1. Rationale for the EU Commission
Decision on State Aid
Richard Williams – Programme Manager,
Birmingham Digital Districts

2. Agenda
Digital Districts Programme – Scope, Aims and Objectives
 The State Aid Process
 SANI and Supplementary Information for Pre-notification
 The Basis for the Decision
 New Draft State Aid Guidelines

3. The Proposal and Basis of the State Aid Notification
• To build and operate an open access broadband infrastructure network that
will be pro-competitive and enhance digital connectivity
• Key benefits
– Provide businesses with access to Ultrafast connectivity from 100Mbps symmetrical services to
40GBps
– Lower costs to businesses
– Offer a platform for innovation amongst service providers
– Drive competition
– Act as a test bed to be expanded across Birmingham and the West Midlands
– Stimulate economic development and growth
– Drive sustainable solutions

4. Phase One Phase two+
 Potentially twice the size of phase 1
 Covering regeneration & employment areas
 Maintaining a contiguous approach

5. The State Aid Process
The steps –
• Consider whether State Aid clearance is required.
• Depending on your proposals, consider timing of state aid submission, - the new state aid
guidelines ( formal consultation ends in September 2012)
• Begin Pre Notification Contact with the Commission to discuss project and obtain a view as to
whether the project should follow full notification process or utilise the Simplified Procedure for
State Aid
• Liaise with DCMS, BIS and OFCOM

6. The State Aid Process
• Form is completed on-line using the SANI system
• Submission of Supplementary Information Sheet – crucial
• Timetable and decision
– Started August 2011 hoping to get decision under simplified process – refused
– Moved to full process in April 2012
– 86 information/clarification email exchanges between us and Commission
– 7 teleconferences to talk through the responses
– Support from the Office of the Director-General for Information Society

7. Additional Areas of Challenge
Following The notification
•Granular modelling of:
– Existing and planned infrastructure – detailed maps from every operator/cabinet level analysis
– Demographic profiling
•Price benchmarking
•Has consultation process been adequate?
- Meetings/Open Days/ Web
•Open Access
– At the passive level…”it is absolutely imperative that all types of wholesale access products are offered
in case of such ultra-high speed networks, including dark fibre”
– All operators must have access to passive infrastructure (eg multiple ducts and fibres)
•Commercial model – ensuring competition
– Public sector owns passive?
– Gap funding?
– Full SPV?

8. Basis for the Decision –
Test of Compatibility
3 key questions.
1. Is the aid measure aimed at a well-defined objective of common interest (i.e. does
the proposed aid address a market failure or other objective)?
2. Is the aid well designed to deliver the objective of common interest? In particular:
(a) Is the aid measure an appropriate instrument?
(b) Is there an incentive effect, i.e. does the aid change the behaviour of firms?
(c) Is the aid measure proportional, i.e. could the same change in behaviour be obtained with less
aid?
(3) Are the distortions of competition and the effect on trade limited, so that the overall
balance is positive?

9. Does the aid address market
failure or other objective?
EU Conclusions
Classified FTTC networks as temporary, interim investments especially for urban
areas, suffering from the same limitations as basic broadband ADSL types of
networks
Classified our Digital district as "grey area" regarding the availability of basic
broadband networks, and partly as a "grey NGA area" regarding the availability of
NGA networks
 It agreed that aid is in line with EU Strategy and National Strategies
-Digital strategy 2020
-National Broadband strategy
-Britain’s Broadband Future Report
In July 2011, only 0.9% of the broadband lines were able to provide at least 100mps download speeds

10. Limit the extent of market distortion
EU Concluded:
Market research and consultation:
-Sufficiently detailed to limit potential distortion of competition
Wholesale access: The selected operator
-will have to offer a wide range of wholesale services and access to the subsidised network
during the complete lifetime of the project (or min 25 years)
- will have to offer other operators access to the active and passive network elements in an
open, transparent and non-discriminatory manner.
Price benchmarking:
- the prices of access wholesale prices will be based on the average published (regulated)
wholesale prices that prevail in other comparable, more competitive areas of the country and
the EU.
Technological Neutrality
- any procurement should be technology neutral, but recognised that ultra-fast broadband can
only be delivered through fibre to the premise solution

11. EU Commission Overall Conclusion
The Commission noted that:
 the public intervention will be able to ensure a significant
improvement in terms of broadband availability
 considerable new investments in the broadband network will be
undertaken by the selected bidder
 the subsidised infrastructure will bring such new capabilities to the
market in terms of broadband service availability and capacity
 these services are not provided and would not be provided by the
market on commercial terms in the near future of three years.

12. New Draft State Aid Guidelines –
Consultation ends 1st September 2012
Key Features
“NGA” networks are defined as wired, fibre-based or advanced upgraded cable
networks
Acceptance that FTTC is considered as an interim solution
Shift towards social cohesion – need to strike a balance between very high speed and
digital divide in rural areas
Requires that OFCOM supports local authorities with State aid schemes
Any new schemes would require a “step change” in terms of broadband availability
Provides greater opportunities for Members states to determine type of intervention e.g.
can create backhaul network or just undertake civil works
New section of use of existing infrastructure – requiring Member States to set up
national database on the availability of existing infrastructures

13. New Draft State Aid Guidelines –
Consultation ends 1st September 2012
Classification of White, Grey and Black for NGA
 If there is basic broadband, but no NGA, then this is a white
NGA area and is eligible for State Aid
 State Aid will only be granted for passive and neutral NGA
infrastructures
 Ultra fast networks are envisaged as FTTP providing a
minimum of 100mbps, symmetrical, offers a step change and
can be operated as wholesale only

14. Questions
Richard Williams – Programme Manager,
Birmingham Digital Districts
Email: richard.williams@birmingham.gov.uk