The UK’s relationship with EU broadband 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.

 

  1. Walter G M Willcox says:

    1. I reproduce below a piece written by Frazer Munroe of High Point Infrastructure on the Isle of Wight.

    2. Precisely what does HMG think they will achieve with their latest “Superfast Britain” TV advertisement which has “Won’t be fooled again” (The Who) as its background music.

    ____________________________________________________

    I think you may be missing the point that many of us feel very strongly about.

    Many of us agree that these massive sums should not have been spent from the public purse. We would much rather have seen an ‘inclusive’ tender process where innovative, effective, efficient and well established regional providers were allowed to bid to offer more effective solutions at far lower costs. Instead the tender process ensured that every single regional provider was excluded – so that lower cost, higher speed and far more effective solutions were all ‘buried’ from view – leaving only the encumbant BT’s outdated, hugely expensive, and under performing copper based FTTC as being eligible for public funding.

    This narrow minded and unjustifiably exclusive approach by government and supported by local authorities, led to the elimination of any competiton and the suppression of genuine private investment initiatives that were well under way getting the job done in many rural areas.

    For example in our county on the Isle of Wight, there are 2 local providers who have invested hundreds of thousands of their own money – with ZERO pounds of public money – to deploy effective solutions to provide high speed into rural areas that had little or nothing from BT’s phone lines. Both providers sumbmitted comprehensive details of their coverage and capabilities to the local authority and BDUK – NOT TO ASK FOR ANY PUBLIC FUNDING – SIMPLY SO THAT PUBLIC MONEY WAS NOT WASTED SUBSIDISING BT IN THE AREAS ALREADY COVERED BY THEM.

    The local authority and BDUK made the ludicrous decision to deem all existing coverage as ‘not existing’ and gave a green light to their own BT/BDUK project to use publc money to overbuild areas where private investment had already solved the problem. This caused 2 major issues : 1. It cost the tax payer millions of pounds that did not need to be spent, and 2. It caused independant local providers to be forced to stop all further investment as they have no way of knowing or finding out which areas the public money will be spent in and which it will not – this information on where public money is beng handed out to BT is being actively kept SECRET from everyone! Independant local providers cannot therefore identify areas where they can target their own investments. The result is that the private money that providers are ready, willing and able to spend in our region has to sit ‘unused’ while public money is drained down the BT plug hole buying overpriced cabinets and supporting an outdated FTTC system that every shred of evidence that exists proves will underperform, underdeliver and cost far more than other options – options that were silenced, burried from view and excluded.

    As a result the cost to the public purse in rural areas is massive. The sums are so huge I’m not surprised that people are upset by how much is being spent on rural folk. However it’s not the fault of the rural folk that live there – they did not ask for and did not want overpriced and underperforming ‘old fashioned’ copper phone line broadband contracts awarded to a monopolistic and inefficient encumbant in an uncompetative process that excluded the majority of available providers. All that rural folk wanted was decent broadband – and that was available and achievable at a fraction of the costs that will be incurred by these BT/BDUK schemes.

    The problem is the sums are so unreasonably high because the technology choice was unreasonable. That happened because the tender process was unreasonable – a one horse race where the winning horse runs slowly and only on expensive copper hooves.

    If there had been a shred of genuine competition in the tender process then local authorities would have had a portfolio of choices from competing ‘systems’ offering a range of price, performance and coverage templates to choose from within different technologies. If some genius had then thought of possibly even combining technologies – so that copper was used in high density areas with short distances, and perhaps wireless was used for low density areas with long distances, then the results could have been a cost effective, efficient and ‘fit for purpose’ system at a small fraction of the cost to the public purse. Saving hundreds of millions of pounds and easing the sting in the tail for the public purse.

    • Bill says:

      much that i disagree with much you say and do Walter, i will agree with you on your points here.

      However your words, like mine are futile. The EU ratified the current funding setup, as far as uk.gov and the LA’s are concerned they are 100% safe and risk free with the current strategy.

      The state aid protections have all but been completely waived, the requirements for a Wireless ISP to be considered as NGA compliant are similar to gaining access to the Plans for demolition of Arthur Dents house* .

      Kijoma has been operating full commercial networks for over 9 years , in that time the LA’s have done there best to hide or defame our service, even within the county our business was formed and operates. the BDUK process only worsened this.

      Fortunately despite clearly targeted overbuild of some of our coverage areas (those with the highest take up per population) we are spread across 5 counties and have already evaluated where FTTC will fall or fail to a great extent.

      Like the ADSL fiasco before the result of BDUK will create even more divides between the have/have nots. we will invest and diversify where needed and withdraw where not.

      Bill

      *hitchikers guide to the galaxy

      • Adrian Wooster says:

        I agree that the rules surrounding wireless are tricky to traverse but a key problem I’ve seen repeated over and again is that much of the industry hasn’t really understood what the rules mean, how state aid actually works, and how they might use them to their benefit. It is perfectly possible to get alt-net footprints removed from county plans, and has been done, but it takes time and a proper understanding what the process. While the amount of time for a small business is painful, it may be better invested than seeing a network overbuilt.

  2. Chris Conder says:

    Its disgraceful Walter, it really is a superfarce. The powers that be are being led by the nose by the telcos protecting their copper assets. Thank goodness you keep all this info, its going in our history books for sure. We need altnets. We need competition. We are witnessing a growing digital divide with public money being wasted on obsolete patch up technology, and a feckless regulator and ASA allowing them to call it ‘fibre broadband’. Indeed, a superfarce.

  3. Bill says:

    so what you are hinting at is the government getting involved could be good and is in other countries.

    however here when it gets involved it tries to engage with the market, is quickly bullied into a single provider solution and then proceeds to pay what that provider demands.

    The result , Market distortion, commercial providers reduce or stop investing in their own networks until at least all the money is spent and the targets still not met, despite the promises and rhetoric.

    Just as they then go to do that, the cycle repeats… ADSL..FTTC..etc..

    Value for money, especially in the final 5-10% is questionable at least at present.

    it is so many wins for the chosen one , the government will promote and advertise for you too, even on prime time TV.

    In fact they will make so much money they can then afford to buy other telco’s up and pay for expensive sports rights..

    Cue competitive advantage over the many providers that rely on their infrastructure.

    Monopolies do what they do.. even under the disguise of “open network” competition.

    • Adrian Wooster says:

      I’m not sure it gets bullied. I think the risk appetite in the public sector is lower than in some other countries which can lead to a reduced set of options.
      Also, I’d argue that value for money in the final 5-10% can be managed if those additional options are available. The West Oxfordshire project is an attempt to adapt a model which may be more common in some quarters of Europe but new to broadband in the UK, and which seeks to deliver value for money for each stakeholder involved.

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