UK Next Generation Networks roll out - update
The UK Government’s stated aim is ensure the UK has the best superfast broadband in Europe by 2015.
In 2012 we have seen a number of initiatives at both UK Government and European level designed to:
- increase level of funding available to address market failure and encourage the private sector telecommunications industry to deploy next generation networks;
- result in a higher level of broadband coverage and penetration than would otherwise be the case; and
- facilitate well-designed aid targeted at market failures.
The initiatives include:
1. Super Connected Cities – Urban Broadband Funding
In December 2011 the UK Government announced that it intended to invest £150million to put UK cities at the centre of the digital stage, competing for jobs and investment with the best in the world.
In March 2012 the UK Government announced that Birmingham, Bristol, Leeds, Bradford, Newcastle and Manchester along with the four UK capital cities had all successfully bid to become Super-Connected Cities and able to obtain a share of £100million funding. The funding is to be used to assist with the deployment of ultrafast fixed broadband access, and large areas of public wireless connectivity. The UK Government defined ultrafast broadband as having a minimum download speed of at least 80Mbps.
In September 2012, following the assessment of business plans, the UK Government announced the allocation that the 10 cities are to share of the £100 million pot.
A second wave of smaller cities lodged their business plans on 17th September 2012 to apply for a share of £50million funding and the results of this will be released in October 2012.
2. 'EU Guidelines for the application of state aid rules in relation to the rapid deployment of broadband networks'
On 1 June 2012, the European Commission launched a consultation in respect of 'EU Guidelines for the application of state aid rules in relation to the rapid deployment of broadband networks' and in that consultation proposed some amendments ("Draft Guidelines"). The Draft Guidelines seek to simplify the previous 2009 State Aid Broadband Guidelines on public funding for broadband networks as well as accommodate technological advances made since then.
The consultation deadline was 3 September 2012 and the EU Commission aims to publish revised guidelines in December 2012.
Eligibility for State aid is considered on an assessment of the geographic market and existing broadband infrastructure within that area. The following geographical classification remains the same in the Draft Guidelines:
- White areas indicate regions where there is no broadband infrastructure and where no such infrastructure is likely to be developed in the near future (taken to mean three years);
- Grey areas indicate areas where there is one network operator present, with no prospect of another network being deployed in the near future; and
- Black areas have at least two networks operating within them.
The Draft Guidelines set out the context in which the development of infrastructure for (i) basic broadband networks and (ii) next generation access networks ("NGA") will be eligible for State aid.
(i) Basic broadband networks
Basic broadband networks include ADSL, cable, mobile, wireless and satellite solutions.
Areas identified as white are likely to be eligible for State intervention, provided that the aid granting authority can verify that no private investment is likely in the next three years. Grey areas could be deemed as appropriate for State aid, but before aid can be granted, a detailed assessment of the market must take place and aid will only be justified where a market failure persists. Black areas are not suitable for State intervention as the presence of two basic broadband networks implies that there is no market failure.
(ii) NGA networks
NGA networks are wired access networks which consist wholly or partly of optical elements which are capable of delivering broadband access services with enhanced characteristics (as compared to those provided over existing copper networks). The Guidelines have been amended to further support the rapid deployment of NGA networks.
Eligibility for State aid to develop NGA networks will again depend on an assessment of the geographic market and existing NGA broadband infrastructure within that area. White NGA areas indicate regions where NGA networks do not at present exist and are unlikely to be developed in the near future (again taken to mean three years). Grey NGA areas indicate areas where only one NGA network is in place or being deployed in the next three years and there is no prospect of another NGA network being deployed in the same area in the next three years. Black NGA areas have at least two NGA networks either in place or being deployed in the next three years.
Areas identified as white NGA areas will be eligible for State aid as long as the measure satisfies the compatibility assessment set out above. Grey NGA areas could be entitled to State aid, but a detailed assessment must be conducted before State aid can be granted as there may be a high risk of crowding out private investment and distorting competition. The level of evidence required in respect of coverage is very detailed ie assessment down to street level. Black NGA areas will not be eligible for State aid because any such aid could seriously distort competition.
Development of NGA networks where basic broadband networks already exist
For areas that are white from both a basic broadband and NGA point of view, no additional criteria must be met. However, white NGA or grey NGA areas (that are grey or black in terms of basic broadband), must meet additional criteria as follows:
- State aid must be limited to a passive and neutral NGA infrastructure; and
- the subsidised infrastructure must enable the provision of competitive and affordable services to end-users by competing operators and equal treatment of content providers.
In addition, effective wholesale access for third party operators must be ensured and the subsidised network must offer access under fair and non-discriminatory conditions with the possibility of effective and full unbundling to those who request it.
Ultra-fast broadband networks
The Guidelines have been amended to include a provision providing that State aid may still be available for ultra-fast broadband networks in areas where existing or planned NGA networks do not reach the end user premises with fibre networks. The subsidised network would also have to demonstrate a clear 'step change' compared to existing networks / technology and have significant enhanced technological characteristics. There would have to be demand for such improvements and the subsidised network would be operated as a wholesale network only. In essence, the funding would have to lead to a "significant, sustainable, pro-competitive and non-temporary technological advancement”
Taylor Wessing is advising three large cities that have successfully bid for an allocation of the Urban Broadband Funding and three smaller cities that have lodged applications for funding. Taylor Wessing has also assisted a number of clients on providing responses to the consultation.
"Areas identified as white are likely to be eligible for State intervention, provided that the aid granting authority can verify that no private investment is likely in the next three years."