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Brussels, 9th March 2006

State aid: Commission endorses public funding to bridge broadband communications gap in Ireland

The European Commission has authorised, under EC Treaty state aid rules, a programme to boost broadband availability in Ireland. Ireland is lagging behind most EU-15 Member States in broadband penetration. The Irish Government will create open-access Metropolitan Area Networks (“MANs”) in over 120 Irish towns at a cost of €170m, with support from EU structural funds. The Commission concluded that the aid was not likely to distort competition within the EU significantly.

Competition Commissioner Neelie Kroes commented: “I am pleased to endorse this expansion of the Irish Metropolitan Area Network programme. The open networks will enable all operators to offer high-speed broadband services to businesses and citizens in the towns concerned. The project will boost competition in the area and is fully in line with the Commission’s policy to promote broadband in areas which would otherwise miss out.”

In partnership with the local authorities, the Irish Government decided to build open, carrier-neutral, fibre-optic networks (“Metropolitan Area Networks”) in over 120 towns where such infrastructure is not supplied by market players. The management and exploitation of the networks, which remain in public ownership, will be tendered out to a wholesale operator. This wholesale operator will then offer its services to telecommunications companies, who will provide high-speed electronic communications services to end users. This funding is for Phases II and III of the MANs programme. Phase Ihas already been completed with networks built in 26 towns.

In the EU-15, broadband take-up in Ireland ranks second lowest, just before Greece. In late 2005, only 5.3% of the population had broadband connections. A large part of the Irish population is located in the Greater Dublin area. In many smaller towns, infrastructure investments by telecommunications operators are limited due to the high construction cost and low likely return of investment. Furthermore, cable networks exist only in few Irish cities. Therefore, there is no competition on the infrastructure level in the towns targeted by the project.

EC Treaty state aid rules (Article 87(3)(c)) allow subsidies for the development of certain economic activities or of certain economic areas provided there is no overall negative effect on competition. The Metropolitan Area Networks project pursues a clear cohesion objective and is expected to be co-financed by EU structural funds. Moreover, the project is in line with Community priorities outlined in the eEurope 2005 Action Plan (see IP/04/626) and the i2010 initiative (see IP/05/643).

The Irish authorities have implemented a number of safeguards which will ensure that the scheme does not unduly distort competition. For example, the wholesale operator will be selected through an open tender and a revenue distribution mechanism will keep the aid amounts to a minimum.

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