Public funding for broadband networks and State aid rules

1. Public funding for broadband networks and State aid rules Norbert GAAL / Filomena CHIRICO DG Competition – State Aid Directorate Information, Communication and Media JOINT MEETING OF THE RURAL DEVELOPMENT COMMITTEE and THE COMMITTEE ON THE AGRICULTURAL FUNDS27 May 2009

2. Agenda Introduction The role of State aid Our policy Procedural aspects

3. Who we are DG COMP unit dealing with State aid in the Information, Communication and Media sectors: Audiovisual (cinema, film funding,…) Broadband Broadcasting Digital TV Publishing, education Sport Telecoms

4. Agenda Introduction The role of State aid Our policy Procedural aspects

5. Broadband: why public funding is needed? • 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 (“market failure”) • Market forces do not always lead to a socially desirable outcome (“equity problem” or “cohesion problem”)

6. Why we need SA control? Not to jeopardize the existing investment of operators; Avoid unnecessary network duplication; Ensure a level playing field for all operators; Avoid picking the winner operators; Avoid favouring certain technological platforms; Avoid the creation of local monopolies with the help of state aid; Inject competition to areas where it was not present before.

7. Assessment under Article 87(3)(c) Promoting Broadband • Lisbon European Council: making the EU the most competitive knowledge-based economy of the world • i2010: priority for the Union to ensure that less favoured regions can fully participate in the Information Society • European Regional Development Fund (ERDF): European co-financing available in disadvantaged regions • EC Treaty Art. 87: • prohibition of state-aid which distorts competition • certain aid is or may be considered compatible Safeguarding Competition • Competition leads to more choice, lower prices, innovation,… • Avoid crowding out private investments and companies • State aid should address genuine market failures in a necessary and proportionate way

8. Agenda Introduction The role of State aid Our policy Procedural aspects

9. State aid broadband decisions Well-established case practice; More than 40 State aid broadband decisions since 2003; Assessed public funding of more than €1 billion (generated investments of approx. €2 billion)

10. Broadband Guidelines • Objective: to provide a clear and predictable framework about the EU State aid rules to Member States and other stakeholders. • Two main parts: • summarizes our current practice on support for "traditional broadband"; • addresses public financing of very high speed, so-called "next generation access networks". • The document is published and public consultation started on 19 May 2009. • Multilateral meeting on 22 June 2009.

11. Conditions requested for traditional bb Detailedmapping and coverage analysis – market analysisto clearly identify which geographic areas will be covered by the support measure in question; Open tender process selecting the best economic offerto limit aid, to respect equal treatment of candidates and to leave the market to come up with the best solution; Technological neutralitynot to favour any technology or service provider; Use of existing infrastructure to avoid unnecessary and wasteful duplication of resources; Wholesale accessto enhance competition and provide more choice for end-users; Benchmarking pricingto avoid excessive/ predatory pricing; Claw-back mechanismto avoid over-compensation to minimise the amount of aid ex post;

12. Agenda Introduction The role of State aid Our policy Procedural aspects

13. Assessment under the SA rules • Is the measure State aid within the meaning of the EC Treaty? Examples: • “De minimis” • If it is State aid, is it compatible? • The majority of broadband cases are assessed under Article 87(3)(c) • GBER (e.g. aid to SMEs) • See new procedures

14. Simplified procedure (Article 87 (3)(c)) • The objective of DG COMP to concentrate its resources on the cases most harmful to competition • Introduction of General Block Exemption Regulation (6 August 2008) • Introduction of Simplified procedure (29 April 2009)

15. SP for broadband measures –1. • Applicable for cases with sufficient number of precedents, i.e. • Funding of traditional broadband networks in “white areas” [i.e. in rural and remote areas, where no affordable broadband services are available] • Provided that conditions laid down in the Broadband Guidelines are incorporated

16. SP for broadband measures -2. • How will it work in reality • MS should contact us before notifying the project • If all the conditions are met and the simplified procedure applies, MS can notify with the usual form • The measure will be published on the COMP website • The Commission issue a short form decision within 20 working days after the notification

17. Temporary Framework for State aid measures (Article 87(3)(b)) • Objective: to give Member States additional possibilities to tackle the effects of credit squeeze on real economy • Adopted on 17 December 2008 • Schemes have to be notified, individual aids not. • Inter alia, allows a lump sum of aid up to €500,000 per company until 31 December 2010.

18. TF for broadband measures Member States • with a notified and approved Temporary aid scheme, • can subsidize broadband development, inter alia, with lump of sum of € 500.000, • Under similar conditions as the “de minimis” (no cumulation, monitoring, not for companies in difficulties, etc.) – but it is not an increased “de minimis”! • Without prior notification and State aid approval for individual aid measures.

19. Overview of State aid procedure A simplified overview! No SA notification SA notification no MEIP Presence of State aid? De minimis yes yes GBER / TF* Small amount of aid? No/ not applicable yes “White areas”? Simplified procedure no yes NGA? “Grey areas”? Standard SA assessment no yes Incompatible SA * For individual aids if the scheme was approved by the Commission - until the end of 2010 “Black areas?” State aid

20. Useful links and information on DG COMP’s website THANK YOU FOR YOUR ATTENTION!