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Brussels, 6th October 2005

State aid: Commission endorses public funding for broadband communications in Midlands and South West of England

The European Commission has authorised, under EU state aid rules, a UK broadband project which aims at bridging the “digital divide” between certain areas of England that currently have fast Internet access and those that do not. The initiative will bring broadband communications to West Midlands, East Midlands and South West England, which are currently underserved, allowing citizens and businesses to exploit the benefits of broadband technology. The Commission concluded that the aid was not likely to cause undue distortion of competition within the Single Market and was therefore compatible with EC Treaty state aid rules (Article 87).

Competition Commissioner Neelie Kroes commented: “I am pleased that we have been able to endorse the public funding for the project. Citizens and businesses in the Midlands and South West of England will have access to fast Internet connections, boosting the economic development of these regions”.

One of the objectives of the Rural Broadband Access Project, which feeds into the UK National Broadband Strategy, is to address the current gap in broadband service delivery between communities which can get affordable access and those who cannot. The rural nature and geographical remoteness of the concerned areas make them an unattractive goal for investment by broadband service providers. The project aims at correcting this “digital divide” by awarding grants to service providers selected through public tenders, to extend first generation broadband coverage to underserved areas of the West Midlands, East Midlands and the South West of England.

The Commission has found that the aid granted is compatible with the EU rules on state aid (Art. 87 (3) (c) of the EC Treaty), since the subsidies are provided only to the extent necessary to develop the use of broadband services in the target areas.

The UK authorities have implemented a number of safeguards to ensure that the aid amounts are kept to a minimum and do not distort competition to an extent contrary to the common interest. In that respect, the funding for the provision of wholesale broadband will be open to all Internet service providers, the project does not favour a specific technology and contains a repayment mechanism under which a progressive reimbursement of public funds is envisaged as demand picks up.

The Commission already adopted similar decisions over the past months concerning the public funding of broadband projects in other parts of the UK (see IP/04/1371, IP/05/646) and in Spain (see IP/04/626). The measure is in line with Community priorities in the eEurope 2005 Action Plan (see IP/04/626) and the i2010 initiative (see IP/05/643).

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