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EC Drafts Rules for State Aid in New Broadband Networks

The European Commission has laid out guidelines for how European Union national governments can boost development of super-fast broadband networks without falling foul of European laws designed to restrict state aid.

The move was broadly welcomed by the telecommunications industry but some say it should be more specific in terms of the technology a government can support.

If public money was invested in building VDSL or VHDSL (very high bitrate digital subscriber line) or PON (passive optical network) networks, this could result in restricted competition and ultimately in higher prices for consumers, said Ilsa Godlovitch, director of regulatory affairs at the European Competitive Telecommunications Association, a lobby group.

Instead, governments should invest in so-called point-to-point fiber-optic architecture, as this would allow greater scope of competition. "It would also be future-proof, unlike the other architectures favored by incumbent operators, because download speeds across point-to-point fiber-optic networks are almost limitless," she said in an interview.

The Commission's policy on public investment in broadband infrastructure until now has allowed public funding to be channelled to rural and remote areas where market operators lack sufficient incentives to provide adequate broadband services, while restricting public sector involvement where there is competition.

The draft guidelines for next-generation networks follows a similar path. Where there is no super-fast broadband, the Commission will permit states to finance private companies' investments, as long as the tenders for those contracts are fairly offered to all competitors, and not simply handed to a former monopoly.

The Commission would take a more critical view of state aid in areas with super high speed networks already in place, it said.

The Commission invited comments on the draft guidelines by June 22. After considering the responses it will publish definitive guidelines later this year, the Commission said.

Competition commissioner Neelie Kroes said her aim is "to provide a clear and predictable framework for the application of E.U. state aid rules in this strategic sector."

She added that it is urgent to clarify the rules as quickly as possible so as not to hinder what could be a vital tool for helping E.U. countries get out of recession.

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