Out-Law News 2 min. read

State support for broadband infrastructure may be legitimate in competitive urban areas if it leads to 'step change' in services


The Government and local authorities will be able to invest in broadband infrastructure to significantly enhance the speed of services available in areas where there is existing private sector presence under exceptional circumstances, the European Commission has said.

The Commission said that state support for 'next generation access' (NGA) networks could be justified in urban areas where competing broadband networks already exist as long as the publicly-funded infrastructure would provide a "step change" in the speed of service available in the market, subject to a number of other conditions.

The Commission made the announcement as it published new guidelines (34-page / 222KB PDF) on the issue of 'state aid' for broadband networks.

"In light of the Digital Agenda objectives, in particular achieving 50% penetration to internet connections above 100 Mbps, and taking into account that especially in urban areas there may be higher performance needs compared to what commercial investors are willing to offer in the near future ... public intervention could exceptionally be allowed for NGA networks able to provide ultra-fast speeds well above 100 Mbps," the Commission's new guidelines said.

The Commission said that it would ordinarily consider public investment in broadband infrastructure to be prohibited in "black NGA" areas, which is where "at least two NGA networks of different operators exist ... or will be deployed in the coming three years". State support for a new NGA network in those areas would be "likely to seriously distort competition" and would be "incompatible" with EU competition rules.

However, it said that an exception would be allowed if a 'step change' in service can be provided by the publicly-funded network and providing a range of other criteria are met.

A 'step change' criteria will be met if a "selected bidder makes significant new investments in the broadband network" and if the "subsidised infrastructure brings significant new capabilities to the market in terms of broadband service availability and capacity, speeds and competition," the Commission guidelines said.

In 'black NGA' areas, the 'step change' criteria will not be said to have been met if the existing or planned private networks are "fibre networks", if the market in that geographic area will not develop to provide for competitive "ultra-fast services about 100 Mbit/s in the near future" as a result of private sector investment, and unless there is "expected demand" for the publicly-funded network.

Under the guidelines state support in 'black NGA' areas that meets all the 'step change' criteria will still be prohibited unless additional criteria is also met.

The public authority providing the subsidy must, among other things, show that "the subsidised network exhibits significant enhanced technological" and that it "will be based on an open architecture operated as a wholesale only network" and that the funding they are putting forward "does not lead to an excessive distortion of competition with other NGA technologies that have recently been the subject of significant new infrastructure investments by market operators in the same target areas," according to the guidelines.

"Only if these additional conditions are fulfilled, public funding of such networks might be considered compatible under the balancing test," it said. "In other words, such funding would have to lead to a significant, sustainable, pro-competitive and non-temporary technological advancement without creating disproportionate disincentives to private investments."

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