Brussels, 25 July 2012
State aid: Commission opens in-depth investigation into Italian broadband project in Trentino
The European Commission has opened an in-depth inquiry to investigate whether a joint venture between the Italian Province of Trento and the Italian telecommunications operator Telecom Italia to build a fibre infrastructure is in line with EU state aid rules. At this stage, the Commission has doubts whether the project is carried out on terms that a private player operating under market conditions would have accepted. The opening of an in-depth inquiry gives interested third parties an opportunity to comment on the measures under investigation. It does not prejudge the outcome of the investigation.
"Public investments in ultra-fast broadband networks promote growth and contribute to the objectives of the EU's Digital Agenda. It is however crucial to ensure that public funds are not used to favour one market player, alter competitive market conditions and roll back the benefits of a liberalised telecommunications market." said Commission Vice President in charge of competition policy Joaquín Almunia.
Following a complaint, the Commission opened an investigation into a capital injection of €50 million to be granted by the Province of Trento to a joint venture with the Italian telecommunications incumbent Telecom Italia, to operate under the name of "Trentino NGN". Telecom Italia would only make contributions in kind, i.e. the transfer of rights on its existing copper infrastructure. Such infrastructure is expected to be switched off once the fibre network becomes operational. Subsequently, by virtue of a call option, Telecom Italia could become the sole owner of the joint venture.
At this stage, the Commission has doubts that a private investor in the position of the provincial authorities would have undertaken such an investment at the same terms and conditions. First, the planned fibre network targets areas where no private investor has showed an interest so far. Second, the Commission has doubts as to whether the in-kind contributions made by Telecom Italia to the joint venture have been adequately valued and whether there are any other hidden advantages for Telecom Italia from its dual role of shareholder and supplier of services to Trentino NGN. Third, there are doubts as to whether the envisaged return on equity for the Province is in line with market conditions.
The Commission will now investigate in-depth, to determine whether the existence of an undue economic advantage for Telecom Italia is confirmed or not. It such an advantage exists, the measure would constitute state aid in the meaning of Article 107 of the Treaty on the Functioning of the European Union (TFEU) and its compatibility would need to be assessed under the EU Broadband Guidelines (see IP/09/1332 and MEMO/09/396).
Investments by public authorities into companies carrying out economic activities are considered to be free of state aid when they are made on terms that a private player operating under market conditions would accept (the market economy investor principle, MEIP). If the Commission has doubts that the MEIP has been respected, it has to open an in-depth investigation.
If the Commission finds that the MEIP has been complied with, it closes the investigation concluding that no state aid was involved, as for example in a fibre project by the City of Amsterdam (see IP/07/1889). If the Commission finds that an investment was not MEIP compliant and therefore involves state aid, it will assess whether such aid is compatible with the Internal market, for instance because it furthers an objective of common interest, such as the rollout of broadband networks, without unduly distorting competition.
The smart use of public funding for the rollout of broadband networks contributes in particular to the goals of the EU Digital Agenda and the EU2020 initiative for growth (see IP/10/581 and MEMO/10/199). The EU broadband guidelines set out the criteria under which such funding can be found compatible with EU state aid rules (see IP/09/1332 and MEMO/09/396). In this context, the Commission has authorised more than 100 national and regional projects (see MEMO/12/396).
The Guidelines allow public support for ultra-fast broadband networks provided that they are built in areas where no private investments are taking place, that the beneficiary is chosen through an open tender and that access at all levels is guaranteed to other operators. The Commission is currently reviewing the guidelines (see IP/12/550).
The non-confidential version of the decision will be made available under the case number SA.33063 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.