Europe Clears UK State Aid Funding for Superfast Broadband Deployment

The European Commission (EC) has officially granted final approval for the release of state aid funding through the UK government, which allows local authorities to proceed with their national deployment of superfast broadband services (25Mbps+) to reach 90% of people by around spring 2015. But what are the minor changes?

Approximately half of the 47 related Local Broadband Plans (LBP) were effectively stuck in limbo for several months after Europe expressed competition concerns earlier this year. As a result some £530m of public money could not be released to start the deployment (total UK state aid investment is expected to reach GBP1.5 billion), which also resulted in the deadline for the government’s local procurement process being delayed by roughly six months to July 2013.

At the time Europe was understood to be concerned about the limited choice of ISPs in the Broadband Delivery UK (BDUK) framework, which effectively only allowed for the selection of either BT or Fujitsu. But Fujitsu, which has also been re-classified as a “high risk” for government contracts, had already withdrawn from most of the bidding (usually long before the contracts were due to be awarded).

However, despite these concerns, the situation appeared to be moving forward in October 2012 when the EC’s competition boss, Joaquín Almunia, requested several vague and “relatively minor changes” to BDUK’s design. Shortly after that the UK government’s Culture Secretary, Maria Miller MP, boarded a plane to Brussels in the hope of securing final approval for the use of state aid. It appears she was successful.

Maria Miller, Secretary of State for Culture, Media and Sport, said:

“Finally getting the green light from Brussels will mean a huge boost for the British economy. Superfast broadband is essential to creating growth, jobs and prosperity and the delay has caused frustration within Government. Today’s announcement means that we can crack on with delivering broadband plans, boosting growth and jobs around the country.

Britain is in a global race today. To succeed in that race we must have the infrastructure to match our aspiration, providing people who work hard with the tools they need to get on and prosper; this green light will benefit both businesses and communities across the UK.

Our broadband plans are hugely ambitious – to connect 90 per cent of homes to superfast broadband and ensuring the rest have access to at least 2Mbps. The Government will not allow parts of our country to miss out on the digital age.”

Joaquín Almunia, EC Vice President for Competition Policy, added:

“BDUK, as a national competence centre, will assist local granting authorities in designing and implementing successful broadband support measures in line with EU competition rules. The umbrella scheme will be a big step towards the achievement of the EU Digital Agenda targets and a strong impetus for growth in the UK.”

So what ever happened to those “minor changes” we were promised? Some hints can be found in the EC’s official response, which states that the design of the Broadband Delivery UK (BDUK) scheme contains several “best practices” that will help to “ensure more effective, better targeted and less distortive public interventions“.

EC Statement Highlights

* The government must setup a “national competence centre” to help advise smaller local authorities.

* Ofcom has been told to play a crucial role in designing wholesale access prices and conditions (technically nothing new).

* All information related to projects under the scheme will be published on a central website (including mapping, public consultation, tenders, aid beneficiaries).

* The UK has also committed to submit an evaluation of the scheme to the Commission before 31 March 2015 and to ensure that any forthcoming scheme will take this evaluation into account.

Perhaps the most crucial “minor change” is the mention of “any forthcoming scheme“, which is a vague reference to the possibility of a post-2015 broadband strategy. A new scheme might be required because the current BDUK target falls short of Europe’s existing Digital Agenda strategy, which aims to make 30Mbps+ speeds available to 100% of households by 2020 (with 50% being within reach of a 100Mbps+ service).

It’s widely expected that any future scheme will thus focus on the last 10% of predominantly rural areas. The BDUK scheme focuses more generally upon the final 33% as the first 66% of the UK can already be reached by private sector investment. It’s hoped that the government will open any future strategy up to smaller ISPs (altnets) and or set a target that is more in keeping with the Digital Agenda but there’s still no hard information. In the meantime BT still looks set to win the lion’s share of public funding.