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Brussels, 24 October 2005

State aid: Commission opens inquiry into funding for broadband in Appingedam (Netherlands)

The European Commission has opened a formal investigation to assess whether the public funding for a fibre access network in the Dutch town of Appingedam complies with EC Treaty state aid rules. The EC Treaty (Article 87) requires that aid granted by Member States does not distort or threaten to distort competition in a way liable to affect trade between Member States. This is the first time the Commission has had to open a formal inquiry into public support for broadband development. The launch of an in-depth inquiry does not prejudge in any way the Commission’s final decision.

Competition Commissioner Neelie Kroes commented: “Public support for broadband communications can bring benefits to citizens and businesses and improve economic competitiveness. The Commission has already approved several such schemes. However, on the basis of the information currently available, I am not convinced that the Appingedam project is either necessary or proportionate given the existing infrastructure for the delivery of broadband services.”

The municipality of Appingedam intends to part fund the deployment of a glass fibre access network in the Dutch town. Following local court action by a Dutch cable operator at the end of 2004, the Dutch authorities notified the measure to the European Commission in spring 2005 for approval under EC Treaty state aid rules. After a preliminary assessment, the Commission has doubts about the compatibility of the project with EU state aid rules as the public funding might distort competition in the market for electronic communications and have a negative impact on existing private infrastructure investment.

In view of these doubts and the implications of the case for similar projects all over Europe, the Commission has decided that an in-depth inquiry is necessary to analyse the conditions for granting state support for the roll-out of the fibre access (or Fibre to the Home, FttH) network in Appingedam under EC Treaty state aid rules.

In all previous cases which were notified to the Commission, state support was targeted at areas where broadband was not available at all or only provided in densely populated areas by the incumbent operators, but not in rural and remote areas. Hence, the state support to these projects in the rural and remote areas was found to constitute either compatible aid under Article 87(3)(c) of the EC Treaty in the case of public funding for broadband support measures in the UK and Spain (IP/04/1371, IP/05/646, IP/05/1231), or not to constitute state aid in two cases in France (IP/04/1371, IP/05/530).

Details of the measure will be published in the EU’s Official Journal, allowing interested parties to provide the Commission with their comments.

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