The UK’s relationship with EU State Aid rules often feels a little difficult but its a complex area where few seem to really understand the art of the possible.
Recently a group of UK cities were reported as saying that state aid rule were blocking investment in broadband in their cities while enabling it in rural areas, and I was quoted in an article suggesting the UK Government is blocking funds for broadband.
Its not my view that funds are being blocked but I do feel that understanding of what the state aid rules can permit is not widespread, and UK public bodies often seem more risk averse than some of their European colleagues; a generalisation but certainly many of the smaller, more decentralized countries struggle less with state aid than the UK does. This can result in a narrower and more cautious approach to issues like broadband.
Three years ago I reported that the level of fibre-based broadband in a country was often inversely correlated to the number of state aid applications for broadband. At the time, the UK had by far the highest number of state aid applications for subsidising broadband investment yet remained unranked in the FttH Council’s European fibre league table, while the Scandinavian countries riding high in the league table also had very few state aid applications.
Let’s be clear: The reason isn’t because UK bodies are deliberately blocking funds for broadband or because the EU has sneakily added rules which target the UK in some way.
Often it’s simply because countries with lower levels aid applications have public bodies with a higher tolerance for risk so their interventions aren’t viewed in the same way by the European Commission.
The rules exist to ensure that when members states opt to intervene in a market, broadband operators in this case, they minimise the resulting market distortion. As covered here before, loan guarantees are considered less distorting than grants, for example.
However, less distorting interventions, like public loans or equity investments, also tend to result in the public body maintaining a longer-term direct involvement in the solution. On the downside this can mean accepting some additional delivery risk but it also means the public body can continue to directly influence the delivery of their social and economic goals.
While I don’t agree that UK public bodies are deliberately blocking funding for broadband, I do believe that a wider understanding of the art of the possible and a measured but enlarged appetite for risk would pay dividends for all.