On 12 December 2022, the European Commission adopted the new Guidelines on State aid for broadband networks (‘Broadband Guidelines'). The new Guidelines update the rules on State aid granted by Member States for the deployment of broadband networks and the take-up of available broadband services to support the digital transition.
-What are the Broadband Guidelines?
The Broadband Guidelines set out the rules that the Commission applies when it assesses whether Member States' State aid measures supporting broadband connectivity are compatible with the Single Market. The Broadband Guidelines include specific criteria for the allocation of State financing for the deployment and take-up of broadband networks to reduce the digital divide, while minimising its impact on competition.
-Why has the Commission amended the Broadband Guidelines?
The new Broadband Guidelines update the Commission's framework for the assessment of public support measures, previously laid down in the 2013 Broadband Guidelines. The revision follows on from the conclusions of the evaluation of the 2013 Broadband Guidelines, which showed that the rules worked well, were broadly fit for purpose and have made an important contribution to the deployment of broadband networks. At the ame time, the evaluation showed that some targeted adjustments of the rules were necessary to reflect the latest technological, regulatory and market developments and fast evolving connectivity needs, as reflected in the current EU priorities and the connectivity targets set in the Digital Compass communication. The revision included a public consultation with interested parties on the draft new Guidelines.
The 2013 Broadband Guidelines were designed to help Member States investing in broadband networks to reach the connectivity performances appropriate at that time. Following growing connectivity needs in the context of the digital transition, the Commission has set targets aiming to ensure by 2030 a coverage with Gigabit networks of all EU households and 5G coverage of all populated areas in the EU. The new Guidelines therefore also reflect the current EU policy priorities as set out in the Gigabit Society Communication, the Shaping Europe's Digital Future Communication, the Digital Compass Communication, as well as the Digital Decade Policy Programme recently adopted by the European Parliament and the Council.
Furthermore, the new Guidelines reflect the experience gained by the Commission through its case practice. By clarifying the applicable rules, in particular the compatibility conditions that the Commission applies when assessing public support measures, the revision improves legal certainty and facilitates the implementation of State aid measures.
-What are the main changes introduced in the new Broadband Guidelines?
The new Broadband Guidelines (i) update the rules for public support to fixed networks, (ii) introduce new sections on public support to mobile networks and on take-up measures, (iii) simplify certain rules to facilitate the application of the Guidelines, (iv) provide additional guidance on certain key concepts, and (v) streamline the structure of the assessment framework.
New thresholds for public support to fixed broadband networks
The new Broadband Guidelines establish a new threshold to determine the necessity of public support for the deployment of fixed networks, taking into account evolving needs for higher speeds. Such State support may be necessary in areas where the market does not and will not provide end-users with a download speed of at least 1 Gbps and an upload speed of at least 150 Mbps. Any State investment will have to at least triple the available download speed and, in competitive areas (i.e. areas in which at least two independent networks providing at least 100 Mbps download speeds are present or credibly planned), provide at least 1 Gbps download and 150 Mbps upload speeds.
The new Guidelines set also conditions for (i) exceptional public support in areas in which at least two independent networks providing at least 100 Mbps download speeds are present or credibly planned, and where broadband services are typically provided under competitive conditions; and (ii) intervention in mixed areas, i.e. areas where some end-users are already served by one network providing at least 100 Mbps download speeds.
Introduction of a new assessment framework for deployment of mobile (including 5G) networks
The new Guidelines clarify conditions under which State support for the deployment of mobile networks may be considered necessary and appropriate to address market failures. Member States must demonstrate that: (i) the existing or credibly planned mobile network does not, and will not, provide end-users with sufficient quality of service to satisfy their evolving needs; and (ii) the aid will support an adequate quality of service bringing about a material improvement of capabilities compared to the existing mobile networks.
Compatibility conditions for State aid measures supporting take-up of broadband services
The new Guidelines outline the rules that the Commission will apply when it assesses the compatibility of measures incentivising the take-up of broadband services to address barriers to connectivity and increase access to broadband services. The objective of these measures is to enable end-users to purchase broadband services they would otherwise not buy, for instance through financing of monthly fees, standard set-up costs, necessary terminal equipment and/or limited in-house wiring.
Simplification of certain rules to facilitate the practical application of the Guidelines
The new Broadband Guidelines simplify certain requirements in order to facilitate the practical application of the Guidelines. The three following key elements have been adjusted:
-Wholesale access products: The new Guidelines now allow Member States, under certain conditions and depending on the competitive situation in a given area and demand for specific products, to require either physical unbundling or virtual unbundled local access (VULA), in addition to bitstream and access to passive infrastructure.
-Wholesale access pricing: Member States may now choose which benchmark (i.e. published price, regulated price, cost-based price) is most appropriate for establishing wholesale access prices.
-Backhaul networks: Member States may support the deployment of backhaul-only networks without conducting a detailed assessment of the competitive situation at the level of access networks, in areas where there is no backhaul network or the existing or credibly planned network is not based on fibre or on other technologies that can provide the same level of performance and reliability as fibre. However, the backhaul network must be dimensioned in a way that it can support the need of the access networks based on current and future end-users' needs.
Clarification and guidance on certain key concepts
The new Guidelines seek to provide a clearer assessment framework, helping Member States design and implement State aid projects, and informing interested parties about such projects.
-Mapping: The new Guidelines propose a common methodology that Member States may use to map existing and planned networks' performance to determine areas where the public support may be necessary. The Guidelines also clarify that speeds should be measured under peak-time conditions, in line with the standards set in the sectoral regulatory framework (the Electronic Communications Code and the BEREC guidelines on the definition of very high capacity networks' performance). Relying on such speeds guarantees that all end-users benefit from the new services offered by the subsidised networks, also in the case of congestion of the network.
-Public consultation: The new Guidelines clarify the timeframe of the necessary public consultation (i.e. at least 30 days) and the timeframe within which Member States have to launch a selection procedure or, in case of the project undertaken without selection procedure through direct investment model, to start the implementation (i.e. one year from the end of the consultation). This modification increases transparency, especially as to the expected timeframe of the State intervention, allowing operators to comment on the planned measure on time.
-Selection procedure: The new Guidelines clarify that qualitative criteria may also include environmental and energy criteria, sustaining the EU policy ambition for a greener society.
-Extension of the subsidized network: The new Guidelines clarify the general permission for access seekers that are not aid beneficiaries to extend the networks with private funds. This will generate more competition to the benefit of consumers and allow for a more efficient use of publicly supported infrastructure. Private extensions by aid beneficiaries may be allowed under specific conditions.
-Clawback: Clawback mechanisms are fundamental for avoiding a possible overcompensation that may result from inaccurate ex-ante assumptions. The new Guidelines elaborate on the conditions under which Member States must monitor networks' commercial performance and possibly claw-back money in case the network is outperforming.
-Reporting: State aid control also aims at ensuring that public support fulfils the pursued goals. This is why the Guidelines clarify the information that should be submitted to the Commission every two years, essentially relating to the development of broadband coverage and take-up of broadband services in the target area.
Streamlined rules and updated criteria for balancing the positive impact of the aid against its negative effects on competition and trade
The new Broadband Guidelines provide for a simpler and more predictable and up-to-date State aid assessment framework. The structure of the Guidelines has been redesigned to clarify the steps of the Commission's assessment.
Furthermore, the new Guidelines align the transparency and ex post evaluation provisions to those that already apply in other sectors, to ensure consistency among State aid instruments. As a consequence, the transparency threshold above which individual aid awards must be published on a central website is lowered from €500,000 to €100,000.
-What are the next steps?
The new Broadband Guidelines will enter into force on the day following their publication in the Official Journal of the European Union, which is expected in January 2023. From then on, the Commission will rely on the new Broadband Guidelines when it assesses aid schemes, regardless of whether or not the aid measure was notified before the entry into force of the Guidelines.
-How do the new rules affect existing aid schemes?
The aid schemes, which the Commission has already approved under the 2013 Broadband Guidelines or before the entry into force of the new Guidelines, may continue to apply in compliance with the rules set in the 2013 Guidelines or in the relevant Commission decisions. However, Member States must amend all existing schemes in compliance with the new transparency provisions, within 12 months after their publication in the Official Journal of the European Union.
-What else is the Commission doing to modernise its rules against the background of the EU's strategic objectives for the digital transition of the Union by 2030 (Digital Decade Policy Programme)?
The revision of the Broadband Guidelines complements other on-going initiatives, such as the review of the Broadband Cost Reduction Directive, replacement of Recommendation 2010/572/EU of 20 September 2010 on regulated access to Next Generation Access Networks and Recommendation 2013/466/EU of 11 September 2013 on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment, and the earlier revision of the Recommendation of Relevant Markets in 2020.
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