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EU rules block UK broadband investment, claims cities group

Monday, December 15th 2014 by Phil Wilkinson-Jones

European rules are restricting investment in broadband infrastructure, the director of a group representing 10 UK cities has said.

The practice known as state aid – using taxpayers' money to pay for work by private companies – is restricted by the EU to prevent national governments giving preferential treatment to certain companies and thereby distorting the market.

Chris Murray, of Core Cities, said: “At the moment you’ve got a perverse situation where, as I understand it, you can invest in a rural area and you’re not subject to state aid.

“But if you invest in an urban area you are, because it’s more expensive to put broadband into an urban area than just digging up a field.

“That doesn’t feel right to me and it means in some cities, you’ve got areas of the city region classed as rural where you can make that investment and areas that are classed as urban where you can’t.”

Some state aid is illegal under EU rules because of the way it can distort competition.

It can be given legally by getting approval from the EU Commission or by using one of the commission’s pre-approved mechanisms.

“The thinking needs to be a bit more joined up,” added Mr Murray, whose organisation represents England’s eight largest city economies outside London, plus Cardiff and Glasgow.

“It’s not as easy as just saying ‘let’s not bother about state aid’ and break the law or ‘let’s beat up the European Union’.

“I think actually we just need to get our heads together and think about what the proper solution is that’s really going to benefit in the end.”

Mr Murray said cities should work together to better understand common problems and work with the government to come up with solutions.

“Cities are also competitors, one has to accept that – it’s healthy and that’s good for the economy – but there are areas where working together we can create an environment where each of us has got a better chance of being more competitive.”

He also said it was important for cities to work in tandem with the private sector.

“We don’t want to end up in a situation where the private sector is blaming the public sector for a lack of movement on digital infrastructure,” he said.

“If cities haven’t got the money to [invest] then maybe the private sector want to come together in the same way they do in business investment districts to say ‘well, actually with a little bit of leverage we could put some money in and we can all gain’.”

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