Broadband Investment and State Aid Guidelines

Broadband Investment and State Aid

• This chapter outlines the State aid rules applicable to broadband investment, based on the 2022 Broadband Guidelines.
• Section 8.1: General principles of State aid. Any public funding for broadband investment must comply with EU State aid rules. These rules aim to prevent creating unfair advantages and market distortions. This includes situations where public funds might dissuade private investment.
• Section 8.2: Cases where broadband interventions might not be considered State aid. This includes EU-level funding allocations and administrative measures (e.g. facilitating rights of way, promoting tech-sharing).
• Sections 8.3 & 8.4: Interventions that are considered State aid but may be self-assessed for compatibility with State aid rules.
• Sections 8.5-8.13: Interventions that constitute State aid requiring Commission notification for compatibility assessment.

Public Funds and State Aid

• State Aid: Use of public funds to support an economic activity.
• No State Aid: EU-level funding allocations, administrative measures, MEOP (Market Economy Operator Principle) measures (when private investors would have acted similarly), and de minimis aid (small amounts).
• Notification: Public funding for broadband investments needing pre-approval notification to the European Commission.
• Self-assessment: Public authorities can self-assess the compatibility of certain funding types (e.g. measures falling below a threshold) with existing EU rules.

Public Funds That Aren't State Aid

• EU-level funding allocation: National authorities do not control the usage or beneficiary selection of EU funds, and compliance checks occur at the EU level versus a national level.
• Administrative measures: measures focusing on improving broadband environment (e.g. right-of-way provisions) which do not discriminate against private individuals and are publicly available to all.
• Market Economy Operator Principle (MEOP): Measures consistent with the private sector's actions in normal market conditions. This analysis must be completed prior to project implementation.
• Measures representing an SGEI (service of general economic interest) but fulfilling the four Altmark criteria: non-monetary measures aimed at market improvement or demand/incentive, and are not expected to harm/distort the market.
• De minimis: Aid amounts falling under a specific threshold do not require Commission notification.

SGEIs Meeting the Four Altmark Criteria

• SGEIs (services of general economic interest) are economic activities that serve the public interest, and might not be sufficiently viable if solely left to private sector investment.
• The Commission questions definitions if there's a significant error in classifying an activity as an SGEI.
• The Broadband Guidelines provide clear aspects to consider.
• Factors for classifying as an SGEI:
  • The project is limited to areas where private investment for broadband is not available.
  • The project deploys a network providing universal and affordable broadband.
  • The project provides wholesale network access to any company that requests it fairly and equally.
  • The project design neutralizes potential conflicts of interest related to broadband provision.
• Compensation for SGEIs: Compensation must only cover net costs of deploying the network, and reasonable profits, and contain claw-back mechanisms to prevent unjustified gains.

Market Economy Operator Principle (MEOP)

• A way to determine if public intervention is state aid by measuring if a private sector party would also have invested.
• Projects conforming to MEOP: Those deemed attractive to private investment under normal market conditions.
• The Commission can assess the MEOP compliance of State intervention. It is crucial if the intervention conditions have similarities to private investment measures.
• In order for MEOP to avoid State aid categorization, there needs to be demonstration of significant private sector involvement (at least equal to state involvement). A clear business plan with calculations for risk-adjusted return and return on investment should be provided.

Other Key Concepts

• Compatibility with State Aid Rules: EU laws determine which measures qualify as state aid and how to assess their compatibility with EU internal market rules.
• Public Funds: Different levels of public funding for broadband projects and their classifications as State Aid or not.
• Case Studies: (e.g., Citynet Amsterdam, Trentino NGN) highlight specific examples of broadband projects that have been scrutinized for state aid compliance.
• Monitoring and Claw-back Provisions: Mechanisms to monitor project implementation and recover any unjustified subsidies.

Additional Information

• De-Minimis Regulation: Aids falling below a certain threshold for certain periods do not require Commission approval.
• **GBER Exemptions:**Certain types of broadband aid are exempted from prior Commission notification. This requires mapping areas to identify appropriate measures.
• Articles 52(b), 52(c), and 52(d): Exemptions for various types of aid to fixed broadband networks or broadband infrastructure projects.
• Mapping and Public Consultation: Essential procedures for determining market failure.
• Step Change: Evidence that a new broadband project offers substantial performance improvements against existing projects.

Overviews and Procedural Steps for Implementing State Aid Projects

• Mapping exercise: identification of broadband coverage areas for public intervention, and existing network status.
• Public consultation: Gathering public opinion and input prior to implementing broadband State aid projects.
• Competitive selection process: Use of procurement rules and procedures in awarding broadband contracts via a competitive process.