The European Commission has opened an in-depth inquiry to investigate whether a joint venture between the Italian Province of Trento and the Italian telecommunications operator Telecom Italia to build a fibre infrastructure is in line with EU state aid rules. At this stage, the Commission has doubts whether the project is carried out on terms that a private player operating under market conditions would have accepted. The opening of an in-depth inquiry gives interested third parties an opportunity to comment on the measures under investigation. It does not prejudge the outcome of the investigation.
“Public investments in ultra-fast broadband networks promote growth and contribute to the objectives of the EU’s Digital Agenda. It is however crucial to ensure that public funds are not used to favour one market player, alter competitive market conditions and roll back the benefits of a liberalised telecommunications market.” said Commission Vice President in charge of competition policy Joaquín Almunia.
Following a complaint, the Commission opened an investigation into a capital injection of €50 million to be granted by the Province of Trento to a joint venture with the Italian telecommunications incumbent Telecom Italia, to operate under the name of “Trentino NGN”. Telecom Italia would only make contributions in kind, i.e. the transfer of rights on its existing copper infrastructure. Such infrastructure is expected to be switched off once the fibre network becomes operational. Subsequently, by virtue of a call option, Telecom Italia could become the sole owner of the joint venture.
At this stage, the Commission has doubts that a private investor in the position of the provincial authorities would have undertaken such an investment at the same terms and conditions. First, the planned fibre network targets areas where no private investor has showed an interest so far. Second, the Commission has doubts as to whether the in-kind contributions made by Telecom Italia to the joint venture have been adequately valued and whether there are any other hidden advantages for Telecom Italia from its dual role of shareholder and supplier of services to Trentino NGN. Third, there are doubts as to whether the envisaged return on equity for the Province is in line with market conditions. Here to read more.