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Brussels, 16 November 2004

Commission approves public funding of broadband projects in Pyrénées-Atlantiques, Scotland and East Midlands

Regarding the project in the French department of Pyrénées-Atlantiques, the European Commission has decided that, under certain conditions, the public co-funding of an open broadband infrastructure constitutes compensation for the provision of a Service of General Economic Interest and hence is not State aid. In its assessment of the two projects in the United Kingdom, the Commission has found that the aid granted is compatible with EU rules since it is provided only to the extent necessary to develop the use of broadband services in remote and rural areas.

Pyrénées-Atlantiques: absence of State aid

The notified project envisages the construction and exploitation of a public open access broadband communications network across the Pyrénées-Atlantiques region, enabling telecom operators to provide broadband services to residential users, businesses and public authorities on a transparent and non-discriminatory basis.

The construction and operation of this infrastructure will be implemented by means of a public service delegation in the form of a concession under French law. Selected through an open tender procedure, the concession holder will act as a wholesale operator providing various wholesale services to operators but will not offer services to end users. In order to stimulate competition, client operators will, inter alia, also be able to lease dark fibre[1] from the wholesale provider. In its assessment, the Commission took into account the fact that the region concerned consists mainly of rural and remote areas. According to studies provided by the French authorities, the access to broadband services offered by the market is not sufficient to respond to the essential need of the population.

The Commission has therefore, qualified the access to broadband services for all citizens as a Service of General Economic Interest (SGEI) in the region. But this is only valid for investments linked to network infrastructures and not for broadband services offered to the end user. The latter may include many different forms of services which do not necessarily qualify as SGEI.

Since the four criteria established by the Altmark[2] jurisprudence are fulfilled in the project at hand, the public co-funding of the infrastructure constitutes a compensation for the provision of a SGEI and hence is not State aid.

Scotland and Midlands: compatible aid

The Commission has also approved, under Art. 87 (3) (c) of the EC Treaty, two aid measures concerning the provision of broadband services in Scotland and the East Midlands, in the United Kingdom. The Commission concluded that both schemes provide State aid only to the extent necessary to develop the use of broadband services in remote and rural areas. Depending on the outcome of the public tenders and the availability of funding, the public authorities will provide financing to both projects, for instance up to 1.9 million pounds in the East Midlands.

Both projects involve the provision of end-to-end services beyond the mere provision of infrastructure enabling the access to these services.

However, the UK authorities implemented a multitude of safeguards which ensure that the aid amounts granted are minimized and do not distort competition to an extent which is contrary to the common interest. Both UK projects are carried out through open tenders, foresee wholesale access provisions and do not favour a specific technology.

All three projects are in line with Community priorities as indicated in the eEurope 2005 Action Plan[3].

[1] A plain fibre-optic cable with no optical transmission equipment. Operators may add their own equipment and build their own network, retaining complete control over the fibre.

[2] Judgement of 24 July 2003 in Case C-280/00, Altmark Trans. According to this judgement, a compensation for a public service obligation does not constitute State aid if a number of criteria related to the definition of the service and its funding are fulfilled.

[3] Commission Communication COM (2004) 369 of 12 May 2004, “Connecting Europe at High Speed – National Broadband Strategies”

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