. In order to prevent that public intervention distorts competition in the broadband market, State aid by national, regional, and local authorities or public entities is in principle prohibited. However, in areas where the market does not provide the necessary infrastructure investment, State aid can be permissible if certain conditions are met.
To avoid crowding out private investments, State aid has to ensure that public investment is correcting a market failure. Therefore, public investment should only take place where the market is not providing the desired connectivity and if the publicly funded network offers connectivity significantly beyond the commercial offer. The guidelines include a detailed discussion of the rules to be observed.

Principles and priorities

The guidelines focus on the following principles and priorities.

Mapping and public consultation: to ensure that State aid interventions proportionately address identified market failures, mapping and public consultations are mandatory. Existing broadband infrastructure in geographic areas targeted by the public intervention must be clearly identified to single out areas lacking adequate broadband infrastructure. The summary of the planned public intervention and the target areas identified based on the mapping exercise must be submitted to a public consultation to verify private investment plans in the target areas.
Competitive selection process: to ensure transparency, equal and non-discriminatory treatment, as well as to minimise the potential State aid involved, aid must be granted to the most economically advantageous offer via an open selection process in line with the spirit and principles of the EU public procurement directives.
Technological neutrality: the guidelines take into account technological advances, acknowledging that different technological solutions exist to provide broadband services. Therefore, selection procedures cannot favour or exclude any particular technology or network platform able to support the delivery of the services aimed for.
Networks able to support download speeds of at least 100 Mbps: to help achieve the EU objectives, the guidelines allow public funding also in areas where there is current or planned private investment, as far as such private investment falls short for the EU objectives. Such public intervention is subject to strict conditions to ensure a pro-competitive outcome.
Step change: to protect private investors, public investment must fulfil a so-called step change: it must make significant new investments in the broadband network and the publicly financed infrastructure must provide a substantial improvement over otherwise existing and planned networks in terms of broadband service availability, capacity, speeds and competition, to the benefit of consumers.
Open access: third-party operators* must be allowed to effectively access the subsidised network. Open wholesale access enables third-party operators to compete with the selected bidder (when the latter is also present at the retail level) and thus strengthens choice and competition while at the same time avoiding the creation of monopolies. When a network is deployed using taxpayers’ money, it is fair that consumers benefit from a truly open network where competition is assured.
Transparency: transparency requirements include obligations regarding the publication of documents, a centralised database for existing infrastructure and results-based (‘ex post’) reporting to the Commission. The purpose of the transparency requirements is to promote accountability of the public authorities granting public support and to reduce asymmetries on the market.

The Commission may again review the guidelines on the basis of market, technological and regulatory developments.

FROM WHEN DO THE GUIDELINES APPLY?

They have applied since 27 January 2013.

BACKGROUND

For more information, see:

Digital Single Market — Broadband Europe (European Commission)
Digital Single Market — State aid (European Commission)
Handbook for decision makers - The broadband State aid rules explained (European Commission).

KEY TERMS

Penetration: the market share or take-up of a new service or product.

Third-party operator: an operator making use of a network it does not own.

MAIN DOCUMENT

Communication from the Commission — EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks (OJ C 25, 26.1.2013, pp. 1-26)