UPDATE2 UK Accuses EU of Delaying Urban Broadband Funding Approval

The Project Director for the government’s £150m Urban Broadband Fund (UBF), which aims to help expand the coverage of “ultra-fast” broadband (80-100Mbps+) and “high speed” public wifi services into neglected areas, has blamed Brussels for once again delaying funding approvals and forcing selected cities to “urgently find a Plan B“.

A similar tit-for-tat situation of blame beset Europe’s competition commissioner, Joaquín Almunia, last year after the UK government’s Culture Secretary, Maria Miller, perhaps unfairly attacked the European Commission‘s “stifling bureaucracy” for initially holding up £530m in State Aid funding for its wider Broadband Delivery UK (BDUK) project (here).

In the end the fact that only BT were left in the running for all of BDUK’s contracts, which aims to help 90% of the UK gain access to superfast broadband speeds of 25Mbps+ by the end of 2015, didn’t seem to concern the EC and, after 6 months delay, the plan was eventually cleared.

Meanwhile the semi-separate “super-connected cities” (UBF) project could now be facing an arguably even more difficult situation. Back in June 2012 the EU praised the city of Birmingham for being the first UBF scheme to win its approval, which was largely due to its focus on being “genuinely open to all operators” and strong support for Dark Fibre access (here).

Unfortunately the plan soon hit rocky waters after BT and Virgin Media launched a legal challenge to Birmingham’s Smart City plan (here). Both operators were concerned that the city’s plan for a new network would perhaps inevitably overlap with their own. “It’s a poor implementation of what is otherwise a sensible policy,” said Virgin Media.

By comparison other UBF plans have tended to favour BT and or Virgin Media (Virgin seems to be primarily interested in Wi-Fi provision) and the majority of those are still awaiting approval. Part of the problem appears to be because the EU allegedly want state aid funding to only go towards open access providers, which has left the government’s Department for Culture, Media & Sport (DCMS) concerned that BT might withdraw.

The situation was confirmed at the recent Ultra-Connected Smart Cities Seminar, which had been arranged by the Independent Networks Cooperative Association (INCA) and held on 30th April 2013 at the Custard Factory in Birmingham.

INCA Statement

“A packed audience heard Iain Bennett from DCMS manfully defending the increasingly sticky wicket that is the Urban Broadband Fund. He explained that the competition authorities in Brussels won’t sign off on state aid approval for the DCMS plan without a long and no doubt tedious examination. This would take the programme out of time.

A key sticking point is open access with the Commission insisting that any state aid should go only to open access providers, leaving DCMS worried that this would mean the exit of BT. As a consequence cities are left with a need to urgently find Plan B.“

So what is Plan B? Bennett apparently told the audience that the government was looking at some sort of “end user vouchers” that wouldn’t fall foul of EU state aid rules, although INCA members are said to be concerned that these will simply favour incumbents over new infrastructure investors. Some sort of concession for wireless networks is similarly understood to be a consideration.

The government are apparently also prepared to consider alternative approaches to infrastructure investment, such as possibly using the market economy investor principal (MEIP) or entirely new projects like digital exchanges (we’re trying to find out what that last one means). But these would take time to implement and some believe that they probably couldn’t be developed to meet the current 2015 timetable.

Suffice to say that most of the 10 large cities (here) and 12 smaller cities (here) that have so far won funding to improve their broadband infrastructure could now be in for a much longer wait.

UPDATE 11:10am

ISPreview.co.uk understands that the idea for “digital exchanges” would involve the new facilities being “carrier-neutral” (unlike BT exchanges). The exchanges would act as hubs for the “development of digital businesses” and INCA suggests that this effort could be linked to LINX’s wider plans for creating a number of new regional Internet peering points (here).

Suffice to say that such an idea, which is unlikely to please BT, would certainly take quite a few years to establish.

UPDATE2 13th May 2013

Here’s the full DCMS statement that came in response to the above concerns.

A DCMS Spokesperson said:

“Since the Chancellor announced the Super Connected Cities Programme in 2011 the market has made huge strides in deployment of highspeed broadband across UK cities – with increases of more than 50% in some cities and higher speeds and wider coverage to come by 2015. The roll out of 4G mobile and the removal of planning barriers will support this further.

One of the key challenges for cities since the start of the programme has been the question of state aid for infrastructure build, and in particular how to meet EU requirements without creating unhelpful delays to delivery. The December publication of the new EU Broadband Guidelines made this challenge even more difficult by appearing to rule out the solution developed for the Government’s rural programme in our Super-Connected Cities. Since then the Government has worked very hard on Cities’ behalf with the EU Commission and suppliers to find alternatives.

At a recent meeting with the EU Commission it was made clear that a workable State Aid approval for infrastructure would require an investigation of between 7-18 months. On this timescale, and with uncertainty over the eventual decision, cities would find it exceedingly difficult, if not impossible, to deliver completed infrastructure elements of their plans by 2015. The decision has therefore been taken to remove state -aid dependent infrastructure build from the scope of SCCP. This will allow cities to focus efforts on the components of their projects that can be delivered on time and can contribute to growth now.”