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EC Probe State Aid Complaint vs Buckinghamshire FTTP Broadband Project

Monday, September 5th, 2016 (12:21 am) - Score 1,387

The European Commission’s Directorate-General for Competition has opened an investigation into the Aylesbury Vale Broadband project over its use of State Aid to roll-out an ultra-fast FTTH broadband network in rural Buckinghamshire, which is despite the presence of a competing wireless network.

The publicly funded effort, which was initially supported by £200,000 from the local Aylesbury Vale District Council (AVDC) and has recently been given another boost of £500,000 to help the network expand, has already made good progress to reach three villages (Granborough, North Marston and Swanbourne) and they hope to cover a total of ten by the end of 2016.

Customers of the new Fibre-to-the-Premise (FTTH/P) network usually pay from £30 per month for an unlimited 30Mbps (symmetrical) service, which rises to £38 if you want 100Mbps or £135 for the fastest 300Mbps package. A one-off connection fee of £150 also applies via the self-install method.

The Managing Director of AVB, Andrew Mills, explained: “AVB is a “community driven” company – a hybrid of Gigaclear and B4RN. We call it community driven for whilst it is a commercial company its primary objective is to expand its fibre network to deliver ultra-fast broadband speeds to all of Aylesbury Vale. To guarantee this objective is kept and the loaned funds are used solely for this purpose, AVDC has received 95% equity in the company.”

However problems emerged last year after two local fixed wireless ISPs (Village Networks [VN] and Rapid Rural) said they were unhappy at the use of public money, which they claimed had enabled AVB to roll-out into some of the same areas as their own planned “superfast broadband” capable networks. VN later lodged a formal letter of complaint with AVDC (here).

At the time Andrew Mills said, “We are also aware that Village Networks has previously met with AVDC to present and discuss their proposal to deliver super-fast broadband to Aylesbury Vale but we understand their proposal was based on a pure grant subsidy rather than a loan or equity model.” Mills also said that AVB had “consulted closely” with the local Government and BT supported Connected Counties scheme on their own roll-out.

Nearly a year has now passed since the original dispute erupted and there’s finally been a new development. The boss of Village Networks, Roger Carey, informed ISPreview.co.uk over the weekend that the EC’s Directorate-General for Competition has found “sufficient merit” in the case to warrant an investigation.

Roger Carey said:

“AVB’s business model calls for network coverage of such scale that it will have to take business from existing self-funded commercial providers – which is why, although it claims to be a ‘pure fibre’ network, ‘with no old technology, and no aerials’ it’s now approaching communities already covered by superfast fixed wireless operators, offering to connect them by, er, fixed wireless. They’re offering something called FTTM, which stands for Fibre To The Mast. AVB claims this is different and better to anyone else’s wireless. Other fixed wireless operators find this curious, not least because AVB do not seem to have any masts or towers.

The AVB project started out as a decent but heroic attempt to help bring better broadband to rural communities in the Vale. A noble cause which everyone, including us, supports. But that project has acquired some behaviour which can only be described as inappropriate for one owned and operated by a local authority, and it doesn’t serve them or their cause in any way.

For as long as AVDC and AVB present a publicly subsidised direct threat to existing providers – and their subscribers – in the Vale of Aylesbury, we’ll take whatever proper and fair steps we can to protect those interests. The EC complaint is a regrettable distraction from our core business, but it’s what any responsibly-run business would do.”

At this point it’s important to remember that the United Kingdom is still beholden to EU State Aid rules, which are designed to prevent EU member states from distorting competition through abuse of public funding etc.

Meanwhile the Brexit vote to leave the EU isn’t likely to be formally implemented for a few more years (possibly not until around 2020) and even then we might still have to respect some of the same measures. But if AVB are worried about any of this then it doesn’t appear to be showing.

According to Andrew Mills, AVB has not yet been informed of the EC’s decision to investigate, although they suggest that it’s “routine” for the Commission to investigate any complaint made to them and they “welcome any investigation“.

Andrew Mills, MD of AVB, told ISPreview.co.uk:

“We look forward to putting this complaint behind us, so we can continue to focus on delivering ultra-fast fibre broadband to residents of Aylesbury Vale who have little hope of ever receiving super-fast speeds, let alone ultra-fast.”

Competition investigations by the EC sometimes have a tendency to drag on for quite awhile before reaching a conclusion and as a result we might not learn the outcome of this one for a fair few months. By then AVB will probably have been able to reach its current target of ten villages and many residents, most of whom will be unaware of the dispute, will no doubt continue to welcome the new service.

UPDATE 10:17am

According to Roger Carey, the earlier claim by Andrew Mills (AVB) that VN submitted a proposal based on grant funding may not be entirely correct.

Roger Carey said:

“After AVB had been formed and commissioned, we complained. At a subsequent meeting, AVDC informally asked how much we would have charged to provide superfast coverage of the same area. We told them (it was substantially less than £200,000). That was clearly an academic after-the-event exercise. There was no tendering process, before or after AVB was formed, and that’s one of the reasons the EC has decided to open an investigation.”

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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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34 Responses
  1. Avatar New_Londoner says:

    A bit odd that the MD of Aylesbury Vale Broadband claims knowledge of discussions between Village Networks and the district council when Village Networks is a competitor. Surprising also if it has had dialogue with Connected Counties as it wouldn’t be able to share the input to its Open Market Review given this is confidential.

    It will be interesting to see what the Commission concluded given the district council does not appear to have conducted any form of tender before investing, nor has it conducted its own open market review before deciding when to deploy. Awkward if the money has to be paid given district councillors are directors too.

    1. Avatar Gadget says:

      AFAIK if it has found to breach State Aid rules it is the recipient who has to return the money, not the authority so I hope they(the recipient) get a good take-up since in that case they will end up building with their own money.

    2. Avatar TheManStan says:

      Aylesbury Vale District Council owns 95% of AVB…

      https://www.aylesburyvaledc.gov.uk/avdc-and-its-companies

    3. Avatar Steve Jones says:

      @Gadget

      “since in that case they will end up building with their own money”

      As AVB doesn’t have any money of its own, that’s going to be difficult. To all intents and purposes this is a company owned by AVDC. The danger is that if the district council is found to have breached state aid rules, it’s open to being sued for damages by companies who might make a case that their investments have been devalued by unfair state aid.

  2. Avatar fastman says:

    think the money all came for Section 106 so nothing like gigaclear or B4RN be very interesting what the outcome of this is — bearing in mind the recent apple ruling

  3. Avatar Optimist says:

    The government hands out money to install broadband with one hand then imposes taxes on the infrastructure with the other. Community initiatives get taxed differently from commercial companies. Consumers pay a higher rate VAT for broadband than for electricity and water.

    The whole thing is a mess and needs to be sorted out. Fortunately EU rules can be ignored now.

    1. Avatar New_Londoner says:

      “Fortunately EU rules can be ignored now.”

      I don’t believe they can until we’ve actually left the EU, which seems unlikely before 2019 at the earliest,

    2. Avatar Steve Jones says:

      EU or not, it’s simply not going to turn into a free-for-all for central or local government bodies to throw money into uneconomic ventures which undermine any private investment. There’s a very good reason for that, and that’s because one extremely good way of depressing investment is to create a climate of uncertainty for private investment. If local or central government can, at a stroke, wipe out the value of investments it will have a chilling impact.

      This does not mean that there isn’t a role for public investment where there is social need and there is not viable economic case, but it has to be done in a way that is sympathetic to a thriving private sector. If that’s not done, you’ll just end up with the sort of economic wasteland characterised by some parts of the country where the economy is dominated by public expenditure.

      So those state aid rules are not arbitrary. They have an economic function, and tests about the way social factors and the impact on private investment are very wise.

      We saw what happened in Yorkshire where tens of millions of public funds were simply thrown away on broadband investment that delivered virtually nothing.

  4. Avatar fastman says:

    optimist fraid not — its not a mess there are rules and question were they followed

    any public money has to have a full procurement regardless of EU or whatever rules you use, this has none

    1. Avatar Optimist says:

      Fastman – it hardly matters now as we are leaving.

      In any case the EU is soon going to be history, sinking into irrelevance even faster than the Holy Roman Empire.

    2. Avatar AndyH says:

      It does matter as we are bound by law.

    3. Avatar Evan Crissall says:

      Hmm. How will the EU enforce any of its laws against non-member state? Answer: flip it the bird.

    4. Mark Jackson Mark Jackson says:

      Often in order to trade with another country you have to have a mutual agreement to respect certain rules (trade deals can take years to negotiate and are often very complex). But this is a moot point right now because we will not leave the EU for at least a couple more years, so the existing rules remain valid.

  5. Avatar Optimist says:

    AndyH – Lord Digby Jones described in a recent TV discussion on the workings of the single market how the French blatantly block bids from non-French companies. They admit they are in the wrong but still won’t budge as they know that companies are not going to spend millions of pounds challenging the French in the ECJ in a case that will take years.

    Perhaps we should act more like the French?

    1. Avatar TheFacts says:

      As someone in France may have said about acquiring land for the TGV – ‘You don’t ask the frogs when you drain the swamp’.

  6. Avatar broadbandbob says:

    Looks like the council are already behaving more like the French. But the UK has the same state aid rules as the EU and leaving the EU won’t change that. Whatever the legality of the money, the question is how can they pay it back. They’ve already borrowed £300k going up to £500k at 7.5% over five years, but there were no interest or capital repayments shown in the business plan. And they’ve just doubled Andrew Mills salary. Not surprising they charge £78 a month if you use one of their connections for business purposes. In effect that’s £35 just for a fixed IP address.

    1. Avatar Justin says:

      I don’t understand you broadbandbob – Gigaclear charge £79.70 per month for the equivalent business package (and Gigaclear charges £45.25 for the equivalent residential package that AVB charges £38 for). I guess you must be complaining about how cheap they are.

    2. Avatar Evan Crissall says:

      Yeah, just politics of envy from broadbandbob. Meanwhile Bob’s naff provider / employer still saddling customers to its flagged-out legacy copper.

  7. Avatar Evan Crissall says:

    Plain old sour grapes from Roger Carey of Village Networks. Presumably they who engineered this selfish complaint; sabotaging FTTP rollout to thousands of homes for their own commercial gain. Carey owns 19% of the Village Networks stock; so that’s why he’s in whinge mode.

    And no surprise, Village Networks’ fixed-wireless offering, by comparison, is distinctly lack-lustre and grossly over-priced to AYB’s FTTP. Not even credible competition.

    Village Networks’ “providing an average of 6 Mb/s – 10 Mb/s” with upstream crippled to 1 Mb/s (or worse) for an eye-watering £30 a month with or without a 60GB cap; installation at £222 and another £90 for their budget router.

    Thanks, but no thanks, Roger. No brainer when FTTP is almost on our doorsteps.

    Bring on the fibre, Aylesbury Vale Broadband!

    https://beta.companieshouse.gov.uk/company/04603174/
    https://beta.companieshouse.gov.uk/company/09661210/

    1. Avatar Justin says:

      Well said Evan. I live in an area where Village Networks claim to be delivering super-fast speeds – what a joke! They don’t even believe in their own product so they’ve become a reseller for Gigaclear.

      Village Networks are living in fantasy land if they think their network is super-fast. Doesn’t matter though, they can say what they like, we all know the truth about their network – we can’t wait for AVB to arrive.

    2. Avatar YourMum says:

      sitting on VN with a 30mb connection – moron.

    3. Avatar BB says:

      Anyway Evan who pissed on your chips?

      Id be quite rightly pissed off too if the local council used public money to fund vanity project without first doing proper due diligence.
      Whoopee do, Roger owns 19% of Village Networks – no surprise then that he has a vested interest and is speaking on behalf of VN!

      As a VN long term subscriber I am extremely happy with the service, the level of detail and support overall happy to support a local small business! with a FREE STATIC IP ADDRESS! thank you VN!!!

    4. Avatar DadHere says:

      Nigh on 50meg for us with VN — UNCONTENDED.

      Stick that in your pipe “Mr Christall” & “Mrs Mills” – fools.

    5. Avatar Paul says:

      Hi,

      Thank goodness VN are here. They provide an excellent broadband in this area and have done for years. They do a fantastic job, provide great support. Would like to see “Mr Mills” do that LOL. “Mr Mills” can only go around and rubbish his competitors because his service is a load of old crap!

    6. Avatar TheFacts says:

      @DadHere – uncontended to where?

  8. Avatar fastman says:

    I think the point that some are missing is the issue for the State aid will not be just village networks although no market test was done on the area – its whether a body used public money without any procurement or market Test

    Section 106 is money into a local authority

    1. Avatar Justin says:

      I disagree fastman. The point isn’t the issue of state aid (and it doesn’t sound like AVB are concerned about that), but if you read Roger Carey’s letter this time he’s whinging about AVB delivering a wireless service rather than fibre. I can’t see any mention in this article as to whether AVB was asked about this claim, and from what I’ve seen on the roads AVB are definitely putting in fibre. Me thinks Roger has got the wrong end of the stick again.

    2. Avatar Steve Jones says:

      @Justin

      You can disagree all you like, but the fact is that an investigation is being opened and it could very well included going into the mechanism that AVDC chose to avoid putting this out to a tendering process. Read the AVDC minutes on the subject, and they believed they didn’t have to go through the sort of hoops that BDUK did in tendering due to the amount being invested by the district council being lower than a procurement threshold (without specifying what that threshold was – reading the EU rules, there are a couple which might apply).

      Now I’m not expressing an opinion as to whether or not that AVDC complied with the law, but the important thing is that it is the law that is applicable in this country, and you might not like it, but it is beholden on local authorities to comply with it. We will see what happens, but the AVB project always looked unusual. There isn’t anything quite like it. Perhaps the (financially disastrous) South Yorkshire Digital Region scheme which left the relevant local authorities with a massive financial loss). That scheme was also starting to run into issues with EU state aid rules as new funds would have been required to keep a hopelessly loss making exercise going.

  9. Avatar Roger Carey says:

    Guys – some facts.

    Our complaint is not against AVB. We have no wish to stop them doing what they’re doing, or to undo what they’ve done. Our complaint is against AVDC, who seem to have ignored all the rules of State aid.

    We don’t compete with FTTP, never have, never will. Can’t. Wouldn’t. Fibre’s always best, if you can get it. But as everyone knows, 100% coverage of rural fibre doesn’t make financial sense, hence fixed wireless (look at the West Oxfordshire broadband contract). Even AVB is offering wireless connections for people it can’t reach with fibre.

    Of course we believe in our product. It’s served our subscribers brilliantly since 2003, coming from a dazzling 2Mbps to today’s 24-30Mbps. Sure, some of our subscribers in the darker corners of our network get less than superfast. And the great majority of them are perfectly happy with what they’ve got. Not everyone out there is a pointlessly speed-obsessed bandwidth junkie. Where they need more, we deliver it. We just try to be responsible with bandwidth, which is not yet an unlimited commodity.

    In a couple of communities in our network, Gigaclear have arrived. The suggestion that we became a Gigaclear reseller came from members of those communities, who like us and our service, see as a supportive ISP and a friendly face, and who asked if they could have the Gigaclear product through us. We’re happy to help. We’re not a fixed wireless business. We’re a technology-agnostic rural broadband provider. It just so happens that wireless is usually the quickest, least disruptive and most cost-effective way to deliver faster broadband to people who need it.

    Broadband Bob is correct. AVB’s business subscription is exactly the same service as a Family subscription, but simply costs another £35 for nothing more than a fixed IP address, which is a uniquely high premium. Add to that the fact the AVB says it distinguishes between personal and business use, and if you’re caught using a non-business connection for business purposes without AVB’s permission, they reserve the right to suspend or terminate services. (I’m not sure how, these days, one can separate the two uses, or how AVB can appoint itself to decide how you will use an internet connection). We give all our subscribers a fixed IP address, at no charge. We also offer business subscriptions. The extra cost covers a higher level of response. AVB’s business package is indeed cheaper than Gigaclear, but offers less. Gigaclear offer specific levels of support and response. AVB’s support and response for business users is the same unspecified concept as for non-business users.

    I’ll take criticism of our network performance from people who actually use the service, and I’ll respond by doing something about it. Evan Crissall is not a subscriber of ours, quotes selectively from our tariff, and seems to spend all his time on ISP Review being miserable, knocking everyone and everything, and looking people up at Companies House. If, instead, he’d stop complaining, got out and did something difficult, like Village Networks have, or indeed, like AVB are doing, he’d realise I’m not whingeing. I’m simply defending my business against unfair competition. Note: we haven’t made any complaints about BT, Rapid Rural or Gigaclear. Mr Crissall suggests we’ve engineered the sabotage of FTTP rollout to thousands of homes. Such tosh. How have we sabotaged it? What thousands of homes? I suppose protecting my business could be described as pursuing commercial gain. Is that less honourable than using State Aid for commercial gain?

    I don’t think Justin is one of our subscribers either, so his opinion of our service clearly isn’t based on experience. But he talks curiously like Andrew Mills who, of course, he clearly isn’t.

  10. Avatar Justin says:

    You’re right Roger, I’m no longer a customer of yours but my neighbours still are and they all wish they weren’t.

    I phoned Connected Counties to get superfast broadband and was told we weren’t part of the next phase of BDUK rollout because Village Networks claimed their network delivers superfast in our area. Thanks for nothing Village Networks.

    You say you’re not knocking AVB but you are. I had a look at AVBs website and I can’t see mention of what their business service SLA is, how do you know what it is (other than the price)? But you’re only making a passing comment and not knocking AVB. “Evan Crisswell quotes selectively from your tariff”, you’ve just done the same thing with AVB.

    At least you said one thing I agreed with, and thats unusual – Fibre’s always best.

    1. Avatar Muppet says:

      Maybe your neighbours would be happier on BT’s dial up speeds? Nothing stopping them!

      But since youre ragging on Wireless can you come lay a few miles of fibre down my drive please? Fibre is best you know Mr Mills 🙂

      …. oh sorry, i mean “”Justin””

    2. Avatar Evan Crissall says:

      He’s full of it. The product that Village Networks is selling for thirty bucks upwards — in their own words — offers an average of just 6 Mb/s – 10Mb/s for most people. How is that even “superfast broadband”? Doesn’t even meet the basic criteria for the proposed “superfast” broadband USO.

      So Village Networks is not competing with AVB’s FTTB on a like-for-like basis. i.e. no match, nor competition for symmetric fibre.

      No one likes a whinger, Roger. Especially one who’s bad-mouthing a reputable rival business, purely for his own gain.

      As for the mark-up on AVB’s Business products, compared to Residential — the general Terms and Conditions are clear :- an enhanced SLA is available for the former, but not the latter. i.e business customers are offered a lot more than just a static IP. Another inconvenient fact for Village Networks.

      From — http://avbroadband.co.uk/wp-content/uploads/2016/01/AVB-Terms-and-Conditions.pdf

      [quote] “enhanced service levels .. can be ordered by a Business or Enterprise customer subscribing to AVB’s enhanced Business or Enterprise Services including an SLA.” [/quote]

  11. Avatar Roger Carey says:

    I have the right end of the stick, Justin. I was approached last week by a resident of a very small, very remote hamlet, where we have a number of subscribers. He said AVB had offered to provide wireless connections for them, but – he asked – was it possible to have two wireless networks in one community?

    I wasn’t whingeing about AVB offering a wireless service, nor was I suggesting that AVB weren’t still laying fibre. I was pointing out that, on the one hand, they claim to be a ‘no aerials, just pure fibre’ outfit, but on the other hand, they offer wireless when fibre’s too difficult. Which is, of course, absolutely the right thing to do. So why overtly knock wireless but covertly offer it? Is that a way to be taken seriously?

    I very much doubt that Connected Counties would have said you weren’t part of a BDUK rollout just because of us. Cabinets continue get fibred in all kinds of communities where we operate, in Oxfordshire, Bucks, Herts and the Thames Valley, in spite of our NGA Accreditation. That’s just a hazard of running wireless networks in a BDUK world.

    I didn’t say I knew what AVB’s SLAs were. I simply said they were unspecified concepts. If they existed, surely they’d be on the website, like everyone else’s. But they’re not.

    The issue at hand is about AVDC and the legality of their State Aid process. The ‘my broadband’s bigger than yours’ nonsense – which is simply irrelevant in this context – was started here by Mr Crissall and Justin. Once again, I find myself departing from the agenda to correct diversionary untruths and groundless criticism of Village Networks from sources openly aligned with AVB. If you want to sit up all night grizzling on comments pages, I’d rather discuss the merits of the case in hand. Simply slinging out insults (Justin, September 5 2016, 9.33pm) doesn’t do the discussion any favours, nor AVB either, whether you’re a friend of theirs, or you actually work for them.

    Justin – I’m sorry you’re a cancelled customer. I’ve checked our database in that category to see when and why you cancelled, but we don’t have anyone by that name in it, anywhere. I am aware, however, that comments contributors often don’t want their real names to be revealed, which would explain things. My name, though, really is Roger Carey, and I have no reason to hide behind another name.

    I’m off to bed. You guys can carry on, but do try and stick to the subject, and the facts. Until that happens, I’m out.

    G’night.

    1. Avatar New_Londoner says:

      @Roger
      Some posters find facts to be an unnecessary hindrance when it comes to sharing their firmly held opinions. So I’m not sure Evan or Justin will be easily swayed by such details, however thank you for sharing your informed view on the story.

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