Universal Service and State Aid in the European Union in the Era of NGN

Abstract

This paper was authored with a Japanese audience in mind to explain recent developments in universal service policy and State aid rules for Next Generation Networks in the European Union. Universal service policy is intended to ensure that all members of society should be able to obtain a minimum level access to communications networks at fair and reasonable prices without regard to their where they live, their income level, or other disadvantages. Countries typically pursue universal service policies for communications networks because their benefit in terms stimulating broader economic growth outweighs the possible economic inefficiencies these policies can introduce.

The on-going migration of communication networks to multi-service NGNs holds challenges for universal service policy. Heretofore, these universal service policies have been applied to traditional voice telecommunications networks. Given the decreasing importance of traditional voice telecommunications networks and growing adoption NGNs, industrialized nations are considering whether and how to apply universal service policies to broadband networks.

Within the European Union, efforts are under way to address these questions such as the necessary and appropriate role for governments in funding universal service for NGNs. The rules governing State aid prohibits any form of aid which distorts or threatens to distort competition by favoring certain firms or certain goods. State aid includes, under certain circumstances, the public ownership of firms. The European Union recognizes that State aid can advance common interests and can remedy market failures. However, this approach also limits the way in which State aid can be used so as to not crowd out private investment. In September 2009, the European Commission published guidelines which established distinction between what it calls white, black and grey NGA areas to guide the granting of State aid for NGA deployment. In so-called ‘white NGA’ areas, aid supporting broadband network is generally permissible. In so-called ‘NGA grey’ and ‘NGA black’ areas, State aid is permissible only where the deployment where unsatisfactory or if there is market failure.

These efforts may hold valuable lessons for regulators in other countries, particularly those where the incumbent carrier is partly publicly owned. The European Union approach is intended to present the least intrusive means, and as such it embodies the principle that desired outcome should be achieved with the least amount of effort possible and at the least possible economic cost.

Keywords: universal service policy, state aid rules, NGN, European Union