CASE STUDY ONE :
SUPPORT FOR BROADBAND
Overview
From the following case studies it can be seen that as long as new network projects only serve the public sector and only provide citizens free access to public sector websites and public sector non-commercial content, then State aid is not involved.
However, where public money is used to fund a new broadband network which would result in additional spare capacities which would be commercially exploited and provides advantageous conditions in a market which already has a high density of broadband platforms clearly has State aid implications.
Case 1 - Prague Municipal Wireless Network – NN 24/2007
In May 2007, the Commission considered that Prague municipal wireless network project did not constitute aid.
Project -
This project was initially planned in 2 phases:-
Phase 1 - entailed the construction and operation of a complete WiFi infrastructure (antenna for hotspots in the target areas, backbone connection to link the various hotspots) and the provision of free wireless internet access only to non-commercial public sector content and services, such as e-Government services and tourism information.
Phase 2 was the commercial exploitation of the new network through a public tender process. Third party operators would have had the possibility to obtain wholesale access to the network at non-discriminatory conditions. These operators would have been able to use capacity on the new wireless network to offer broadband internet access to citizens and business users.
Complaint -
Another network operator raised a complaint with the Commission against the public funding for a free broadband wireless network in the City of Prague.
Commission obliged to investigate -
After an investigation the Commission found that the initial plans for the commercial use of the network (phase 2) could have raised doubts from a State aid perspective, since the creation of a new broadband network with public funds and its availability for commercial exploitation at advantageous conditions, in a market characterised by high density of broadband platforms, and in light of the existing investments made by private network operators could have raised questions about the necessity and proportionality of such a measure in an area well covered with broadband services such as Prague.
Project changed -
Following the Commission’s findings, the Czech authorities considerably modified the project.
The project (now only phase 1) includes the provision of high-speed connectivity to public buildings and institutions (such as schools or municipal buildings), the provision of free internet access to public administration services (such as eGovernment services) and to public sector information for citizens as well as the development of public sector applications (such as mobile camera surveillance of municipal areas or traffic monitoring and control). The network would enable all citizens in the covered areas to have free broadband access (using their laptops, mobile devices, etc.) limited to public sector websites and content.
Commission’s Decision -
The Commission came to the conclusion that Phase 1 of the modified Prague wireless project does not constitute State aid as it does not confer an economic advantage to an undertaking. The network is only used for the public sector and to offer free public access strictly limited to non-commercial public services and content.
The Commission advised the Czech authorities, that if Phase 2 of the project was pursued in the future, the plans would need to be notified before they could be put into effect.
Case 2 - Welsh Public Sector Network Scheme – N 46/2007
In the same month the Commission also found that a Welsh public sector network scheme did not constitute State aid.
Project -
This project’s aim is to provide public sector organisations in Wales with high availability, high bandwidth managed network services and will allow public sector organisations to work more effectively together and improve the delivery of public sector services to the citizens.
Commission’s Decision -
The Commission came to the conclusion that the Welsh Public Sector Network Scheme does not constitute State aid because:-
CASE STUDY TWO :
SUPPORT FOR MUSEUMS
Measures concerning Ecomusee, Alsace - NN136a/2002
Background -
Ecomusee is a site of cultural and heritage interest. Based in Ungerheim, Alsace, it is organised around an Alsace village where ancient houses have been preserved, restored and reconstructed, and an old potash mine.
In the village there are exhibitions of collectable objects and reconstructed old trade workshops where you can visit a reconstructed, interactive demonstration of typical Alsacian village life over the centuries. The museum was complete with a small structure welcoming tourists. Principally, a 40 bedroom hotel, with 2 restaurants and shops with hand crafted products.
The main aim of the operations were as follows:
European Commission Analysis -
The Commission noted in the first place, that the sole subsidy given to ECOPARC was in the framework of an approved regime.
The Associations’ activities are conservation and museum management. This is exactly what certain establishments, such as the Museum Grevin, Paris, exercised under the designation of museum activities bound to the field of leisure tourism, the Commission noted that in these types of cases, the activities of the association were very relevant to scientific activities of museums of a more classical/standard term as testified by the fact that Ecomusee was controlled by the Direction des Musees de France. The Commission considered that it was probable that the associations did not constitute enterprises according to the EC Treaty as they were not engaged in commercial activities in a competitive sense. As a result, the subsidy did not give them a competitive advantage. The aid given to the 2 associations took the form of investment aid and operating [functioning] aid.
Second, the Commission considered that, in principle, museum activities were not tradable between member states. In fact, with the exception of some important museums of international standing, those living in member states do not cross frontiers with the principal objective of visiting a museum. The Commission therefore considered it unlikely that the measures constituted State aid in the sense of Article 87(1).
The subsidy invested by FEDER, DRAC and the local groups aimed at protecting, safeguarding, restoring and showing the objects and houses of Alscacian heritage were, according to the Commission aimed at heritage conservation.
The subsidy from the Direction Regional du Tourism aimed at allowing blind people to access parts of the expositions were considered by the Commission to be the promotion of culture..
All the subsidies were therefore designed to promote culture or heritage conservation.
Conclusion -
In view of the elements mentioned above, the Commission decided that the aid to Ecomusee and the measures which exist are compatible with the Treaty.
CASE STUDY THREE :
TRANSFER OF CORE LOCAL AUTHORITY SERVICES
Overview -
From the following case study, it can be seen that the EC does allow some scope for local authorities to restructure some of their core functions in a way that brings cost efficiencies and improves effectiveness for delivery, without falling foul of State aid rules.
Case Study Glasgow City Council Transfer of Culture and Leisure Services
In September 2007, the Commission considered that Glasgow City Council’s transfer of culture and leisure services to a charitable trust did not constitute State aid, following a complaint to them, claiming State aid rules had not been applied.
Commission’s Decision -
The Commission came to the conclusion that there was no convincing evidence for the existence of State aid in the sense of Article 87(1) of the EC Treaty, for the following considerations:
“Glasgow City Council, following an administrative reorganisation, established a new body “Culture and Sport Glasgow” to allow it to continue the delivery of its statutory functions in relation to cultural and leisure services in a more effective and cost-efficient manner. The new body is a company limited by guarantee, and its sole member is the Glasgow City Council, which accordingly has the ultimate control of it. Furthermore, the UK authorities stated that the contractual framework between the Council and the new body is set in a way which ensures that the Council retains control over the services by the imposition of detailed service requirements, that financial transparency is maintained, that the new body adheres to the cultural strategy of Glasgow City Council in the delivery of services, and that the new body adheres to EC procurement requirements for the award of public contracts.”
The EC has described this as a public sector reorganisation with the assets remaining in the ownership of the Council, which retains control over the services. In their view, there is no indication that a selective advantage would be granted to an undertaking through the transfer of State resources. However, any other transfers which do not follow this decision would need to be considered separately for State aid consideration.