Broadband Delivery UK (“BDUK”) applied to the European Commission in December last year for State aid clearance for its up to £830 million plan to support around 40 local broadband projects throughout the UK up to the end of 2017.  According to the BDUK notification, the purpose of making a single “umbrella” notification is to avoid each individual project having to seek separate State aid clearance from the European Commission.  Under the BDUK scheme, local authorities seeking BDUK funds for a broadband project in their area will submit a local broadband plan to BDUK for approval and, by granting that approval, BDUK is indicating that it considers the project compliant with State aid law.  

While we can see the advantages from the European Commission in terms of workload management in delegating its responsibilities to BDUK, this approach does seem to us to raise potential difficulties: 

First, although aid schemes under which “umbrella” clearances are obtained for a large number of potential projects are not uncommon (for example in the field of urban renewal), the rules for granting aid under these schemes are often fairly simple – e.g. is the land in question contaminated and how much money is required to remediate it.  Accordingly, the administrators of such schemes are not themselves making value judgements about the extent of any distortion of competing arising from such state interventions.  By contrast, the BDUK scheme is highly complex and leaves BDUK a significant amount of discretion as to, for example, the areas covered by a particular broadband project and the technology to be deployed.  As a matter of law, only the European Commission has the power to grant State aid clearance but there seems to be a danger that BDUK could trespass on the Commission’s turf in this regard, with the possible result that “State aid approval” from BDUK for certain projects may not be as legally robust as project sponsors hope.  It remains to be seen whether project sponsors will be comfortable with this situation, particularly given the facts that: (i) the BDUK scheme has not yet received State aid clearance – despite the application having been made over 6 months ago; and (ii) the amount of information that BDUK will require from local authorities as part of its approval process may be scarcely less than the European Commission would require if the authority were to go direct to it for clearance. 

Secondly, BDUK has stated that it only will support schemes in so-called “White” or (in limited circumstances) “Grey” areas.  White areas are those in which there is no existing NGA (or as the case may be, basic broadband) coverage nor has any provider issued a (in BDUK’s opinion) credible plan to roll any out in the next 3 years.  Grey areas are those in which only one provider has rolled out NGA (or as the case may be, basic broadband) and there are no (again in BDUK’s opinion) credible plans by other operators to roll it out in the next three years in that area.  Given that incumbent operators may be unhappy to see a network that they have built or at least planned superseded by a publicly funded alternative, it would seem that legal challenges from incumbents could not be ruled out and we understand that one such challenge has already been submitted by the body Broadband for the Rural North (“B4RN”).  The outcome of that challenge is eagerly awaited.