COMMISSION STAFF WORKING DOCUMENT Executive Summary of the Impact Assessment Accompanying the document Commission Communication Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks
Date: 2013-01-15
Institutions: European Commission
Subjects: State aid, control of State aid, economic and social cohesion, innovation, public financing, regional development, sustainable development, transmission network

EUROPEAN 
COMMISSION 

Brussels, XXX  
SWD(2012) 449 

COMMISSION STAFF WORKING DOCUMENT 

Executive Summary of the Impact Assessment 

Accompanying the document 

Commission Communication  

Community Guidelines for the application of State aid rules in relation to rapid 
deployment of broadband networks 

{C(2012) 9609} 
{SWD(2012) 448}

EN 

   EN 

 
 
 
 
 
  
 
1. 

1.1. 

PROBLEM  DEFINITION 

The underlying problem: the funding gap and the need to protect competition 

The existence of a high performing broadband infrastructure is considered to be an 
important  factor  for  economic  development  throughout  the  world.  High  speed 
internet access enables businesses, especially small ones, to remain competitive and 
it  allows  consumers  to  benefit  from  many  advanced  online  services  that  improve 
their quality of life. 
When publishing its Digital Agenda for Europe1 in 2010, the Commission underlined 
that  Europe  needs  widely  available  and  competitively  priced  fast  and  ultra-fast 
Internet access. The Digital Agenda restated the objective to bring basic broadband 
to all Europeans by 2013 and set the objective to ensure that, by 2020: 

(cid:190)  all Europeans have access to much higher Internet speeds of above 30 Mbps, and 

(cid:190)  50%  or  more  of  European  households  subscribe  to  Internet  connections  above  100 

Mbps. 

The estimated costs to achieve those objectives are up to EUR 60 billion for the first 
stage and EUR 270 billion for the second.2 

While  most  of  the  necessary  investments  to  achieve  the  goals  of  the  DAE,  as 
highlighted above, will be carried out by private companies , there are areas in which 
market  investment  is  not  profitable.  Due  to  the  economic  characteristics  of  the 
industry, private investments alone will not suffice to attain such ambitious coverage 
goals and governments will have to step in with the smart (and pro-competitive) use 
of  public  funds  to  extend  high-speed  and  very  high  speed,  next  generation  access 
("NGA") network coverage to those areas in which market operators are unlikely to 
invest  on  commercial  terms.  The  goal  of  achieving  ambitious  infrastructure 
development targets needs to be qualified in the sense that effective competition shall 
also take place between and on these infrastructures. Effective competition will help 
to maximise “consumer welfare”, in the form of lower prices and of better and more 
services for European citizens and companies 

To give guidance as to how public investment can reconcile these conflicting goals, 
the  Commission  adopted  in  2009  the  Broadband  Guidelines3.  The  Broadband 
Guidelines  aim  to  contributing  to  the  achievement  of  the  policy  objective  of 
broadband coverage by appropriately directing public subsidies. The Guidelines are 
complementary to  encouraging  private  investment via appropriate regulation and to 
undertake  other  actions  to  stimulate  insufficient  demand.  Whenever  the  other 
regulatory  policies  will  not  succeed  in  stimulating  private  investment  because  of 
existence  of  a  market  failure,  public  authorities  may  decide  to  fund  a  broadband 
infrastructure with the aim to achieve the coverage objectives set at European level to 
spur economic growth and development. The goal the Guidelines want to achieve is 
to channel public investment in the most pro-competitive way. 

1  
2  
3  

COM (2010) 245 
Source: State aid Scoreboard: Report on State aid contribution to Europe 2020 Strategy – Spring 2011 
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52009XC0930(02):EN:NOT 

1 

 
 
                                                            
1.2.  Why is Commission action considered? 

The  present  Broadband  Guidelines  foresee  that  they  would  be  revised  within  three 
years  after  entering  into  force  to  take  into  account  the  main  technological  and 
regulatory  developments.  In  particular,  since  the  Guidelines  entered  into  force  in 
2009,  they  pre-date  the  adoption  of  the  Digital  Agenda  and  therefore,  the  current 
rules are not fully compatible with the Digital Agenda targets. 

1.3. 

Issues identified in the consultation process 

The following issues have been identified to be relevant for the application of State 
aid rules in the broadband sector: 

•  Directing  State  aid  where  it  is  needed:  Detailed  mapping  and  coverage 

analysis 

•  Ensure competition by an effective tender process 

•  Best value for money: define the right criteria for the selection process 

•  Ensure effective wholesale access 

•  Access pricing 

•  Better involvement of NRAs 

•  Relationship between SMP regulation and State aid rules 

•  Framework programmes 

•  Better use of existing infrastructures 

•  Claw-back mechanism to avoid over-compensation 

2. 

ANALYSIS OF SUBSIDIARITY 

EU  State  aid  control  is  the  exclusive  competence  of  the  Commission  according  to 
Articles  107  and  108  TFEU.  If  Member  States  notify  aid,  but  also  ex  officio,  the 
Commission has to assess the measure under the Treaty. 

3. 

OBJECTIVES 

The general objective of the Broadband Guidelines, as explained in the context part 
of the Report and in the Guidelines themselves, is to increase growth and consumer 
welfare by wide and rapid deployment of fast and ultra-fast broadband networks in a 
competitive  market  landscape.  This  general  objective  can  be  further  specified  into 
the following specific objectives: 

1. 

Bringing infrastructure to under served areas: 

i. 

ii. 

iii. 

aligning with the DAE 

Accelerating NGA roll-out  

Avoiding duplication of infrastructure 

2. 

Avoiding undue competition distortions 

i. 

mimicking the market mechanism through tender process 

2 

 
 
ii. 

iii. 

iv. 

increasing transparency 

ensuring open access 

reducing aid to the minimum 

3.  Minimising administrative burden 

i. 

ii. 

iii. 

encouraging Framework programmes 

streamlining regulatory and state aid obligations 

improving NRA involvement 

4. 

POLICY OPTIONS 

As  mentioned  above,  rapid  deployment  of  broadband  networks  is  not  sustainable 
without public funds. With this perspective the following three options have been set 
out.  

4.1. 

Baseline Scenario: Option 1: prolonging the existing Guidelines for three more 
years 

The current Guidelines bind the Commission to carry out the revision process within 
three  years  from  their  adoption.  After  carrying  out  the  revision  as  envisaged,  the 
Commission  could  conclude  that  no  change  is  needed  from  the  current  text,  which 
has been consistently applied in the past three years with satisfactory results. 

4.2. 

Option  2:  Amendment  of  the  Guidelines  to  ensure  a  rapid  and  competitive 
deployment of broadband infrastructure 

The evaluation of the current policy highlighted a number of issues for which fine-
tuning may be suggested without completely upsetting the approach followed in the 
existing Guidelines. Different sub-options are possible: 

First sub-option (minimum level): improve the use of resources 

This  sub-option  includes:  adapting  the  rules  for  access  to  publicly  financed 
infrastructure,  clarifying  the  rules  for  public  tendering,  stricter  rules  for  the  use  of 
existing 
implementation,  more 
involvement  of  NRAs 
transparency (including ex post reporting), a lighter claw-back mechanism. 

infrastructure, 

the 

in 

The  current  Guidelines  foresee,  as  a  quid  pro  quo  for  the  subsidies  received,  an 
obligation  to  provide  effective  wholesale  access  on  the  subsidised  network.  This 
provision can be fine tuned by requiring a neutral and open infrastructure for ultra-
fast networks, which tend to have the characteristic of natural monopolies, while for 
more remote areas the access obligation can be subject to a proportionality test. 

To ensure competitive markets, a number of other amendments concern the selection 
of  the  most  economically  advantageous  offer  (regarding  the  geographical  coverage 
and  the  effect  on  competition),  wholesale  access  and  access  pricing.  To  ease  the 
administrative burden on the  granting  authorities, it can be foreseen to increase the 
thresholds for projects to include a claw-back mechanism from 1 million Euros to 10 
million Euros. 

3 

 
 
The existing Broadband Guidelines require that Member States consult the relevant 
NRAs  if  they  grant  aid  to  broadband  networks.  Under  this  option,  in  the  new 
Guidelines the position of NRAs can be clarified and strengthened. 

The current Guidelines put strong emphasis on transparency in State aid broadband 
schemes,  yet  the  relevant  provisions  are  kept  at  a  general  level  without  detailed 
specifications. This can be improved by (a) including more details on the content of 
the transparency obligations, (b) including a requirement for Member States to keep 
a centralised database of infrastructures and of tenders. 

Second  sub-option  (intermediate  level):  Adapt  the  Guidelines  to  technological 
progress  

The second sub-option builds on the first one but in addition includes adaptation to 
technological  developments.  The  current  Guidelines  define  NGA  as  mainly  wired 
based  technology.  As  the  performance  of  technological  platforms  (cable  mobile, 
satellite  etc)  is  constantly  improving,  the  definition  can  be  refined  to  include  other 
platforms, as long as they can exhibit NGA capabilities.  

The  existing  conceptual  framework  of  the  Guidelines  (basic/NGA  networks, 
white/grey/black areas) will not be changed. Yet, the principle behind the conceptual 
framework can be made more explicit by introducing the notion of “step change. 

Third sub-option (advanced level): Align the Guidelines with the Digital Agenda  

The  third  sub-option  includes  the  measures  discussed  for  the  less  ambitious  sub-
options (1) and (2) and adds a specific additional compatibility section for ultra-fast 
networks.  

With a view to support the Digital Agenda targets, the additional section introduces 
the possibility to publicly finance NGA infrastructure in black NGA areas, provided 
that  strict  conditions  and  important  pro-competitive  safeguards  are  respected.  To 
preserve  the  incentive  to  invest,  private  investments  need  to  be  protected  against 
being overbuilt with publicly financed infrastructure. 

4.3. 

Option  3:  A  more  radical  amendment  of  the  Guidelines  by  putting  DAE 
objectives first 

A third option is that of radically changing the approach followed so far and modify 
substantially the current Guidelines in order to meet the need to accelerate as much 
as possible broadband rollout and the achievement of the DAE targets. It is important 
to note that even a radical amendment cannot go as far as overhauling completely the 
existing  approach  (as  regards  the  target  areas,  for  example)  because  it  would  run 
against the general objective of keeping markets open and not crowding out private 
investments.  

Therefore the third option will remain within those limits by proposing to introduce 
in  the  text  new  concepts  and  definitions  as  well  as  new  requirements  for  the 
compatibility  test.  In  particular:  the  DAE  targets  would  be  incorporated  in  the 
Guidelines  concepts,  the  access  obligation  requirements  would  be  reduced,  the 
proportionality requirements would be eased. 

4 

 
 
5. 

ANALYSIS OF IMPACTS 

Bearing in mind that the Commission does not have the choice not to intervene in the 
sector (i.e. not performing the state aid assessment of the measures in question) and 
that  there  is  already  a  consistent  case  practice  and  Guidelines  in  place,  only  the 
variation of the relevant impact factors of each option will be pointed out  

5.1. 

Option 1: Baseline scenario: prolonging the existing Guidelines for three more 
years 

This  option  has  the  advantage  of  celerity  but  would  not  address  all  the  specific 
objectives  pursued  by  the  revision  exercise.  Moreover,  nearly  all  stakeholders  and 
Member States have – to various degrees – argued in favour of adapting the current 
Guidelines.  Thus,  this  baseline  option  of  merely  prolonging  the  current  Guidelines 
has not been supported in the consultation process. 

5.2. 

Option  2:  Amendment  of  the  Guidelines  to  ensure  a  rapid  and  competitive 
deployment of broadband infrastructure 

This option builds on the current policy of the Commission and gives an immediate 
follow up to the issues arising from regulatory and technological developments, case 
practice,  stakeholders  consultation  and  expert  reports.  In  general,  the  existing 
conceptual approach of the Guidelines would be kept, thereby reaping the benefits of 
consistency and legal certainty. 

First sub-option (minimum level): improve the use of resources 

Several  measures  proposed  under  the  first  sub-option  support  specific  objectives 
related  to  the  avoidance  of  distortion  of  competition.  Improving  and  clarifying  the 
conditions for access to publicly financed broadband infrastructure has the benefit of 
further improving the pro-competitive nature of the approved measures. Better access 
conditions generate more competition on the network and thereby a larger variety of 
services  at  lower  prices.  Incumbents  are  generally  not  in  favour  of  stricter  access 
rules, as they argue that obligations under State aid should be aligned to regulation. 
Alternative operators instead favour better access conditions as it would allow them 
to compete on existing infrastructure. Consumers would benefit from these measures 
as  a  better  implementation  of  the  Guidelines  would  lead  to  a  more  competitive 
broadband infrastructure. 

With  regard  to  the  involvement  of  NRAs,  this  option  leads  to  adding  a  few 
specifications  to  better  detail  the  role  they  are  expected  to  play  in  the  State  aid 
procedure. Such role implies neither assessment nor discretionary policy decisions. 

A  better  use  of  existing  infrastructure  would  improve  the  availability  of  broadband 
networks  and  would  allow  focussing  available  resources  on  areas  where  such 
infrastructure is lacking.  

As  regards  the  specific  objective  of  reducing  the  administrative  burden,  this  sub-
option provides a mixed result. A more extensive involvement of NRAs could entail 
certain  additional  administrative  costs  for  both  the  governments  and  NRAs 
themselves.  However,  that  administrative  cost  would  be  limited.  Also  the 
transparency measures will have mixed results regarding the administrative burden. 
On  the  one  hand,  it  is  a  limited  burden  on  administrations  which  have  to  publish 
information  on  a  website.  On  the  other  hand,  the  availability  of  such  data  reduces 

5 

 
 
searching  cost  to  private  investors  (incumbents  and  alternative  operators)  and  it 
reduces  administrative  costs  for  other  administrations.  The  benefits  of  increased 
transparency should outweigh the administrative burden arising from it. 

Clarifying the rules on the use of existing infrastructure in the tender procedure for 
state  aid,  should  offer  to  alternative  operators  better  access  to  such  infrastructure 
when preparing their own bids. 

Second  sub-option  (intermediate  level):  Adapt  the  Guidelines  to  technological 
progress  

Being cumulative, the impact of the second sub-option is the same as the one of the 
first sub-option with an incremental effect from a new NGA definition.  

Broadening the NGA definition has two effects on competition. On the one hand, it 
will increase the number of platforms and operators which can participate in a public 
tender for state-funded NGA networks. This should increase the competition in the 
tender and thereby potentially reduce the necessary aid amount. On the other hand, 
different  technologies  have  different  qualitative  performances,  including  the 
technical  ability  to  grant  access.  If  a  platform  is  selected  which,  for  technological 
reasons  can  only  provide  inferior  access,  the  competitive  impact  of  the  new 
infrastructure is reduced. 

The  broadening  of  the  NGA  definition  has  several  effects  on  broadband  roll-out. 
First, it may increase the areas which are considered to be NGA "grey" or "black". 
Second, it will encourage private investment in these technologies as they would be 
better  protected  against  being  overbuilt  by  another  publicly  funded  NGA  network. 
As a result of the first effect, granting State aid may no longer be granted in certain 
areas. Whether that has an effect on overall public investment in NGA networks is 
uncertain. 

Third sub-option (advanced level): Align the Guidelines with the Digital Agenda  

This  option  balances  the  risk  of  crowding  out  private  initiatives  in  profitable  areas 
with the need to encourage fibre rollout: public funds will be allowed in such areas 
only  if  it  is  proven  that  existing  private  investments  merely  concern  marginal  and 
temporary improvements, while the subsidies aim at encouraging a substantially new 
infrastructure. In the public consultation incumbent and cable operators have argued 
that  their  investments  in  upgrading  their  own  infrastructure  may  be  jeopardised  by 
the public intervention. While such investments may not be too capital intensive and 
not imply new infrastructure development, nevertheless they need to be protected to 
avoid unduly altering the market mechanism. The public consultation suggested that 
a "competition check" may be a good solution to mitigate these effects. 

5.3. 

Option  3:  A  more  radical  amendment  of  the  Guidelines  by  putting  DAE 
objectives first 

This  option  would  allow  to  reduce  the  amount  of  state  aid  necessary,  as  the 
profitability of the funded network would increase (the aid beneficiary would be able 
to exclude competitors using the newly built infrastructure).  

However,  it  is  not  obvious  that  this  more  lenient  approach  would  actually  lead  to 
increased  investment  in  NGA  and  ultrafast  NGA.  As  most  of  the  infrastructure  is 
built by  private investors, the latter may decide to hold back on such investment if 

6 

 
 
the  perceived  risk  of  later  being  "over-built"  by  state  funded  infrastructure  is 
increased (the crowding out effect). Second, public money would be used to finance 
dominant operators (or even monopolies). 

The option of incorporate the DAE quantitative targets in the Guidelines definitions 
would have the benefit of increasing consistency of EU documents and would more 
directly  adapt  the  Guidelines  to  the  Digital  Agenda.  It  would  also  introduce  a  very 
clear-cut  division  which  would  increase  stakeholders’  understanding  (in  particular 
small  local  authorities)  as  regards  the  objective  of  the  public  intervention  they 
undertake. However, this approach would also entail substantial drawbacks. First, the 
approach  is  currently  untested  and  neither  the  Commission  nor  the  national/local 
authorities have experience with it. As a consequence, it could generate uncertainty 
among stakeholders. In addition, the assessment may actually be more complicated: 
introducing three categories ("basic", "slow NGA" and "ultra-fast NGA") instead of 
currently two, many more possible combinations would have to be assessed. Specific 
compatibility  conditions  for  the  different  categories  would  have  to  be  applied. 
Moreover,  quantitative  definitions  bear  the  risk  of  being  quickly  outdated,  which 
would  require  another  revision  of  the  Guidelines  in  a  short  period  of  time,  while 
binding the Commission to their application while they are in force. 

Limiting  access  obligations  to  what  would  be  imposed  under  sectoral  regulation, 
would have the likely impact of reducing investment costs and necessary aid amount 
per  project.  Additionally,  as  regards  existing  operators,  in  particular  incumbents,  it 
would  reduce  their  cost  and  increase  legal  certainty.  However,  the  risk  is  high  that 
investments  might  not  materialise  at  all,  that  public  funds  would  help  to  create  or 
strengthen  dominant  positions  and  that  public  authorities  may  fund  with  taxpayers' 
money  the  rollout  of  "closed"  NGA  architectures.  This  would  restrict  future 
competition  on  the  subsidised  infrastructure  with  consequent  increasing  prices  and 
decreasing quality. 

Abandoning  the  involvement  of  NRAs  in  state  aid  process  would  overcome  the 
problems indicated by some Member States as regards the formal entitlement of the 
NRAs  to  intervene  in  State  aid  cases  and  reduce  the  administrative  burden.  On  the 
other hand, it would entail a loss of control over how access conditions and tariffs are 
set on subsidised networks, a potential loss of consistency. 

Relaxing  the  public  consultation  requirement  and/or  the  tender  requirement  has  the 
advantage  of  speeding  up  the  planning  of  the  measure  and  the  timing  for  granting 
authorities to be able to implement their measures. On the negative site, commercial 
operators  might  hold  back/postpone  their  investments  due  to  enhanced  public 
intervention in this area, public and EU monies might be misused or not effectively 
used. The Commission could face a high number of complaints and litigations. 

6. 

COMPARING THE OPTIONS 

Options 

Baseline: 
Prolonging 

the 

Effectiveness 

Efficiency 

Coherence 

- 

+/- 

- 

7 

 
 
 
existing GL 

Option 2: Revising 
the GL 

Sub-option (1) 

Sub-option (2) 

Sub-option (3) 

Option  3:  Radical 
overhaul of the GL 

+ 

+ 

++ 

- 

+ 

+ 

+ 

- 

+/- 

+ 

++ 

+ 

7. 

MONITORING AND EVALUATION 

All  Member  States  that  adopt  aid  schemes  covered  by  the  Broadband  Guidelines 
shall  submit  annual  reports  on  such  schemes  to  the  Commission.  In  addition,  a 
specific evaluation on the effectiveness of the State aid broadband measures cannot 
be  carried  out  because  the  basic  set  of  data  on  the  measures  is  not  available. 
Therefore the new Guidelines proposes that a basic set of data –as the name of the 
aid beneficiary, the aid amount received, the aid intensity and the technology applied 
– shall be published on a central website and made available for the general public. 
Furthermore, the new Guidelines introduce a light ex-post reporting obligation. 

8