Good old Neelie Kroes spoke out on the EC position on public funding of broadband projects during her keynote speeche at the “Bridging the Broadband Gap” conference in Brussels.
This speech is very interesting for Ireland when considering the recently released National Broadband Tender. The Irish government will have to thread very carefully to stay within the guidelines. Something that I doubt the tender will accomplish. What’s needed is a broadband backhaul infrastructure that is open to everyone (on a fee paying basis). Somthing along the lins of the MAN’s but then with a management policy that will actually stimulate usage instead of hampering it.
Anyway, I won’t rant…
Below is a sumary of what was mentioned in the keynote:
1) EU regulations require former monopoly telecoms to share their lines with competitors.
(2) The Commission uses the antitrust powers to challenge anticompetitive practices. In 2003, they fined Wanadoo, a French ISP owned by France Telecom, for predatory practices designed to drive competitors out of the market. The Commission’s decision was upheld by the Court of First Instance. Because the Commission has come down hard on anticompetitive practices in the French market, France has one of the most dynamic broadband markets in Europe.
(3) The Commission looks closely at state aid to ensure that they do not stifle private investment. The Commission realizes, however, that sparsely populated regions are not commercially interesting area. At the same time, public authorities can do a lot even without offering financial support. For example: city councils can coordinate network rollouts or rights of way to lower cost of providing broadband access. But if state funding is granted to support rollouts, one must look closely at the conditions under which this aid is permissible.
All public entities are required to notify the Commission of state aid for broadband projects. The Commission uses a three step test to determine whether such aid complies with EU regulations:
(1) Is public intervention justified? The public authorities must identify exactly what the problem is. Is it market failure (e.g. not interesting for private providers)?
(2) Is this instrument appropriate to the problem being addressed? There might be other ways to boost broadband adoption, e.g. lowering bureaucratic hurdles. But that might not even be enough. Maybe subsidies are appropriate.
(3) Has the public authority designed the aid scheme in a way that does not distort competition? Open tenders, the amount of subsidy, not favoring one provider, open access to all operators to promote competition are among the factors that the Commission considers in determining whether the public authority has complied with the regulations.
Patterns in state aid have emerged
Most of the projects approved by the Commission are in rural, sparsely populated areas where there is no broadband service. These are called “white areas”.
Gray areas: there is some broadband service in parts of the territory. These cases require closer scrutiny. The Commission recently approved the metropolitan area networks set up in Ireland and the national broadband project in Greece because they determined there was an absence of effective competition.
Black areas: There is broadband service provided by at least two types of infrastructure (usually cable and DSL). It is doubtful that these projects will be approval from the Commission unless there is serious market distortion.
For example, the Commission turned down the deployment of a fiber network in Appingedam, the Netherlands using public funds because the local cable company (Essent) and the telecom incumbent (KPN) complained that they already had broadband networks. KPN and Essent alleged that the publicly funded fiber network would have crowded out their investments. The Netherlands, after all, has one of the most thriving broadband markets in the world.
All this makes intresting reading and I am glad to see that the EC’s policy on this is on the mark. Let’s just hope that their decisions/rulings will be accordingly.