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EU Publish New UK National Broadband State Aid Agreement in Full

Thursday, June 23rd, 2016 (9:46 am) - Score 821

Last month the Government’s Broadband Delivery UK programme confirmed that it had established a new EU State Aid agreement (full summary), which would support the on-going roll-out of “superfast broadband” services. The EC has now published the full text of that deal, albeit with a caveat for Leased Lines.

As a quick recap, the new “National Broadband Scheme for the UK” agreement covers the period from now until 2020 and its primary focus is to help expand superfast broadband (30Mbps+) networks towards and beyond the current 95% coverage goal for the United Kingdom.

On top of that it’s been designed to encourage smaller alternative network providers to bid, albeit through a technologically neutral approach that appears to have become more complicated. All suppliers in the bidding process will have to provide “full open access” networks (i.e. share cable ducts, masts, local loops) and share information on their existing infrastructure in the relevant intervention areas (details), which might discourage some operators.

The final document opens with a message from Philip Hammond, the British Secretary of State for Foreign and Commonwealth Affairs, which includes some interesting babble about “reduced access tenders” not being a part of the agreement, yet.

Letter from the British Secretary of State for Foreign Affairs

Sir,

I am pleased to inform you that the Commission has assessed the measure “National Broadband Scheme for the UK 2016-2020 (2016 BDUK) and decided not to raise objections insofar as the measure will be implemented via open access tenders, as presented in this decision. On that basis, the measure is compatible with the internal market, pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU).

However, at this stage, the Commission cannot take a position concerning reduced access tenders under cascading procurements, since in the absence of a review of the leased lines exception including a cost-benefit analysis, as described in this decision, the notification remains incomplete. Once the leased lines review is finalised, and a final report is notified to the Commission, the Commission will take a position in relation to implementation of the measure via reduced access tenders.

The Rt Hon Philip HAMMOND
Secretary of State for Foreign and Commonwealth Affairs
King Charles Street
London SW1A 2AH
UNITED KINGDOM

Regarding that bit about reduced access tenders. The UK proposed a “cascading” procurement approach as a means to maximise the number of tenders using the open access requirement and to limit the use of tenders that might be based on a “leased line exception“. Leased lines are expensive and dedicated high capacity business connections, which aren’t normally used for connecting individual homes (unless you happen to be fairly rich).

In theory if no viable open access bids were made then the local authority would be allowed to “consider whether bids that offer reduced forms of access meet the baseline evaluation criteria.” As such it’s possible that there may be some areas where an “existing leased line operator is the only bidder” and so the UK proposed a derogation from the open access requirements.

Put another way, access seekers to the subsidised network would be “prohibited from providing leased line services unless and only insofar as that would serve their business case to provide retail broadband“. Implementation of that exception would be via what is referred to in this decision as “reduced access tenders“.

However the EC noted that the “impact of full open access requirements for leased lines in the UK market remains uncertain at this point” and called for the UK to conduct an in-depth cost-benefits analysis of the leased lines exception.

Otherwise the final document adds plenty of detail on the processes and requirements of bidding for future contracts, although we recommend reading our original article for a simplified summary of the general changes.

The New UK NBS 2016-2020 Agreement (.PDF)
http://ec.europa.eu/../263954_1760328_135_4.pdf

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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8 Responses
  1. Avatar NGA for all

    I think it states that altnets Step Froward and agree the open access conditions, failing that cascade back to BT under the existing access arrangements.
    It is disappointing there is formal summary of what has and has not been spent so far, It looks to be c£700m of the £1.2bn Phase 1contracted) or a record of BT’s capital contribution to date. Nothing on how clawback and underspends are to be re-used in the funding mix.
    It is useful to see that Phase 2 contracted is £327.m, (1.3m premises) that I think is the first public reference to that number.

    • Avatar DTMark

      Does it mention anything about timeframes?

      From what I recall, any money spent under BDUK which carries an obligation to provide “open access” [to other providers] only obliges the recipient (I nearly pluralised that word) of the funds to do so, for seven years.

    • Avatar NGA for all

      I did not find a reference to 7 years but it does criticise Ofcom for not doing more.
      The access conditions were referenced amongst broader regulatory objectives for competition and open access.
      The whole competition and open access things gets a increasingly wishful the more rural the programme becomes.
      There is nothing describing the workings of the ‘Investment Fund’ arising from Phase 1.
      It appears to give those with an appetite to step forward to do so but with conditions not applied in the earlier SA 33671. It then provides room to step backwards if no takers can be found.
      This is a lot of work compared to extending what is already in place, particularly if the costs, clawback and capital are now transparent.

  2. Avatar gah789

    The ignorance and absurdity of this document is quite breathtaking – and an extremely poor reflection on competence/intentions of both BDUK & the Commission. (Read it in detail!) It is written in a manner that seems designed to ensure that the only qualified or willing bidder for BDUK contracts will be BT.

    Consider two simple but real situations:

    Company A proposes to build an FTTP network as a community venture with fibre on poles and/or in duct. These rules require that the poles be capable of accommodating cables from at least 3 other operators. Ditto for the duct. So why should Farmer X agree to have duct or poles on his land as a matter of community spirit when any commercial operator can come along and demand access to install their own cable? Instead he demands a standard commercial wayleave payment and the whole scheme is dead.

    Company B wants to build a wireless network using small masts. The rules say that the operator must provide space for at least 3 other operators to install antennas and other kit. So a small mast becomes a rather large mast. Farmer Y who might agree to a small mast in exchange for a small payment or free connection is faced with the prospect of a much more intrusive structure with an expectation of commercial rent charges. Again, end of project.

    The suggestion that this agreement will encourage altnets is ludicrous. It is a deliberate exercise in excluding any small operator. The only good aspect for altnets is that they can use the provisions strategically as a way of preventing money from being spent on supporting BT in areas that they intend to serve. But, that is a mixed blessing, because it will delay the rollout of new services and even further irritate the public who can’t understand why they can’t get access to superfast broadband.

    This is a exercise in dogma that reflects an obsession with access to infrastructure even when this will sabotage the alleged goals of the exercise.

    • Avatar MikeW

      I don’t think you are being cynical enough.

      Before the winning tender gets to pledge open access to the new infrastructure, there is another off-putting phase: to merely bid for the tender requires a pledge of open access to an operator’s existing infrastructure.

      You might be right that BT are favoured to win a tender, but I’m not sure they are favoured to put a bid in in the first place.

    • Avatar Steve Jones

      BT are already required to provide access via PIA (or whatever replaces it) whether they bid or not. There are, of course, all sorts of practical issues about this, but I rather think any tendering exercise is likely to place special demands on the incumbent whether they bid or not.

    • Avatar NGA for all

      The EU dogma on competition (passive infrastructure sharing in this case) being applied to the final 10% does look nutty, when Ofcom have mostly ignored that dogma and applied VULA. It is more nutty when no real effort was made to enforce the last state aid measure.
      I think BDUK/LA will try and apply this and then revert to BT if there are no takers. VULA/PIA and enhanced PIA can be presented as UK compatible. EU have no appetite or resource to enforce so this will be vexing for those needing to navigate it.

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