In a landmark decision published last week, the European Union has concluded that the investment of the City of Amsterdam in the fibre to the home network currently being deployed was not state aid. This investigation was ongoing since december 2006 when cable operator UPC has complained to the EU competition authorities that Amsterdam was using state aid to deploy the network in an area where there was no market failure.
Local and national governments, under European Union rules, are not allowed to resort to state aid to finance projects where competition is present and/or private market players are willing to invest in their own terms.
This ruling, however, stipulates that public investment in a public-private partnership, even in areas where no market failure has been proven to exist, is in conformity with EU rulings provided that:
- the private contribution is higher than the public contribution,
- the private investors have enough power to steer the consortium
- the business plan is sound and based on private market principle of return
- the public and private investors invest on equal conditions
- the risks of failure are shared equally by all parties
This is a landmark decision in that it may very well prompt more local government involvement in FTTH deployment especially in countries where the incumbent operator is not seriously considering such deployment (Germany, Italy, UK) and where no private operator is powerful enough to consider deploying on his own.
In more ways than one, Amsterdam's CityNet is proving to be a beacon and a model...
