Brussels, Belgium – The European Commission has approved under EC Treaty state aid rules a broadband initiative by the Welsh Development Agency. The project will provide companies located in 14 Welsh business parks with access to fast broadband services where these are currently unavailable at affordable prices. The Commission concluded that the aid was not likely to distort competition within the EU significantly.

Competition Commissioner Neelie Kroes commented: “I am pleased to endorse public funding for the ‘FibreSpeed Wales’ project. It will allow businesses on the target sites in North Wales to reap the full benefits of the knowledge economy. The project is fully in line with the Commission’s policy to promote broadband in rural and remote areas”.

Wales lags behind the rest of the UK in broadband deployment due to its geographical isolation, mountainous terrain and low population density. A recent comparison by the Welsh authorities found that prices for high-speed services for businesses in Wales can be several times higher than in other areas of the UK. Affordable broadband services for businesses are not available in the 14 business parks in North Wales targeted by the measure because these sites are located in remote areas, making them unattractive for commercial investment by broadband providers.

After extensive market consultations, the Welsh authorities decided to support the construction of an open, carrier-neutral, fibre-optic network linking the business parks. The construction and management of this network, which remains in public ownership, will be tendered out to a wholesale operator. This wholesale operator will then offer its services to telecommunications operators, who will provide high-speed broadband services to business users.

EC Treaty state aid rules (Article 87(3)(c)) allow subsidies for the development of certain economic activities or of certain economic areas provided there is no overall negative effect on competition. The project pursues a clear cohesion objective and is expected to be co-financed by EU structural funds. Moreover, the project is in line with Community priorities outlined in the eEurope 2005 Action Plan and the i2010 initiative.
The UK authorities have implemented a number of safeguards which will ensure that the scheme does not unduly distort competition. The wholesale operator will be selected through an open tender and a repayment mechanism will keep the aid amounts to a minimum. Moreover, the selected wholesale provider will be expected to contribute a substantial proportion of the project costs.