The EC Treaty, however, allows exceptions to the ban on state aid where the proposed aid schemes may have a beneficial impact in overall Union terms. Article 87 of the EC Treaty allows the following forms of aid: 1) aid having a social character, granted to individual consumers; 2) aid to make good the damage caused by natural disasters or exceptional occurrences; 3) aid designed to: a) promote the economic development of underdeveloped areas (regarded as particularly backward in accordance with EU Community criteria); b) promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; c) facilitate the development of certain activities or areas; d) promote culture and heritage conservation (where, in the last two cases sub c) and d), such aid does not affect trading conditions and competition in the EU Community to an extent that is contrary to the common interest).

The European Court of Justice (ECJ) has repeatedly stated that the test in order to classify a state measure as a state aid is whether the recipient undertaking “receives an economic advantage which it would not have obtained under normal market conditions”. $ ^{17} $ This is the so-called “Market Economy Investor” principle. This test is employed in order to determine whether the advantage is one which would or could have been obtained from a private operator acting with a view to obtain a return.

Services of general economic interest are different from ordinary services in that public authorities consider that they need to be provided even where the market may not have sufficient incentives to do so. This is not to deny that in many cases the market will be the best mechanism for providing such services. Many basic requirements, such as for food, clothing, shelter, are provided exclusively or overwhelmingly by the market. However, if the public authorities consider that certain services are in the general interest and market forces may not result in a satisfactory provision, they can lay down a number of specific service provisions to meet these needs in the form of service of general interest obligations. The fulfillment of these obligations may trigger, even if not necessary, the granting of special or exclusive rights, or the provision for specific funding mechanisms.

The definition of a specific mission of general interest and the attendant service required to fulfill that mission need not imply any specific method of service provision. The classic case is the universal service obligation (“USO”), i.e., the obligation to provide a certain service throughout the territory at affordable tariffs and on similar quality conditions, irrespective of the profitability of individual operations. $ ^{18} $ When such services of general interest are granted to regulated industry, they may be prone to abuse by companies. There is evidence that imposing universal service can be both a cost and a benefit. In the case of telecom, one should also consider what the universal service is intended to achieve. It may be cheaper to give people in rural communities access to wireless, rather than wire-line service. Hence granting a USO fund to the incumbent wire-line company is not necessarily advancing this cause. In addition, enabling the incumbent to price at levels below incremental cost means that consumers may seek wire-line services in cases where wireless would have been cheaper, but for the subsidy. This can prevent new technologies from developing and being generally available.