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STATE AID AND IMPLICATIONS
FOR PROJECT DEVELOMENT
Birmingham 30th
April 2013
Robin Bosworth
Tracey Sheehan
INCA
ULTRA-CONNECTED
CITIES SEMINAR

2.
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- Current State Aid landscape
- Implications for Cities
- Potential State Aid Neutral Project Options
- Commercial Models
- Conclusions and Implications
Contents
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> The EU Guidelines for the application of State aid rules in relation to the rapid
deployment of broadband networks (2013/C 25/01) (“the Revised Broadband
Guidelines”)
> Update as to the position – UK Government has not written to provide its
explicit unconditional agreement within the 2 months deadline at paragraph
(90)
> In the absence of any reply the EU Commission will assume that the Member
State in question does not agree with the proposed measures
> Overview of the main changes:
- Open access - increased levels of access (i.e. dark fibre, ducts etc.)
- Allows for Ultrafast Networks
- Strict competitive conditions for Ultrafast Networks
- More lenience in rural areas in respect of access
- Introduction of the concept of step change
- Increased transparency and reporting requirements
- Increased role for the NRA’s
- Raised the claw back threshold from £1m to £10m
Current State Aid Landscape

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> UK National Broadband Scheme for the UK
- EU Commission’s view is that this decision can not be transposed onto
Urban projects
> SCCP – Urban Umbrella notification has not been progressed – The scheme
looks to have been changed to Vouchers
- Vouchers used at national level will be subject to a State Aid
notification
> Birmingham Digital Districts State Aid Clearance
- EU Commission challenged by incumbents on grounds of:
 Alleged Overbuild
 Service portfolio - access conditions
 Cream skimming
Current State Aid Landscape (cont.)

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> State Aid Landscape - unclear
> No infrastructure procurements using UBF funds
> Incumbents are opposed to certain requirements of the Revised
Broadband Guidelines – Access Conditions
> If a City wants to fund an Ultrafast Network it would need to:
- Lodge it’s own State Aid Notification for approval
 Full investigation – 9-18 months?
 Risk of appeal
- Seek a State aid neutral route
Implication for Cities

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> MEIP
- A public contribution from public funds does not involve State Aid if it takes
place at the same time as a significant capital contribution on the part of a
private investor (operating under normal market economy conditions) made
in comparable circumstances
- Not impossible but not an easy option
- Requirement of transparency
- Needs a robust business plan showing an adequate return on investment
- Proportionate Control/Risk Sharing
- No contribution in kind
- Risk of Challenge
> Loan
- If loan is on “soft” terms it will be considered State Aid as it provides the
recipient with an undue economic advantage
- Any loan would needs to be at arms length terms
- Need to show a commercial rate
Potential State Aid Neutral Options

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Potential State Aid Neutral Options continued
> Services of General Economic Interest (SGEI)
- Definition:
A SGEI is a service of an economic nature that public authorities identify as
being of particular importance to citizens, but which are not supplied by
market forces alone, or at least not to the extent and under the conditions
required by society
- To be regarded as a SGEI must satisfy Article 106(2) TFEU, the Altmark
jurisprudence and the new SGEI package adopted on 20 December 2011
- Difficult case to argue in respect of an urban setting
- The Commission considers that:
 in areas where private investors have already invested in broadband
infrastructure; and
 are already providing competitive broadband services with adequate
broadband coverage
then setting up a parallel competitive and publicly funded network could not be
considered to be a SGEI (paragraph 20 of Revised Broadband Guidelines)

8.
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> Infrastructure Options
- Ducts
- Shared tenant services
- developers/landlords
- framework for ICT in
construction projects
- Wireless Concessions
- timing
- industry appetite
- Public Sector
sites/solutions
- Incubators
- showcase for SMEs
- Private sector funded
fibre build
- anchor tenant?
- loans
Possible ‘Neutral’ Project Scope

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> Vouchers
- Cannot replicate other interventions
- Requires granular mapping and analysis
- Sector based approach
- How to consolidate demand?
- Geographic area?
- Multi- tenanted sites
- Requires dedicated resources
- Market communications
- Stakeholder engagement
- Administration and audit
- Avoid a post code lottery or disappoint the market
> Demand stimulation
- Market surveys
- Registration programmes
- Demos
- Training
- Sector/segment driven campaigns/subsidies
Demand Side Measures

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> Minimise risk of challenge – key requirement of DCMS
> 2015 !
> Will a demand side only measure deliver the aspirations of the City?
- Provide ubiquitous coverage
- USP to drive inward investment
> Multiple project streams
- Vouchers and demand stimulation +
- Wireless procurement
> Can/should a parallel state aid neutral infrastructure based approach be
explored?
- There is some market appetite
- Alternative funding sources – EU, Private
- Harness:
- public sector assets
- private sector developments
Implications for Project Delivery

11.
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Contact Details
Tracey Sheehan
Taylor Wessing LLP
t.sheehan@taylorwessing.com
Robin Bosworth
Mott MacDonald Group Limited
robin.bosworth@mottmac.com

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