ETNO Contribution to European Commission Consultation on the Draft “General Block Exemption Regulation” (GBER II)
ETNO welcomes the opportunity to comment on the draft “General Block Exemption Regulation” (GBER II) and recognises the importance of setting appropriate rules in this regard. Please note that ETNO’s wider position regarding the use of public funding in the rollout of broadband infrastructure can be found in the submission which was made in response to the consultation on the EU’s Broadband Guidelines in 2012 (http://www.etno.be/home/positions-papers/2012/44).
While ETNO recognises the value of streamlining the process for state investment in broadband, it urges the Commission to exercise caution with regards to the risk of duplicating investment in broadband networks.
In this context, ETNO would like to reiterate its long held view that the deployment of broadband networks in the EU should be done primarily by the private sector and that public funding should be limited to those areas where there is no business case for the private companies to invest. In ETNO’s view, public funding should remain complementary and should not substitute the investment of market players. Moreover, we believe that any state aid measures for broadband should be selected on a technology neutral basis, supporting the market’s choice of the most appropriate and efficient technologies and services to reach the Digital Agenda targets.
The principle of “non-crowd-out”, well defined in the Broadband Guidelines, should therefore remain valid in all networks deployment projects. The General Block Exemption Regulation should therefore explicitly include, in art. 3 “Aid for broadband infrastructures” the key principle of “non-crowd-out”.
The criteria for compatibility set out in the Draft Regulation should be stricter than those of the Guidelines in order to ensure the efficient implementation of the latter. Therefore, the criteria of article 3 should be construed more strictly.
Article 3 (3) sets out that “broadband investment shall only be located in areas where there is no infrastructure of the same category and where no infrastructure is likely to be developed on commercial terms within three years from the decision to grant the aid’.
First, it is ETNO’s view that the starting date for the three year deadline should correspond to the date of the planned effective deployment of the public network and not the date at which the decision was taken to grant the aid as is currently proposed. Under the existing proposal, it is possible that the Government could incorrectly and prematurely identify market failure. Providing a longer timeframe for examining the possibility of market failure will allow private enterprises a greater opportunity to develop a business case for investment and may ultimately reduce the risk of unnecessary public subsidy.
Second, to clarify the vague expression “on commercial terms” the wording provided for the EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks should be referred to, i.e: “the investment shall be located in areas where there is no infrastructure of the same category (either basic broadband or NGA network) and where no private investors have concrete plans to roll out such infrastructure”.
In ETNO’s view, the basis for specifying this particular threshold is unclear. Our preliminary assessment is that the proposed threshold of 70 million Euro is too high with regards to the exemption that would be applied to all projects below this level. This level of investment is significant and in smaller markets it is likely to cause significant market disruption. In this context ETNO suggests the introduction of a lower threshold to limit the likelihood of market upheaval.
Definitions and technological neutrality:
Article 3, para. 2 sets out that the various investment costs which would be exempted in the context of this regulation. Specifically, it notes that ‘investment costs for the deployment of very high-speed next generation access networks’ would be eligible. In ETNO’s view, this reference to high speed networks is insufficient as it should correspond directly to the definition of NGA networks which was provided in the State Aid Guidelines for Broadband. It would be logical to reference or cite this definition for the avoidance of doubt. Specifically, it is important that the definition of NGA networks be technology neutral – allowing, in particular, for the inclusion of the upgraded copper networks and upgraded cable networks based on DOCSIS 3 and fibre upgrades based on Vectoring DSL. Enhancing the capabilities of FTTN-solutions can be a cost-efficient way to provide speeds of up to 100 MB in less dense areas, thereby limiting the amount of public resources needed and contributing to achieving the goals of the EU-2020 strategy.
ETNO suggests the following inclusion:
At the current stage of market and technological development NGA networks are:
[…] (b) advanced upgraded cable and copper networks, […]”
The definition of full unbundling is not in line with the definition provided by the State Aid Guidelines of January 2013. The latter foresees that “in certain circumstances, virtual unbundling may be considered equivalent to physical unbundling”. ETNO advocates that the EU Commission should include this sentence in the definition of full unbundling in the draft regulation. In fact, only a coherent approach between the upcoming general block exemption regulation and the State Aid Guidelines would promote the principle of technology neutrality and confer legal certainty to market operators.
In ETNO’s view, when selecting roll out technologies, the Commission should encourage aid granting authorities to select network technologies and architectures which are best adapted to market needs in order to minimize the costs of publicly funded roll-out in the relevant areas where private sector investment is not viable. In this context, the definition of NGA under the revised draft Guidelines should be clearly included.
The wholesale access obligations for FTTC-Networks should also be technology neutral.
 Communication from the Commission, EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks, (2013/C-25/01)
 For example in countries like Germany and [?] the current notification threshold would probably turn the recently published State Aid Guidelines for broadband deployment obsolete as it exceeds the budget foreseen in most of the recent state aid schemes approved in these Member States.