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Factsheets / What can local governments legally do to ensure fast internet access in rural areas?

A lack of fast Internet access (‘fast Internet’ in short) in rural areas is a problem that has been growing for years. The market is failing to provide an essential facility to areas that are less densely populated, causing a digital divide between rural areas and urban areas. Although EU state aid rules can be complex and difficult to interpret and apply in practice, they certainly leave room for governments to ensure that nobody is left without access to an essential facility such as fast Internet. In order to avoid falling behind, it is important to make full use of the possibilities that do exist.

1. MANY RURAL AREAS ARE STILL LACKING FAST INTERNET ACCESS

Unfortunately, complaints about a lack of fast Internet access in rural areas are still prevalent throughout the EU. Even in the Netherlands for example, one of the most densely populated and connected countries in the EU, research has shown that in 2015 about 330,000 households and companies in the Netherlands don’t have access to fast Internet. (This estimate even appears potentially optimistic, because coverage data of existing market providers appears to have been used. Such parties have a clear incentive to paint a better picture than may exist in reality.)

Research has also shown that there are almost 150 civil initiatives in the Netherlands that are trying to realise fast Internet in their municipality, town or village. In many cases such initiatives unfortunately fail because realising fast Internet access in low-density areas is not sufficiently profitable for market providers, and citizens themselves lack the necessary means to do it.

2. THIS PROBLEM IS CAUSED BY OLD, LEGACY INFRASTRUCTURE

The reason why many rural areas are still without fast Internet access, is that the distances are too great for the broadband infrastructure currently available. More remote addresses are often connected only to an old copper telephone wire, used to provide DSL Internet access. Whereas in densely populated areas every new generation of DSL technology manages to squeeze more data through the tired old copper wires, rural Internet speeds have been stagnating for years, because newer technologies cannot be applied on longer distances of copper cable or achieve even lower speeds than older technologies.

The same problem applies for mobile Internet. Newer technologies use higher frequencies to achieve higher speeds, but higher frequency waves also fade away more quickly. In more remote areas, 4G coverage is often still very spotty. It is to be expected that this problem will continue to exist and may even be exacerbated with the higher frequencies of 5G.

3. POLITICAL ACTION APPEARS NECESSARY

For such reasons, many local and national governments have begun making policy to ensure fast Internet access is available to all. For example, several countries have notified national or regional aid schemes for broadband to the European Commission for approval (e.g. Italy, France, Germany, Poland, Austria, and the UK). In other countries, like the Netherlands and Belgium, a national aid scheme is still absent, and aid schemes under the General Block Exemption Regulation (GBER) have not always proved effective.

4. COMPLEX STATE AID RULES MUST BE COMPLIED WITH

The way in which EU state aid rules are currently applied to broadband, forms an obstacle for policy intervention. Under current doctrine, broadband provision should primarily be left to the market, and interference is either unwelcome, or must be thoroughly justified. Aid above a certain amount (currently €200.000, for most situations) must be notified to and approved by the European Commission, or be exempted under the General Block Exemption Regulation (GBER).

5. MARKET CONSULTATION REQUIRED

In accordance with the state aid rules market providers must first have the opportunity to provide fast Internet access by themselves. Only where market providers are insufficiently able or willing to do so, governments may interfere. For this purpose, a market consultation is required, in which market providers are requested where (on which addresses) they can guarantee which speeds, now and within the next three years. This is necessary in order to establish if a broadband problem actually exists, and where (also called ‘mapping’). It is important to require hard guarantees, as any data provided by existing market providers may otherwise be difficult to trust or verify. Doing one’s own research (e.g. establishing which cable infrastructure is available on which addresses) is also advisable.

 

6. JUSTIFIED INTERVENTION

Where market providers prove not able or willing to guarantee the required coverage and quality (so-called ‘white’ areas), intervention can be justified. Government interventions that are necessary and proportionate to guarantee an acceptable minimum for all, should normally be permissible.

It is advisable to limit any intervention to aspects which cannot be sufficiently provided by market providers. It is generally not advisable for governments to invest on a short term in active network equipment (which is better left to market providers), but rather to focus on sustainable investments in physical infrastructure on a long term – longer than market providers may be capable of.

7. NOTIFICATION AND APPROVAL

A state aid measure must be notified by the member state to the European Commission. This normally occurs through the Member state’s formal contact point (e.g. the interior ministry and its permanent representation). To initiate a notification procedure (as it is currently), an online notification form must be completed and submitted, including an additional questionnaire that must be attached as a separate (Word) file. When the notification is complete (when the Commission does not have any more questions), a decision will follow within two months. This process offers the most certainty.

8. GENERAL BLOCK EXEMPTION REGULATION (GBER)

The GBER holds that certain specific forms of aid are deemed compatible with the internal market. Approval for aid measures which fully comply with the GBER, do not need to be approved (it is only required to inform the Commission of the measure). A disadvantage of the GBER, however, is that the requirements for broadband aid can be somewhat vague and complex, which can lead to uncertainty whether the measure is truly permitted. Furthermore, aid measures under the GBER stand more chance of being thwarted (e.g. by objections from market providers), compared to measures which have been explicitly notified to, and approved by, the European Commission.

9. WHAT CAN GOVERNMENTS DO IN PRACTICE TO SOLVE BROADBAND PROBLEMS?

Every government who wishes to ensure availability of fast broadband, should ask and answer the following questions:

1. What level of coverage and quality do we wish to achieve and when?

a. Consider the EU targets, for example:
i. By 2020: universal availability of at least 30 Mbps and at least 50% of EU households actually subscribed to at least 100 Mbps;
ii. By 2025: universal availability of at least 100 Mbps, upgradable to Gigabit (1000 Mbps) speed, Gigabit connectivity for all main socio-economic drivers such as schools, transport hubs and main providers of public services as well as digitally intensive enterprises, and uninterrupted 5G coverage in all urban areas and all major terrestrial transport paths (e.g. highways and railroads).

2. What are we willing and able to do to achieve our target?

a. What kinds of intervention are we willing and able to perform to achieve our target? (e.g. subsidies, soft loans, or guarantees to market providers, co-investment, or direct investment.)
b. What budget will be required and available?

3. Who do we need to help us in answering these questions and achieving our targets?

After these questions have been answered, a market consultation and own research (‘detailed mapping exercise’) can be initiated in order to establish to what extent current broadband infrastructure is capable of guaranteeing the achievement of the targets, now and within the next three years.

Where the required coverage and/or quality are not guaranteed, a solution will be required. It is advisable to first try to find a solution together with market providers. When this proves impossible, only a single option remains, which is to procure the construction of a network (via a public procurement procedure).

10. QUESTIONS?

Please contact Legal ICT’s broadband specialists on +32 (0)2 535 77 55 or at info@legalict.com.

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