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Brussels, 3rd May 2005

State aid: Commission endorses public funding for broadband network in Limousin, France

The European Commission has decided that, the public co-funding of an open broadband infrastructure in Limousin, France constitutes compensation for the provision of a Service of General Economic Interest and is not state aid. The project has a total budget of €85 million and will be co-financed by EU funds The scheme will enable telecom operators to provide broadband services to residential users, businesses and public authorities on a transparent and non-discriminatory basis.

Competition Commissioner Neelie Kroes commented: “I am glad we could agree that this project does not constitute state aid. This public-private partnership delivers broadband access to citizens and businesses in Limousin, harnessing competition in the electronic communications markets and improving the competitiveness of the region.”

The construction and operation of the broadband infrastructure will be implemented by means of a ‘public service delegation’ in the form of a concession under French law. Selected through a public procurement procedure, the concession holder will provide various wholesale services to retail operators but not services to end users. To encourage competition, retail operators will, inter alia, also be able to lease from the wholesale provider so-called ‘dark fibre’ (i.e. 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). The Commission has taken into account the fact that Limousin consists mainly of rural and remote areas, and that access to broadband services offered by existing market operators in Limousin is insufficient to meet the population’s essential needs.

The Commission has therefore accepted that access to broadband services for all citizens be qualified as a Service of General Economic Interest (SGEI) in the region. However, this is only valid for investments linked to the wholesale provision of network infrastructure and not for retail broadband services offered to end users. The latter may include many different forms of services which do not necessarily qualify as SGEI. The Commission considers that the public co-funding of the infrastructure constitutes compensation for the provision of an SGEI and hence is not state aid because the project fulfils the four criteria established by the Court of Justice in the Altmark ruling (24 July 2003, in Case C-280/00).

According to this ruling, compensation for a public service obligation does not constitute state aid if the beneficiary is given a clearly defined public service mission; if the compensation payments are based on objective and transparent criteria established in advance; if the compensation (including a reasonable profit) does not exceed the cost incurred in the discharge of the public service minus the revenues earned with providing the service; and if the beneficiary is chosen in a public tender or compensation does not exceed the costs of a well-run undertaking that is adequately equipped with the means to provide the public service.

The Commission already adopted a similar decision in November 2004 concerning the public funding of a broadband project in the Pyrénées Atlantiques (see IP/04/1371).

The measure is in line with Community priorities in the eEurope 2005 Action Plan (see IP/04/626) and the i2010 initiative.

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