Excma. Sra. D.a Margarita Robles Fernández

Ministra de Asuntos Exteriores y de Cooperación

Plaza de la Provincia 1

E-28012 MADRID

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

EUROPEAN COMMISSION

Brussels, 10.12.2019

C(2019) 8831 final

PUBLIC VERSION

This document is made available for

information purposes only.

Subject: State aid SA.53925 (2019/N) - Broadband Scheme for NGA White

and Grey Areas - Spain

Excellency,

1. PROCEDURE

(1) After pre-notification discussions, Spain notified the above measure to the

Commission on 14 October 2019 under Article 108(3) TFEU.

(2) The Spanish authorities have confirmed that the granting of the aid is conditional

upon the decision of the Commission on the notified measure, pursuant to the

standstill clause of Article 108(3) TFEU and to Article 3 of Council Regulation

No 2015/1589 of 13 July 2015 laying down detailed rules for the application of

Article 108 of the Treaty on the Functioning of the European Union1, according

to which new aid measures must not be put into effect before the Commission has

taken a decision authorising it.

(3) Together with the notification, the Spanish authorities have provided a language

waiver and exceptionally agreed to waive their rights deriving from Article 342

TFEU in conjunction with Article 3 of the EC Regulation 1/1958 and to have the

planned Decision adopted and notified pursuant to Article 297 of the Treaty in

English.

1 OJ L 248 of 24.9.2015, p. 9.

2

2. THE MEASURE

(4) The present notification concerns an extension of the previously approved NGA

access scheme (“the PEBA-NGA scheme”).2 Until 2019 the scheme PEBA-NGA

scheme covered only NGA white areas (where no infrastructure is present, or

likely to be developed in the near future, able to reliably provide speeds of at least

30 Mpbs download). The notification covers a prolongation of the on-going

scheme for NGA white areas for 2020-2022, and a modification concerning new

projects in white areas under the scheme which would now aim to ensure speeds

of 300 Mbps symmetrical, upgradeable to 1Gbps (gigabit per second)

symmetrical.3A further modification concerns the extension of the on-going

scheme into NGA grey areas for the period 2020-2022 by rolling out

infrastructure capable of providing speeds of 300 Mbps symmetrical, upgradeable

to 1Gbps symmetrical, in areas where one network is present providing, or

planned to do so within three years following the public consultation, more than

30 Mbps but less than 100 Mbps download speeds.

(5) The geographical scope of the notified scheme is nation-wide, with eligible areas

being determined annually on the basis of 61.674 singular population entities

(SPE)4. The Spanish authorities estimated in 2017 that 3.5 million citizens reside

in the eligible areas (SPE), of which 430,000 in the grey target areas, which cover

about 1% of the Spanish population, and are expected to account for about 15%

of the eligible areas. The projects funded may cover both white and grey areas

and will be subject to one annual tender procedure consisting of up to 50 parallel

tenders aimed at each province. In view of the fact that the Spanish authorities

plan to include both white and grey areas in the same measure, NGA white areas

which are partly grey will be considered grey for the purpose of State aid

compliance. The aim of the scheme is to provide 300 Mbps symmetrical,

upgradeable to 1Gbps symmetrical, to all of the eligible areas, regardless of

whether NGA white or grey, thereby creating a significant increase in speed. As a

result of the extended measure, nearly 98% (compared to currently 87%) of the

population of each province of Spain will have access to ultrafast broadband

networks.

(6) With regard to NGA white areas, the notified measure is an extension of a scheme

previously approved by the Commission and subsequently extended several

times. In 2008, the Spanish authorities launched the programme Avanza

Infraestructuras (SA.25137 ex. N 73/2008), which was designed to facilitate the

investment needed to extend coverage of telecommunications services to rural

areas (with similar conditions to those available in urban areas), in order to

2 The first State aid measure Programme Avanza Infraestructuras was approved by the Commission under State aid

rules in 2008 (SA.25137 ex. N 73/2008), continued through the measure Plan Avanza approved by the

Commission under State aid rules in 2010 (SA.31229 ex. N 304/2010, OJ C 170 of 10.6.2011, page 1,

http://ec.europa.eu/competition/eloiade/isef/case details.cfm?proc code=3). An extension of the measure was

approved by the Commission under State aid rules in 2013 (SA.35834, OJ C 256 of 5.9.2013,

http://ec.europa.eu/competition/state aid/cases/246932/246932 1452187 125 2.pdf). Spain once again extended

the measure under the General Block Exemption Regulation (GBER), via a communication registered by the

Commission under SA.48000 on 11.4.2017.

3 Under the previous scheme and until the entry into force of the current modifications, projects in white areas aimed to

ensure speeds of 30 Mbps download.

4 Alternatively, eligible areas may be published as geographic zone layers in open, interoperable and widely used

geographic information file formats.

3

enhance the economic development and the incorporation of the local citizens

and businesses to the Information Society. The measure was continued through

the measure SA.31229 (ex. N 304/2010) known as Programa Avanza Nuevas

Infraestructuras de Telecommunicaciones ("Plan Avanza"). Plan Avanza was

designed to bridge the digital divide as far as basic broadband was concerned and

to build NGA facilities in areas where private investment alone did not suffice.

(7) The Commission subsequently approved, by decision of 5 July 2013, a measure in

case SA.358345, which was based in substance on the previously approved

scheme SA.31229 (ex. N 304/2010), and on the basis of the experience gained

with the implementation of that aid scheme, together with the fundamental

technological shift due to the development of Next Generation Networks, the

Spanish authorities amended the scope of the measure, which focused on

investments in high speed (above 30 Mbps) and very high speed (above 100

Mbps) broadband. On 11 April 2017, the Commission registered a decision by

the Spanish authorities in application of the GBER6 to extend the temporal scope

of the measure until 2020.

(8) To the extent that the now notified scheme concerns NGA grey areas, the

Commission must carry out an in-depth assessment of the notified measure, in

order to ensure that the distortion of competition created by a publicly funded

intervention in such an area is reduced to a minimum and outweighed by the

advantages of such an intervention, such as significantly improved services.

3. THE SITUATION IN THE SPANISH BROADBAND MARKET

(9) Spain ranks 11th out of the 28 EU Member States in the European Commission

Digital Economy and Society Index (DESI) 20197. Spain performs well in

connectivity, thanks to the wide availability of fast and ultrafast fixed and mobile

broadband networks and to increasing take-up. One fifth of Spanish citizens are

not yet online and close to half of them still do not have basic digital skills. More

Spanish businesses use social media and big data than in previous years, but

cloud and e-commerce stagnated compared to the year before. Spain is doing

best in the area of digital public services, having implemented its e-government

strategy in good time. It ranks fourth in the EU in this area.8

(10) Spain is above the EU average when it comes to fixed NGA coverage. According

to the EU Digital Scoreboard by mid 2018, 88% of households had access to

NGA broadband networks capable of providing at least 30 Mbps download,

although with significant differences between regions and between urban and

rural areas.9 In mid 2016, 81% of households had access to NGA broadband

networks (at least 30 Mbps download) with infrastructure-based competition

developing in dense urban areas, whereas in rural areas only 28% of households

5 http://ec.europa.eu/competition/state aid/cases/246932/246932 1452186 126 2.pdf 6 Commission Regulation (EU) N°651/2014 of 17 June 2014 declaring certain categories of aid compatible

with the internal market in application of Articles 107 and 108 of the Treaty.

7 https://ec.europa.eu/newsroom/dae/document.cfm?doc_id=59911 https://ec.europa.eu/digital-single-market/en/desi 8 https://ec.europa.eu/digital-single-market/en/desi 9 https://ec.europa.eu/digital-single-market/en/desi

4

had fast broadband network access. The deployment of NGA networks capable

of providing at least 100 Mbps download, continues to be an important feature of

the Spanish digital society, covering 87% of the population in mid 2018,

compared to the EU average of 60%.10

(11) Spain's national broadband strategy (Digital Agenda for Spain) supports the goals

related to broadband coverage set by the European Union in the digital Agenda

for Europe (DAE). The 2014 Spanish Telecoms Law and other sectoral

regulations seek to reduce regulatory and administrative barriers resulting in a

more favourable environment for investments in ultrafast networks.11

(12) The national ‘Programme for the extension of next-generation broadband

networks’ (Programa de Extensión de la Banda Ancha de Nueva Generación,

PEBA-NGA), continues to provide financial support for the roll-out of NGA

broadband networks in areas where high speed connectivity is neither available

nor planned in the next 3 years. Since 2013, this programme has provided high-

speed connectivity to 4.8 million premises (households and business). In 2017

this support increased by 58%, reaching EUR 100 million and focused on the

roll-out of high speed access networks providing at least 100 Mbps download

speeds.12 Spain explained that the increase from 100 Mbps for previous years

(2013 to 2018) to 300 Mbps (current notification) is justified by the needs of

bandwidth required for full achievement of the digital transformation. In

particular, Spain considers it essential to the proper functioning of applications

such as Homeoffice/VPN and crucial for the population in rural areas, allowing

for teleworking for residents in these areas. In business, the economic

development of areas with a lower population density also requires an ability to

provide broadband to the self-employed and SMEs located in these areas, and the

full use of cloud computing.

(13) It follows from the Multi-regional Operational Programme for Spain13 on ERDF

actions in the broadband field during the period 2014-202014, that in terms of

current coverage levels there is a significant disparity between regions, with an

increased divide between areas of low population density and small towns in

which the commercial interest for telecom operators is lower on the one hand,

and urban areas where coverage is developing through private investment on the

other hand.

(14) According to the Spanish authorities, by 2020 Spain aims to cover 100% of the

population with 30 Mbps internet, provide 50% of the households with access to

100 Mbps internet and is progressing in achieving the broadband coverage target

of more than 100 Mbps for the entire population by 2020, envisaged in the 2016

Commission Communication Connectivity for a Competitive Digital Single

10 https://ec.europa.eu/digital-single-market/en/desi 11 https://ec.europa.eu/digital-single-market/en/country-information-spain 12 http://ec.europa.eu/information society/newsroom/image/document/2018-20/es-desi 2018-country-

profile eng 20931699-0146-B850-7ACE96CDBF280B2B 52223.pdf

13 The original Operational Programme on Smart Growth has merged with the Operational Programme on

Sustainable Growth resulting in a single Multi-regional Operational Programme for Spain.

14 http://www.dgfc.sepg.hacienda.gob.es/sitios/dgfc/es-

ES/ipr/fcp1420/p/Prog_Op_Plurirregionales/Documents/PO_Plurirregional_de_Espa%C3%B1a_Decision.pdf)

5

Market – Towards a European Gigabit Society (“the Gigabit Communication”)15,

with the support of European Structural and Investment Funds. In the context of

the Digital Agenda for Spain16, the plan for telecommunications and high speed

broadband networks also contains actions to boost demand.

(15) Spain supports the deployment of NGA networks through a number of legislative

and regulatory measures, such as the General Telecommunications law, adopted

in May 2014. In addition, the National Commission on Markets and Competition

(Comisión Nacional de los Mercados y la Competencia, CNMC), the Spanish

independent national regulatory authority for electronic communications

networks and services, has imposed ex-ante regulatory obligations in markets

where competition is not effective. However, financial support provided through

the PEBA-NGA programme has been necessary to guarantee NGA network

coverage in areas where, despite such legislative and regulatory measures,

commercial investors had not deployed such networks.

4. EU POLICY AND THE RATIONALE OF THE INTERVENTION

(16) The Commission, in September 2016, adopted a set of initiatives and legislative

proposals to foster the development of the internet connectivity necessary to

support the European Digital Single Market17. In particular, in the above

mentioned Gigabit Communication the Commission underlines the importance of

the availability and take-up in the EU of very high capacity networks enabling

widespread use of products, services and applications in the Digital Single

Market, and sets three connectivity strategic objectives for 2025. Firstly, all

schools, transport hubs and main providers of public services as well as digitally

intensive enterprises should have access to internet connections with

download/upload speeds of 1 Gigabit of data per second. Secondly, all European

households, rural or urban, should have access to networks offering a download

speed of at least 100 Mbps, which can be upgraded to 1 Gigabit, and, thirdly, all

urban areas as well as major roads and railways should have uninterrupted 5G

wireless broadband coverage, starting with a fully-fledged commercial service in

at least one major city in each EU Member State by 2020.

(17) The Spanish authorities explained that NGA networks capable of providing very

high speed broadband18 access are not being deployed by commercial operators

in the areas concerned. The cost of deploying such infrastructures to those areas

is significantly higher than the cost of reaching urban densely populated areas (on

a per premise basis). Moreover, the achievable revenue base is more limited due

to low population density and economic activity in those areas. This impediment

has not been successfully addressed by other less distortive measures, such as ex-

ante regulation. Despite the crucial role that regulation plays in ensuring

competition and supply in the market for electronic communications, the

15 http://ec.europa.eu/newsroom/dae/document.cfm?doc_id=17182

16 http://www.agendadigital.gob.es/digital-agenda/Documents/digital-agenda-for-spain.pdf

17 http://ec.europa.eu/newsroom/dae/document.cfm?doc_id=17182

18 NGA networks are networks capable of reliably providing speeds above 30 Mbps download, including more

advanced NGA networks capable of providing very high speed broadband access, such as speeds above 100 Mbps

download, upgradeable to 1Gbps or 1 Gbps symmetrical speeds, in line with the Gigabit Communication.

6

regulatory measures imposed by the Spanish national regulatory authority did not

solve the problems related to the lack of suitable broadband infrastructure and

services in the targeted areas. The Spanish authorities consider that without

further public intervention, reducing the "digital divide" between these areas and

those benefitting from commercial deployment of very high speed NGA networks

does not seem possible. In line with points 37-39 of the Broadband Guidelines19,

the Spanish authorities see no alternative but to grant public aid to extend the

coverage of very high speed NGA networks in the targeted areas defined through

detailed mapping and public consultation exercises. An effective, reliable and

secure broadband infrastructure network is deemed essential for the future growth

and sustainable development of rural and remote communities. With the notified

measure, the Spanish authorities intend to accelerate the roll-out of very high-

speed NGA networks, in line with EU and Spain’s connectivity objectives, and

help drive further economic growth, producing further economic and social

benefits. The Spanish authorities expect the notified measure to also indirectly

serve to further accelerate the provision of NGA broadband services by

commercial operators other than the direct beneficiaries of the measure, via the

possibility offered to purchase wholesale access to the new subsidised network.

(18) Step change: The Spanish authorities have confirmed that in line with point 51 of

the Broadband Guidelines, the measure will ensure a "step change" in that the

investments in the NGA network will bring significant new capabilities to the

market in terms of broadband service availability, capacity, speeds and

competition as a result of the public intervention, compared to existing as well as

concretely planned commercial network roll-outs. Step change as a result of the

public intervention will always be verified by the Spanish authorities against

current and planned private investments. The measure requires that access speeds

be at least 300 Mbps symmetrical, upgradeable to 1Gbps symmetrical, in NGA

white areas which have no coverage of NGA networks (able to reliably provide

speeds above 30 Mbps download) or deployment plans by any operator in the

next three years (NGA white areas), and in certain NGA grey areas where there is

one NGA network present or planned within three years following the public

consultation, capable of reliably providing speeds above 30 Mbps but less than

100 Mbps download (NGA grey areas). Areas with existing or planned networks

able to reliably provide speeds above 100 Mbps (including fibre networks such as

FTTB / FTTH) are excluded from the scheme.

(19) The now notified measure is aimed at contributing to the achievement of the

connectivity goals of the "Digital Agenda for Europe" (DAE) for 2020, the new

EU Broadband targets for 202520, and Spain's national broadband strategy

(Digital Agenda for Spain). According to the Spanish authorities, an analysis of

future needs and demands indicates that the bandwidth required for deployments

under the PEBA-NGA scheme for the full achievement of the Digital Agenda and

Gigabit Society, needs to be at least 300 Mbps both upstream and downstream,

upgradeable to 1Gbps symmetrical.

5. DETAILED DESCRIPTION OF THE MEASURE

19 EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks, OJ C

25 of 26.1.2013, p. 1.

20 https://ec.europa.eu/digital-single-market/en/broadband-europe

7

(20) Objective: The general objective of the PEBA-NGA scheme from 2020 until the

end of 2022 is to accelerate the extension of coverage of NGA networks capable

of providing services of high-speed broadband (at least 300 Mbps downstream

and upstream, upgradeable to 1Gbps symmetrical) in areas which have no NGA

network coverage or deployment plans by any operator in the next three years

(NGA white areas), and to extend the eligible areas of the scheme to areas where

there is one network in place or planned within the next three years following the

public consultation, capable of providing speeds above 30 Mbps but less than 100

Mbps download (NGA grey areas).

(21) Duration: The measure covers the time period from the Commission approval

until 31 December 2022, which is the last date on which aid can be granted under

the measure.

(22) Legal basis: The measure is based on a draft order laying down the regulatory

basis for granting aid under the extension of the new generation broadband21 and

follows on from the current order.22

(23) Budget and financing instruments: The overall estimated (maximum) budget of

the notified measure is EUR 400 million, of which approximately EUR 300

million from the ERDF23 and approximately EUR 100 million from national

funds. The annual budget of the scheme amounts to a maximum of EUR 150

million per year. The aid takes the form of grants.

(24) Aid amount and intensity, cumulation of aid: The maximum aid intensity is

100%. The aid cannot be cumulated with other aid received from other local,

regional or national authorities to cover the same eligible costs.

(25) Target areas: The measure targets NGA white and certain NGA grey areas. NGA

white areas are defined as areas where there is no NGA network currently in

place or planned within the next three years following the public consultation,

able to reliably provide speeds above 30 Mbps download. NGA grey areas are

defined as areas where there is one NGA network currently in place or planned

within the next three years able to reliably provide speeds above 30 Mbps

download. However, not all NGA grey areas are eligible under the scheme, but

only those NGA grey areas where there is one NGA network present or planned,

capable of reliably providing speeds above 30 Mbps but less than 100 Mbps

download. Areas with existing or planned networks able to reliably provide

speeds above 100 Mbps (including fibre networks such as FTTB / FTTH) are

excluded from the measure. A list of eligible areas shall be published on the

Portal of the Aids of the website of the Ministry of Economy and Business.

Tendering will be carried out annually per province with the aim of selecting one

beneficiary per province. However, the target area of a selected project will

normally not cover all white and grey NGA areas in the entire province24 due to

budgetary limitations imposed by the authorities and due to the objective to

21 Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New Generation Broadband

Extension Programme for the period 2020-2022.

22 Order IET/1144/2013, of 18 June, as amended by Order IET/241/2014, of 13 February, by Order IET/275/2015, of

17 February and by Order ETU/275/2017, of 22 March.

23 European Regional Development Fund. 24 In exceptional cases, where the remaining target areas of a province are so small that the budgetary amounts allow

for it, an intervention area can cover all target areas of a province.

8

ensure that as many operators as possible can participate in each tender

procedure. Every bidder is free to propose its intervention area within the

province. The bids are compared according to the overall amount and the cost per

premises covered, as described in the section on competitive selection procedure

(recital (36)).

(26) Step change: The Spanish authorities have confirmed that in line with point 51 of

the Broadband Guidelines, the measure will ensure a "step change" in that the

investments in the NGA network will bring significant new capabilities to the

market in terms of broadband service availability, capacity, speeds and

competition as a result of the public intervention, compared to existing as well as

concretely planned commercial network roll-outs. Step change as a result of the

public intervention will always be verified by the Spanish authorities against

current and planned private investments. The measure requires that access speeds

be at least 300 Mbps symmetrical, upgradeable to 1Gbps symmetrical, in the

NGA white areas and in the eligible NGA grey areas.

(27) Beneficiaries of the scheme: A private operator is responsible for the design,

building and operation of the network and is the permanent owner of the

developed network. The selected operators of the networks will be direct

beneficiaries of the aid.25

(28) Detailed mapping and coverage analysis: The services of the Secretary of State

for Digital Advance (SEAD), within the Ministry of Economy and Business,

carry out an annual mapping and consultation exercise where all operators are

invited to provide data on broadband coverage in terms of technology and speed

for each of the 61.674 singular population entities (SPE). The map of NGA white

areas and NGA grey areas for aid to be granted after 2020 will be prepared on the

basis of previous public consultations on white NGA areas launched every year

since 2013, and the first public consultation on grey NGA areas launched on 30

June 2018, and open in both cases for at least 30 days. In the public consultations,

market players are asked to indicate what infrastructure exists in the market, and

what infrastructure is planned within the next three years. The same procedure

will be followed in 2021 and 2022. The information gathered through mapping

and public consultation is used to elaborate a list of eligible areas, which is

published on the website of SEAD and as a notice in the Spanish Official Journal

(Boletín Oficial del Estado). This information is also used to draw up maps of

coverage and reports. The use of Geo-referenced Coverage Information is

incorporated, so that the publication of white and grey areas can be done, in

whole or in part, as geographic zone layers in open, interoperable and widely

used geographic information file formats.

(29) Mapping is done on the basis of households passed, i.e. households already

connected and households which could be rapidly connected at not too high a

cost. This is the case where a home can potentially be connected in a delay of a

few weeks without further installation of substantial infrastructure and without

generating substantive costs. Eligible NGA grey target areas are defined as

singular population entities where one network is present or where one network

operator presents credible plans to be present in the next three years providing

speeds above 30 Mbps but below 100 Mbps. Once the eligible areas are identified

25 This decision only addresses the aid to the direct beneficiaries, as notified by Spain.

9

(NGA white areas and NGA grey areas), the annual call for tenders are carried

out at provincial level, determined for each province by the budget available, the

aid intensity (adapted to the circumstances of each province) and the minimum

number of end-users to be provided coverage.

(30) Consultation with stakeholders: On 30 July 2018, SEAD published on its

website a public consultation26 on the PEBA-NGA scheme for the period 2019-

2021, seeking the opinion of the market on the preliminary identification of 1,061

possible NGA grey areas to be included in the measure. The consultation also

covered the prolongation of the intervention in NGA white areas, as well as

modifications included in the new draft order, such as the increase to speeds of

300 Mbps symmetrical, upgradeable to 1Gbps symmetrical, size of the

target/intervention areas27 and the modalities of the competitive selection process.

(31) The Spanish authorities reported that responses have been received from four

nation-wide operators, 140 operators with a predominantly local scope and five

operators’ associations. Most respondents were positive to the extension into grey

areas. Masmovil pointed out to the Spanish authorities a number of areas

identified as grey target areas, but where Masmovil is already present with FTTH.

The Spanish authorities have accepted to carve these areas out of the scheme.

AOTEC (the Spanish National Association of Telecommunications Operators

and Internet Services) pointed out the need for commitments backing up the

claims in the public consultations of investment plans. The Spanish authorities

have agreed to ensure that such claims are sustained by commitments. Nine

operators objected to the qualification of grey areas, claiming that local operators

already present there and providing NGA services would now be overbuilt by

large operators, since these would have an advantage due to the definition of

target areas. The Spanish authorities have clarified that an intervention area does

not need to cover the entire province (see the following recital), and that large

operators are thus not favoured through the definition of target areas. Also

ACOTEC (Catalan Association of Telecommunications Operators) pointed out

that within the grey areas, local operators providing wireless connections can now

be overbuilt by networks providing 300 Mbps symmetric, upgradeable to 1Gbps

symmetrical, and that this is likely to be done only by large operators due to the

definition of target areas. The Spanish authorities again refer to its clarifications

regarding the definition of the target areas (the following recital) and point out

that wireless technology is unable to reach the speeds targeted by the measure,

which are considered necessary to meet future demand. The Spanish authorities

have also modified the requirements for proof of economic solvency for potential

bidders, which the authorities expect to facilitate the participation of small

operators.

(32) As regards the definition of the target areas, a common criticism from operators

is that using the entire province as the target area would favour only large

operators or operators already present in the area. The Spanish authorities have

clarified that tenders will be carried out annually at provincial level, but in almost

all cases for a project intervention area smaller than all eligible areas of the entire

26 https://avancedigital.gob.es/es-ES/Participacion/Paginas/Cerradas/PEBA-NGA-2019-2021.aspx

27 Target areas are those NGA white and grey areas within each province eligible for aid under the scheme and

intervention areas are the final project area financed under the scheme. The intervention area is expected in most

cases to be smaller than the target area.

10

province (target area), capped by budgetary limitations. It is up to bidders to

select their intervention area within the eligible target areas of each province, and

the decisive element will be the highest number of connections, above a

minimum level, offered with the budget allocated, which is equivalent to the

lowest cost per premises passed. This way each bidder can tailor their bid to best

suit their situation. The amount allocated to any target area must not exceed EUR

10 million, and the total maximum amount of aid allocated per annual call is

EUR 150 million, which results in EUR 3 million on average for each province,

which in some cases, where expedient, can be even lower. The minimum

coverage objectives are the result of dividing the budget per target area by the

estimated unit cost in each province/year. To maximize the efficiency of the

whole process and to reduce the negative effects on small operators, the Spanish

authorities have undertaken measures such as reducing the size of the lot to the

province, reducing the requirements for proof of economic solvency, allowing

other means of accreditation of this solvency, and enabling joint bids in tender

procedures. By this combination of measures, the Spanish authorities aim to

strike a balance between administrative and roll-out efficiency considerations, the

interest to minimize distortion of competition, and ensuring an open and

transparent selection procedure. The Spanish authorities estimate that up to 12

operators could apply individually to the province for a contract equal to the

minimum coverage limit, if that were the case. Up to 20 operators could

individually opt for any province with allocations equal to the average amount

available per province and many others could individually apply to provinces

below the average. In other cases, each operator would have to do so together

with at least one suitable partner. In addition, the requirement of economic

solvency can be justified by different means, such as a bank guarantee, which is

very useful for small operators belonging to a larger business group. The

authorities expect to consecutively cover most of the province during the duration

of the scheme with this model. This is a modification of the previously applied

system, where several projects could be selected in parallel. The authorities

considered the previous system inefficient since it often resulted in overlaps

between projects and many operators withdrawing, which left aid unused and

areas unserved. The now proposed system with one project selected annually per

province is supposed to remedy the flaws of the previous system while ensuring

the economically most efficient use of funding. The Spanish authorities consider

that annual tenders at provincial level is also administratively the most cost

effective way of implementing the scheme, as doing the same at municipal level

could amount to up to 8000 tender procedures in parallel.

(33) Consultation of the NRA: The Spanish authorities have submitted an opinion28

by the CNMC on the draft scheme, and a document laying out the authorities’

reactions to the CNMC’s opinion. The authorities have informed the Commission

that certain modifications have been made to the order setting out the scheme29

following the opinion of the CNMC, for instance regarding wholesale access and

pricing, weighting of evaluation criteria, and aid intensity.

(34) The CNMC agrees with the Spanish authorities that the modified competitive

28 https://www.cnmc.es/expedientes/ipncnmc03218.

29 Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New Generation Broadband

Extension Programme for the period 2020-2022.

11

selection procedure removes the previous problem of overlapping bids and

operators abstaining from aid, resulting in ineffective implementation. The

CNMC however raises the issue that the system of one bid per province favours

large operators and instead proposes a system where contracts are instead

awarded per municipality. The Spanish authorities consider that tenders at

municipal level could lead to a total of around 24.000 tenders for the duration of

the measure, which would create a disproportionate administrative burden. They

also reject the proposal on the basis that the new model, awarding aid to the best

evaluated application per province, but only in exceptional cases (as explained in

recital (32)) the entire province at once, maintains the freedom of bidders to

choose the geographical area of intervention that best suits their circumstances

within the eligible area of the province, which is not biased towards large

operators. The Spanish authorities further consider this to be the most efficient

and effective way of ensuring coverage in unprofitable areas.

(35) The CNMC proposes that wholesale prices be based on the pricing principles

used by the CNMC and on reference values prevailing in other comparable, more

competitive areas, taking into account the aid received by the network operator.

The Spanish authorities have modified the scheme accordingly. Modifications

have also been made as regards the obligation to specify the offer of wholesale

products and the obligation to make available information on the wholesale offer

before the end of the roll-out of the infrastructure. The Spanish authorities also

accepted the CNMC proposal that SEAD publish a map of all population entities

that benefited from aid, including information on aid beneficiaries and the start

date of the wholesale access obligation. Also minor modifications to the

evaluation criteria have been made following the CMNC proposal, and the

Spanish authorities have launched a study by the national authorities responsible

for ERDF funds to evaluate the impact of broadband aid within the framework of

the Spanish Multi-regional Operational Programme ERDF 2014-2020, and in

addition SEAD engages to undertake studies on the efficiency of the PEBA-NGA

Programme.

(36) Competitive selection process: The Spanish authorities confirm that a competitive

selection procedure in order to select the economically most advantageous offer

will be carried out in line with the spirit and principles of the EU public

procurement Directives. However, aid under the notified measure will not be

granted to companies against which an open recovery order for illegal aid exists

(Deggendorf rule) or which on the basis of the Guidelines on State aid for

rescuing and restructuring non-financial undertakings have to be considered as

companies in financial difficulties. Funding is subject to revocation if, within

seven years from start of operation, the subsidised broadband infrastructure is no

longer being used in line with the purpose of the aid (earmarking period).

Annually, the national authorities will carry out 50 tender procedures in parallel,

one for each province, aiming for 50 winning bids. The Spanish authorities

consider this the best way to reach the public objective of coverage extension

while not excluding any operator a priori from participating in the tender

procedure. In the evaluation of bids, 60% weight is given to the criterion

"objectives of coverage" (50% for coverage targets in white areas and 10% for

coverage targets in grey areas), which accounts for the highest number of

premises covered in a province beyond a minimum required, in relation to the

budget allocated. In other words, the largest number of premises covered with the

12

budget allocated, which is equivalent to the lowest amount of money per premise

covered, wins. The minimum coverage targets in each province equals the

estimated number of premises of which coverage is achievable with the budget

allocated, in order to ensure an acceptable use of funds also in case there are not

enough bidders in an area to ensure a competitive situation.

(37) The selection procedure also contains an element of positive discrimination

intended for exceptional cases. Its purpose is to make certain areas (smaller than a

province), that the government considers a priority, such as an island, a district or

a municipality, more attractive to operators. Bidders still retain full freedom to

choose their area of intervention within the province, but a weighting coefficient

helps awarding more points to the priority areas, should these be covered by a

bid. The Spanish authorities have informed the Commission that the weighting

coefficients will be proportionate and fully justified, based on objective criteria

derived from the specific land characteristics and from the incremental costs

attributable to the given geographical area, such as incremental costs derived

from the infrastructure that must be rolled out in the area; orography; insularity

criteria (e.g. the need to deploy an underwater cable to connect an island with

fiber optic); demography of the area. The Spanish authorities do not expect this

possibility to be widely used. The selection procedure is competitive, in

accordance with the principles of transparency, objectivity, equality and non-

discrimination and shall be initiated ex officio by the body responsible for

granting the aid (Secretary of State for Digital Advancement30). The decisions on

calls for tender will be published in the National Subsidies Database — BDNS)

and an extract of the same in the Spanish Official Journal (Boletín Oficial del

Estado). Decisions will also be published on the portal of the Aids of the

electronic site of the Ministry of Economy and Business31.

(38) Technological neutrality: The aid will be granted on the basis of an open call for

any technology fulfilling the requirement of providing minimum speed of 300

Mbps, both upstream and downstream, upgradeable to 1Gbps symmetrical. The

Spanish authorities have explained that the requirement that the new subsidised

network be able to provide speeds of 300 Mbps symmetrical upgradeable to

1Gbps symmetrical aims to ensure that Spanish citizens and businesses have

access to adequate services and applications, such as homeoffice/VPN, cloud

computing, media and entertainment ultra-HD, 4K-TV, 3D. The Spanish

authorities have noted that this is in line with the expectations of the Commission

in terms of speeds required for such applications and services, as set out in the

Staff Working Document accompanying the Gigabit Communication.32 The

Spanish authorities indicate that, while at the current stage of development only

certain technologies (such as fibre) are likely to reliably guarantee such speeds,

the scheme does not preclude or prejudge any technology choice or any

technological development that could enable also other technologies from

achieving these speeds.

30 Article 17 of the Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New

Generation Broadband Extension Programme for the period 2020-2022.

31 http://www.mincotur.gob.es/PortalAyudas/Paginas/index.aspx 32 https://ec.europa.eu/digital-single-market/en/news/communication-connectivity-competitive-digital-single-market-

towards-european-gigabit-society

13

(39) Role of the National Regulatory Authority (NRA): SEAD prepares maps,

identifies target areas, and grants the aid, whereas the CNMC (the independent

NRA) advises and decides on wholesale product definitions and prices, reporting,

and conflict resolution.

(40) Use of existing infrastructure and wholesale access: All operators participating

in the public consultation will be required to provide data on the available

existing infrastructure that may be used for building the network, including

conditions and prices for access. Any operator which owns or controls

infrastructure (irrespective of whether it is actually used) in the target area and

which wishes to participate in the tender, will (i) inform the aid granting authority

and the NRA about that infrastructure during the public consultation, and (ii)

provide all relevant information to other bidders at a point in time which would

allow the latter to include such infrastructure in their bid. All relevant information

on the State aid measure will be made available on a website in accordance with

point 78(j) of the Broadband Guidelines.

(41) The Spanish authorities will ensure that the network operators selected will

provide wholesale access to the subsidized infrastructure for at least seven years

on an open, non-discriminatory basis, respecting the principle of technological

neutrality, in line with the requirements of points 78(g) and 80 of the Broadband

Guidelines. Access to all passive network infrastructure (ducts, poles, dark fibre

and street cabinets) will be granted for an unlimited amount of time. Operators

who are direct beneficiaries of aid must provide all mandatory wholesale services

for at least 7 years from the moment that the network became operational. In case

a network provider is vertically integrated, it will be required to grant access at

least 6 months before the launch of its retail services, in line with the

recommendation of the Broadband Guidelines (point 78(g) and footnote 108). If,

at the end of the 7-year period the operator of the infrastructure in question is

designated by the NRA under the applicable regulatory framework as having

significant market power (SMP) in the specific market concerned, access

obligations would need to be aligned with regulatory obligations set out in

accordance with the Electronic Communications Regulatory Framework. The

Spanish authorities have specified that ducts financed under the measure shall be

large enough to cater for at least three operators and to host point-to-multipoint as

well as point-to-point solutions. To provide enough capacity on the last mile,

sufficient capacity will be planned, in the case of fibre infrastructure, at least four

fibres will be installed. In order to ensure the effectiveness of access, all

subsidised network operators are required to publish a reference wholesale offer

where all supported wholesale products, conditions and prices should be laid out.

All disputes among operators, related to the application of wholesale reference

offer, will be resolved by the NRA (the CNMC).

(42) The prescribed conditions for wholesale access refer to all new subsidised

infrastructure built under the scheme, to the existing infrastructure used in a

project under the scheme, and to all other network parts related to the newly built

subsidised infrastructure or existing infrastructure in a project, which are

functionally necessary for the provision of wholesale services.

(43) In the case of backhaul networks, access obligations shall also include wholesale

leased line point-to-point circuits, depending on the technology used for that

network. These wholesale access services shall be provided under fair and non-

14

discriminatory conditions.

(44) Wholesale access pricing: The draft Order33 states that wholesale prices must be

based on the pricing principles used by the CNMC. For the operator with

significant market power (SMP), wholesale prices will be based on the wholesale

prices for similar services set by the CNMC, which will be considered maximum

prices. In the absence of an equivalent reference offer, the reference will be the

average prices existing in Spain and in the absence of this reference, the cost

orientation criterion will be applied, taking into account the aid received by the

network operator. In either case, in the case of a vertically integrated operator, the

prices defined must allow for the replicability of retail bids and must not

discriminate against the retail branch of the beneficiary operator. The CNMC

may advise the granting authority on pricing and the wholesale access conditions

referred to in this section. In addition, it shall resolve conflicts between operators

requesting access and operators receiving aid.

(45) Monitoring and claw-back mechanism: The Spanish authorities guarantee that

no project will exceed EUR 10 million, in which case no claw-back mechanism is

necessary.34 The managing body in charge of monitoring the aid will be the Sub-

Directorate General for Telecommunication networks and operators, whereas the

Sub-Directorate General for Programme Coordination and Execution shall be

responsible for the economic-budgetary management of the financing of the aid

measure, including the monitoring of the financial obligations contracted by the

beneficiaries of the aid and the application of a sanctions system.35 The aid

beneficiaries shall provide to the national monitoring body inter alia a financial

report and supporting documents justifying its costs, including an audit report.

During the implementation phase, the beneficiaries shall submit monitoring

reports on the technical and economic progress of the project, including

additional information on the implementation of the project where this is

expressly requested by the body monitoring the aid. The same body will carry out

check measures including administrative and on-site checks.36

(46) Transparency and reporting: In order to ensure transparency of the

implementation of the scheme, SEAD will provide a website containing all

information related to the implementation of the scheme, which will be regularly

updated. SEAD will also regularly collect all information related to the

implementation of the scheme. The website will contain at least the following

data and information: the full text of the approved scheme, including

implementing provisions, the identity of the aid beneficiary(ies), aid amounts, aid

intensity and used technology. The website will regularly be updated with the

most recent information on each project being implemented. This includes basic

33 Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New Generation Broadband

Extension Programme for the period 2020-2022.

34 Point 78 (i) of the Broadband Guidelines.

35 Article 15 of the Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New

Generation Broadband Extension Programme for the period 2020-2022.

36 Articles 27 and 28 of the Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New

Generation Broadband Extension Programme for the period 2020-2022.

15

project data such as the target area covered, name of private partner selected,

implemented technology, project status information, such as the current phase of

the project (preparation, design, construction, operation), project financial data,

such as total investment costs, aid amount requested and paid, aid intensity, and a

link to the approved wholesale conditions and prices (reference offer).

(47) SEAD, as the central body responsible for the operation of the scheme at national

level, will collect and consolidate all necessary information from individual

projects for its reporting to the European Commission. Besides the information

already listed in relation to the issue of transparency, SEAD will also collect and

consolidate information on coverage of population by subsidised networks and

the information on actual use of these networks (the number of active end-users

(take-up rate), the number of third party operators accessing the networks and the

number and types of wholesale products supported).

(48) In order to fulfil its reporting obligations to the European Commission under

point 78(k) of the Broadband Guidelines, SEAD will regularly and at least every

two years report all relevant information on the implementation of the scheme to

the European Commission. Such reports will at least contain information made

public in line with transparency obligations as described above in recitals(46) and

(47) as well as information on:

a) amounts of State aid granted,

b) basic information on the operation of the scheme (length of the backhaul

routes built, number of targeted settlements covered, number of nodes, number of

backhaul fibre lessees in all areas),

c) disputes, if any, concerns regarding the project, how they were resolved,

d) award criteria used in tender procedures and the weighting of the criteria used

in the evaluation of the bids,

e) market concentration at network level (if the incumbent is the main or sole aid

beneficiary) and the degree of presence of alternative operators,

f) list of projects carried out - if different than what was foreseen before the

implementation, motivate,

g) any complainants regarding the implementation of the network,

h) open access obligations imposed on the aid beneficiaries: Number of requests

for access (for passive infrastructure), type of operators wishing to connect,

access granted (for passive infrastructure), type of operators, access refused,

reasons, access conditions (type of access, list of access products offered, type of

technology used to connect to the network), description of retail services

provided by the wholesale operator, if any, any disputes, concerns regarding

access to the network, how they were resolved.

(49) Fair and non-discriminatory treatment: In order to prevent any conflict of

interest which could lead to undue discrimination towards access seekers or

content providers and any other hidden advantage, the following safeguards apply

to the scheme:

16

• Wholesale conditions and determination of an access price mechanism is

subject to the consent of the NRA;

• All reported disputes between operators, including disputes related to

access to networks, are resolved by the NRA in accordance with the Draft

Order37.

6. ASSESSMENT OF THE MEASURE

6.1 Existence of aid within the meaning of Article 107(1) of the TFEU

(50) The notified measure constitutes State aid within the meaning of Article 107(1)

TFEU, as also confirmed by Spain during the notification.

(51) According to Article 107 (1) TFEU, "any aid granted by a Member State or

through State resources in any form whatsoever which distorts or threatens to

distort competition by favouring certain undertakings or the production of

certain goods shall, in so far as it affects trade between Member States, be

incompatible with the internal market." It follows that in order to be qualified as

State aid, the following cumulative conditions have to be met: 1) the measure has

to be granted out of State resources and it is imputable to the State, 2) it has to

confer a selective economic advantage to undertakings, 3) the measure must

distort or threaten to distort competition, 4) the measure has to affect trade

between Member States.

(52) State resources: The measure is partially financed from the national budget and is

granted under the legal basis as indicated in recital (23) above. The measure

therefore uses State resources and is imputable to the State.

(53) Selective economic advantage: The measure attributes a selective economic

advantage to individual companies – directly to the selected network providers

and indirectly to the third-party operators if wholesale access is provided at a

price, which is lower than the one which the wholesaler could otherwise achieve

on the market.

(54) The measure supporting the deployment of a very high-speed NGA network is

selective in nature in that it targets undertakings that are active only in one

industry sector (telecommunications), and only in certain segments of the overall

electronic communications sector (deployment and operation of communication

networks capable of providing certain speeds ), to the exclusion of other

electronic communications networks and service providers (such as internet

service providers or network providers offering basic technologies allowing for

speeds only below 30 Mbps download) and other economic activities .38 It does

not concern general infrastructure (e.g. general civil engineering works regarding

for example roads) which would be open on a non-discriminatory basis to all

37 Draft Order Establishing the Regulatory Conditions for the Granting of Aid under the New Generation Broadband

Extension Programme for the period 2020-2022.

38 See also Judgment of the Court of 15 June 2006 Joined Cases C-393/04 and C-41/05 Air Liquide Industries Belgium

[2006] ECR I-5293, recital 31.

17

potential users, but is limited to electronic communication operators.39 The

measure is therefore sector specific. The measure is moreover territorially

selective as it targets undertakings that are active only in certain regions. The

scheme is set up with the aim of improving very high-speed NGA broadband

coverage in underserved NGA white and in certain NGA grey areas. Other areas

of Spain will not profit from a comparable advantage. The public authorities

exercise discretionary power to determine the beneficiary and the conditions of

the measure, allowing them notably to modulate the aid amount and/or the

conditions for granting the aid in question.40

(55) As concerns the identification of the particular legal framework against which

selectivity can be assessed, it is noted that the construction and operation of

broadband networks and the provision of broadband services is a liberalized

economic activity conducted essentially by commercial operators on the basis of

private investments in the market. The regulatory framework applicable to

electronic communications services and networks seeks to promote competition,

the internal market, end-user interests, and widespread access to and take-up of

broadband networks for all citizens of the Union and Union businesses. The

framework promotes sustainable investment in the development of broadband

networks through efficient use of radio spectrum and predictable regulatory

approaches, while safeguarding competition through targeted ex ante regulatory

obligations imposed only where there is no effective and sustainable competition

on the markets concerned. It also aims at reducing the cost of the deployment of

high-speed networks, through the re-use of appropriate physical infrastructure,

including of utilities, and coordination of civil works.

(56) Within this reference framework, the granting of aid – as under the notified

scheme – to a selected individual operator for the deployment of very high-speed

NGA networks, reduces the costs of this direct beneficiary as compared to

operators investing into broadband networks and services merely on the basis of

private funds. The broadband network operators which rely purely on private

funds and do not receive this aid are in a comparable factual and legal situation as

the beneficiary since they operate in Spain under the same technical, commercial

and legal conditions in the field of broadband networks and services. Therefore,

the granting of State support for the deployment and operation of high-speed

broadband networks is not justified by the nature or economy of the liberalised

market and the regulatory framework. In any event, the features of this legal

framework cannot provide any justification for the granting of this type of

subsidies. It is the very purpose of the present measure to give - in line with

39 See also N 383/09 – Spain – Amendment of N 150/08 Broadband in the rural areas of Saxony. See also Commission

Decision 2003/227/EC of 2 August 2002 on various measures and the State aid invested by Spain in "Terra

Mítica SA", a theme park near Benidorm (Alicante) (OB L 91, 8.4.2003, р. 23—37).

40 See also Judgment of the Court of 26 September 1996, French Republic v Commission of the European

Communities, Case C-241/94, European Court Reports 1996 I-04551, ECLI identifier: ECLI:EU:C:1996:353;

Judgment of the Court of 29 June 1999, Déménagements-Manutention Transport SA (DMT), Case C-256/97,

European Court reports 1999 Page I-03913, ECLI identifier: ECLI:EU:C:1999:332; Judgment of the Court of

First Instance of 6 March 2002, Territorio Histórico de Álava - Diputación Foral de Álava (T-127/99), Comunidad

Autónoma del País Vasco and Gasteizko Industria Lurra, SA (T-129/99) and Daewoo Electronics Manufacturing

España, SA (T-148/99) v Commission of the European Communities, Joined cases T-127/99, T-129/99 and T-

148/99, European Court Reports 2002 II-01275, ECLI identifier: ECLI:EU:T:2002:59; Judgment of the Court of

First Instance of 21 October 2004, Lenzing AG v Commission of the European Communities, Case T-36/99,

Reports of Cases 2004 II-03597 (and Appeal - Case C-525/04 P: Judgment of the Court of 22 November 2007,

Kingdom of Spain v Commission of the European Communities, OJ C 8, 12.1.2008, p. 2–2).

18

national and European targets - an advantage to the selected beneficiary for the

deployment and operation of an NGA network in underserved NGA white and

grey areas in Spain. A selective economic advantage will therefore be conferred

directly upon the beneficiary selected in the selection procedures to design, build

and operate the networks. The direct aid beneficiaries will receive financial

support which will enable them to provide broadband services on conditions not

otherwise available on the market.

(57) Distortion of competition: The markets for electronic communications services

are open to competition between operators and service providers, which generally

engage in activities that are subject to competition and trade between Member

States. By favouring certain operators and service providers, the notified measure

is therefore liable to distort competition.

(58) Moreover, the intervention of the State can alter existing market conditions, in

that a number of customers could now choose to subscribe to the services

provided by the direct beneficiary or the various access seekers instead of by

existing, possibly more expensive alternative market-based solutions.

(59) Effect on trade: Insofar as the intervention may affect network operators and

service providers from other Member States, the measure has an effect on trade.

Therefore, the fact that an improved broadband service and additional wholesale

capacity becomes available can distort competition and affect trade between

Member States.

(60) Conclusion: In consideration of the above, the Commission concludes that the

notified measure constitutes State aid within the meaning of Article 107(1)

TFEU. Therefore, it is necessary to consider whether the measure can be found to

be compatible with the common market.

6.2 Legality of the aid measure

(61) By notifying the measure before its implementation, the Spanish authorities have

fulfilled their obligation under Article 108(3) TFEU.

6.3 Compatibility of the aid

(62) The Commission has assessed the compatibility of the notified measure according

to Article 107(3)(c) TFEU which states that: "aid to facilitate the development of

certain economic activities or of certain economic areas, where such aid does not

adversely affect trading conditions to an extent contrary to the common interest"

shall be considered to be compatible with the internal market. In its assessment,

the Commission has taken into account the Broadband Guidelines, which contain

a detailed interpretation of Article 107(3)(c) TFEU as it applies to that area of

State aid law.

(63) As explained in point 33 of the Broadband Guidelines, in order to be considered

compatible with the internal market every aid measure must comply with the

following cumulative conditions:

a. The aid must contribute to the achievement of objectives of common

interest

19

b. Absence of market delivery due to market failures or important

inequalities

c. The aid must be appropriate as a policy instrument

d. The aid must have an incentive effect

e. The aid is limited to the minimum necessary

f. Negative effects must be limited

g. The aid measure must be transparent

(64) If those conditions are fulfilled, the Commission balances the positive effects of

the aid measure in reaching the objective of common interest against the potential

negative effects.

6.3.1 The aid contributes to the achievement of objectives of common interest

(65) The Broadband Guidelines make explicit reference to the Digital Agenda,

especially with respect to the achievement of objectives of common interest41.

The Gigabit Communication was adopted in 2016 – three years after the

Broadband Guidelines. The present decision takes into account the Gigabit

Communication in the assessment under the Broadband Guidelines since the

Gigabit Communication builds upon and complements the Digital Agenda.

(66) As set out above (see recitals (16)-(17)), the Europe 2020 Strategy (EU2020) and

the DAE underline the importance of broadband deployment to promote

competitiveness, social inclusion and employment in the EU. In addition, the

Gigabit Communication confirms the importance of internet connectivity for the

Digital Single market and the need for Europe to deploy the networks necessary

for its digital future (see recital (17)). While the 2010 connectivity objectives

defined by the DAE remain valid up to 2020, the Gigabit Communication sets out

further targets in order to respond to technological developments and future needs

which call for complementary longer term objectives up to and beyond 2025:

European households should have access to Internet connectivity offering at least

100 Mbps (download) which is upgradeable to 1 Gbps symmetrical and socio-

economic drivers (including, in particular, digitally intensive companies and

providers of public services) should have access to speeds up to 1 Gbps

symmetrical.

(67) Spain expects that in order to address future broadband needs, consisting of the

availability and take-up of very high-speed NGA networks enabling widespread

use of products, services and applications in the Digital Single Market, and

bridging the digital divide between well served and underserved areas in Spain,

the expansion of very high speed networks in underserved areas is necessary.

Spain also bases its expectations on the Gigabit Communication and its findings

regarding needs of households and companies in the field of broadband

connectivity in the coming years. Spain considers that there is a need for State aid

in view of insufficient private investment into such networks in the designated

NGA white and grey areas (recitals (17)-(19)).

41 See point 36 of the Broadband Guidelines.

20

(68) The measure constitutes a step towards fulfilling the objectives of the Gigabit

Communication both as regards the need to deploy very high capacity networks

and the target speeds set within the strategic objectives:

(69) The target infrastructure is supposed to provide at least 300 Mbps symmetrical,

upgradeable to 1Gbps symmetrical. This is in line with the target set out by the

Gigabit Communication that all European households should have access to

Internet connectivity offering at least 100 Mbps (download), upgradable to

Gigabit speed, by 2025.

(70) The measure under examination will thus contribute to the achievement of the

objectives of the Gigabit Communication and therefore contributes to the

achievement of a common interest.

6.3.2 Absence of market delivery due to market failures or important

inequalities

(71) In its Communication on State Aid Modernisation (SAM)42, the Commission

notes that State aid policy should focus on facilitating well-designed aid targeted

at market failures and objectives of common European interest. State aid

measures can, under certain conditions, correct market failures, thereby

improving the efficient functioning of markets and enhancing competitiveness.

(72) According to point 37 of the Broadband Guidelines, "a market failure exists if

markets, left to their own devices, fail to deliver an efficient outcome for society.

This may arise, for instance, when certain investments are not being undertaken

even though the economic benefit for society exceeds the costs. In such cases, the

granting of State aid may produce positive effects and overall efficiency can be

improved by adjusting the economic incentives for firms. In the broadband

sector, one form of market failure is related to positive externalities. Such

externalities arise where market players do not internalise the whole benefit of

their actions. For example, the availability of broadband networks paves the way

for the provision of more services and for innovation, both of these are likely to

benefit more people than the immediate investors and subscribers to the network.

The market outcome would therefore generate insufficient private investment in

broadband networks."

(73) Taking into account the Gigabit Communication, Spain considers that the target

infrastructure is necessary in order to respond to fast growing connectivity needs

by industry and households. The target infrastructure is intended to remedy a

market failure by reducing the digital divide between well served and

underserved areas, and provide the effective, reliable and secure broadband

infrastructure necessary for future growth and sustainable development of rural

and remote communities (recitals (17)-(19)).

(74) Spain has conducted a general public consultation in order to request the market's

view on the planned measure. Detailed public consultations about the exact target

areas will be conducted by the relevant provinces in order to verify the maps and

to enquire about investment plans by private investors during the next three years.

Areas with available networks providing the speeds which were set in order to

42 Communication from the Commission – EU State Aid Modernisation (SAM), COM(2012)0209 final;

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52012DC0209&from=EN

21

define the eligibility of households and companies (see recitals (4), (20) and (28))

will be excluded from the measure. The measure will only cover areas where no

infrastructure is present or planned within the next three years, which is able to

provide speeds of at least 30 Mbps download (NGA white areas) and areas where

one network is present capable of providing speeds above 30 Mbps but below

100 Mbps download (NGA grey areas), and there are no plans for roll-out of such

infrastructure within the next three years.

(75) In view of the above, the measure can be considered to address a market failure.

6.3.3 Appropriateness of State aid as a policy instrument

(76) When broadband coverage is considered insufficient, public intervention may be

necessary. It should, however, first be assessed whether State aid is an

appropriate policy instrument to address the problem, or whether there are

alternative, better placed instruments. Spain explained that it has not been

possible to remedy the lack of private investments in very high capacity networks

in the areas targeted by the measure by other less distortive measures, such as ex-

ante regulation or demand stimulation, and that the wider economic benefits of

such networks therefore have not been delivered (recital (17).

(77) The implementation of the now notified State aid measure will guarantee network

roll-out meeting the Spanish needs. The measure makes it possible to achieve the

objective of ensuring NGA network coverage cost-effectively, efficiently and

within the planned time scale.

(78) The Commission agrees that without further public intervention, it would seem

impossible to bridge the digital divide between urban and more rural areas, which

could lead to economic and social exclusion of local citizens and businesses. It is

therefore concluded that the now notified measure is an appropriate State aid

measure.

6.3.4 The aid has an incentive effect

(79) The rules of the measure ensure that aid can only be provided if it is established

that in the target areas no comparable investment would take place without public

funding within the next three years. This is confirmed by the results of the

mapping and successive public consultations. The mapping and public

consultations described in recitals (28)-(32) will ensure that in the intervention

area no comparable investment would take place without public funding in the

near future. The measure will only cover areas where no infrastructure is

provided or planned by private investors within the next three years which would

allow for 30 Mbps download or more (NGA white areas) and areas where one

infrastructure is provided, or planned by private investors within the next three

years, which would allow for more than 30 Mbps but less than 100 Mbps (NGA

grey areas). It follows from this that the investment would not be made within the

same timeframe without the aid, which therefore has an incentive effect.

Moreover, by granting access to the subsidized network to third party operators,

the measure facilitates market access for third parties.

(80) Therefore, in line with point 45 of the Broadband Guidelines, the aid provides a

direct and appropriate investment incentive for the selected network providers

and for third party beneficiaries.

22

6.3.5 Proportionality - Aid limited to the minimum necessary

(81) The Spanish authorities have designed the measure in such a way as to minimise

the State aid involved and the potential distortions of competition arising from

the measure. In that respect, as provided by point 78 of the Broadband

Guidelines, the Commission notes the following elements:

Detailed mapping and coverage analysis and public consultations:

(82) As described in recitals (28) and (29), a detailed mapping and public consultation

on the target areas will be carried out annually by SEAD within the Ministry of

Economy and Business. The mapping will be done at premise level identifying

the NGA-coverage on the basis of "homes passed". The correctness of the

mapping will be verified via public consultations during which market

participants will be asked to confirm the data on the existing infrastructure

including the download and upload speeds and to indicate their planned

infrastructure investments for the next three years. In the definition of the

ultimate target areas the results of the public consultations will be taken into

account and published on a central webpage in order to ensure a high degree of

transparency (recital (25)). The measure will only cover areas defined as NGA

white and NGA grey areas as defined in this decision (see recital (20)).

(83) In order to avoid that operators claiming to have investment plans in relation to

the public consultation actually ensure that these are carried out in time, the aid

granting authority may require certain commitments from these operators to

ensure that significant progress in terms of coverage will be made within the

three-year period or for the longer period foreseen for the investment. It may

further request those operators to enter into a corresponding contract which

outlines the deployment commitments, including a number of “milestones” which

would have to be achieved during the three-year period and reporting on the

progress made. If a milestone is not achieved, the granting authority may go

ahead with a tender covering also that area (point 65 of the Broadband

Guidelines).

(84) On this basis, the Commission can conclude that the mapping and the public

consultations fulfill the requirements of points 78 (a) and (b) of the Broadband

Guidelines.

Competitive selection process and economically most advantageous offer:

(85) As described above (see recitals (36)-(37)), a competitive selection process will

be carried out in line with the spirit and principles of the EU public procurement

Directives in order to ensure that the economically most advantageous offer is

selected. The possibility to grant priority points for smaller areas which are

considered a priority by the authorities is expressed in the tender conditions as a

weighting coefficient based on objective criteria related to the specific land

characteristics and to the incremental costs attributable to the given geographical

area, such as incremental costs derived from the infrastructure that must be rolled

out in the area; orography; insularity criteria (e.g. the need to deploy an

underwater cable to connect an island with fiber optic); demography of the area.

The possibility of giving priority points is expected to be used in exceptional

cases and will, due to the objective and cost-based criteria, not have a major

impact on the assessment of this criterion. The national authorities will annually

23

carry out tender procedures in all provinces in parallel. The tender procedures

aim for the selection of a network provider and operator for the target

infrastructure in their respective target areas (the so called gap funding method).

The tender procedures will be published in the National Subsidies Database and

an extract of the same in the Spanish Official Journal. Decisions will also be

published on the portal of the Aids of the website of the Ministry of Economy

and Business (see recitals (36)-(37)).

(86) The tender will specify certain minimum requirements (minimum coverage

targets in each province, which equals the estimated number of premises of which

coverage is achievable with the budget allocated) in order to ensure that funds are

used in an efficient way also in cases where there are not enough bidders to

ensure a competitive situation as well as the wholesale access obligations, and

will refer to the State aid principles (recital (36)).

(87) It will be up to participating bidders to choose their particular intervention area

within a province (recital (32)). The tender procedure then ensures that aid is

awarded to the bidder with the largest number of premises covered with the

budget allocated (recital (32)). This criterion will be the most important one, even

if additional award criteria which have to be published before-hand (including

their weighing) are used by the authorities. The assessment of bids for individual

lots and bids for the overall target area will be done on the basis of the same

criteria.

(88) It can be concluded that the planned competitive selection process ensures open,

transparent and non-discriminatory tenders and is in line with points 78 (c) and

(d) of the Broadband Guidelines.

(89) Technological neutrality: In its policy documents43, the Commission sees a clear

trend in growing needs for internet connectivity for all sectors of the European

economy and shows that expanding individual usage aggregates into quickly

growing demand for very high-speed broadband infrastructures that can underpin

the Digital Single Market. The Commission, when considering the growing

capacity needs in terms of network infrastructures, underlines the need to take

into account how new devices enable the development of new applications and

affect customer bandwidth requirements (e.g. larger screens and higher

resolution). In addition, a single connection/subscription often serves

simultaneously multiple users, in particular for households with children, SMEs

and organisations like schools and libraries, further increasing the need to ensure

speed and quality of experience. A presentation of the capacity and quality

requirements expected for 2025 of application categories, such as

Homeoffice/VPN, cloud computing, media and entertainment ultra-HD, 4K-TV,

3D, made by the Commission in its Staff Working Document accompanying the

Gigabit Communication44, shows that the Spanish authorities are in line with the

Commission’s expectations in terms of speeds required for such applications and

services. The measure does not specify any technology. The aid is granted on the

basis of an open call for any technology fulfilling the requirement of providing a

43 https://ec.europa.eu/digital-single-market/en/news/communication-connectivity-competitive-digital-single-market-

towards-european-gigabit-society

44 https://ec.europa.eu/digital-single-market/en/news/communication-connectivity-competitive-digital-single-market-

towards-european-gigabit-society

24

minimum speed of 300 Mbps symmetrical, upgradeable to 1 Gbps symmetrical

(recital (38)).

(90) The fact that the target speeds set by Spain at present seem to speak mostly for

fibre infrastructures (FTTB, FTTH) does not infringe the principle of technical

neutrality. First, potential alternative existing technologies may be proposed by

the bidders and even completely new solutions which might evolve can

participate as long as they meet the target speeds. In fact, it is worth noting that

other technologies, such as further technological upgrades of cable infrastructure

and 5G-infrastructure, are as well expected to meet the high target speeds in the

foreseeable future. Second, the principle of technological neutrality has to be seen

in the light of the targets to be achieved. As set out above (see recital (17)), the

targets were defined on the basis of estimated need of bandwidth required for full

achievement of the digital transformation (recital (19)) and the targets set by the

Gigabit Communication, and thus can be considered as being in line with

common interest. Under the principle of technological neutrality, Member States

only have to ensure that all technologies capable of reaching the targeted speeds

may participate.

(91) On this basis, the Commission can conclude that the principle of technological

neutrality is respected and in line with point 78 (e) of the Broadband Guidelines.

Use of existing infrastructures:

(92) Under the notified measure, projects are based on the use of existing broadband

infrastructure to the best extent possible as regards roll-out of new NGA

infrastructure, hereby keeping investment costs as low as possible and limiting

the use of State resources to a minimum necessary. Any operator which owns or

controls infrastructure (irrespective of whether it is actually used) in the target

area and which wishes to participate in the tender, will (i) inform the aid granting

authority and the NRA about that infrastructure during the public consultation,

and (ii) provide all relevant information to other bidders at a point in time which

would allow the latter to include such infrastructure in their bid. All relevant

information on the State aid measure will be made available on a website in

accordance with point 78(j) of the Broadband Guidelines 2013 (recital (40)).

(93) Spain will thereby allow for a use of existing infrastructure as required by point

78 (f) of the Broadband Guidelines.

Wholesale access conditions and pricing:

(94) Detailed provisions for the granting of wholesale access and pricing are set out

above (see recitals (40)-(44)), wholesale access will be granted on an open and

non-discriminatory basis, respecting the principle of technological neutrality.

Wholesale access to the new subsidized infrastructure as well as to the selected

bidder's existing infrastructure in the respective target area will have to be

granted by the respective selected bidder for at least seven years in general and

for passive infrastructure unlimited in time.

(95) Any ducts financed under the measure will be large enough to cater for at least

three operators and to host point-to-multipoint as well as point-to-point solutions.

To provide enough capacity on the last mile, sufficient capacity will be planned,

in the case of fibre infrastructure, at least four fibres will be installed. Access will

25

be granted at least 6 months before the launch of any retail services of the

beneficiary and access obligations will apply irrespective of any change in

ownership, management or operation of the subsidised infrastructure.

(96) As described in recital (44), Spain will oblige the selected network operators to

base wholesale access prices on the pricing principles used by the CNMC. For

the operator with significant market power (SMP), wholesale prices will be based

on the wholesale prices for similar services set by the CNMC, which will be

considered maximum prices. In the absence of an equivalent reference offer, the

reference will be the average prices existing in Spain and in the absence of this

reference, the cost orientation criterion will be applied, taking into account the aid

received by the network operator. In either case, in the case of a vertically

integrated operator, the prices defined must allow for the replicability of retail

bids and must not discriminate against the retail branch of the beneficiary

operator. Disputes among operators, pertinent to the application of wholesale

reference offer, will be resolved by the NRA (the CNMC).

(97) The Commission therefore considers that the wholesale access conditions and

pricing are in line with points 78 (g) and (h) of the Broadband Guidelines.

Monitoring and claw-back mechanism:

(98) Under point 78 (i) of the Broadband Guidelines, Member States should

implement a claw-back mechanism only if the aid amount of the project is above

EUR 10 million. As Spain has confirmed that no project under the notified

measure will exceed EUR 10 million (recital (45)), a claw-back mechanism is not

required.

(99) The Spanish authorities have set up a system of monitoring of the implementation

of the measure, and will provide a website, which will be continuously updated,

containing all information related to the implementation of the scheme. Within

the framework of the monitoring exercise, aid beneficiaries shall provide inter

alia financial reports and supporting documents in order to justify their costs

(recitals (45)-(46)).

(100) It can be concluded that the conditions of point 78 (i) of the Broadband

Guidelines are fulfilled.

Reporting:

(101) Reporting is required under Article 26 of Council Regulation (EU) 2015/1589 as

well as under point 78 (k) of the Broadband Guidelines. As described in recitals

(46)-(48), Spain commits to submit to the Commission the required reports on all

aid schemes as required by Article 26 of Council Regulation (EU) 2015/1589 and

point 78 (j) of the Broadband Guidelines.

6.3.6 Limited negative effects and step change

(102) To the extent that the now notified scheme concerns NGA grey areas, the

Commission must carry out an in-depth assessment of the notified measure, in

order to ensure that the distortion of competition created by a publicly funded

intervention in such an area is reduced to a minimum and outweighed by the

advantages of such an intervention, such as significantly improved services (see

26

recital (8)).

(103) A step change is considered to be at hand if, as a result of the public intervention

(1) significant new investments in the broadband network are undertaken by the

beneficiaries (i.e. investments must include civil works and installation of new

passive elements) and (2) the subsidised infrastructure brings significant new

capabilities to the market in terms of broadband service availability, capacity,

speeds and/or competition.

(104) The scheme does not foresee the granting of aid for marginal investments related

merely to the upgrade of active component of the network, which, as indicated in

point 51 and footnote 64 of the Broadband Guidelines, do not normally ensure a

step change and are therefore not eligible for State aid. As described in recital

(19), the Spanish authorities will make State aid available only to support a step

change compared to existing as well as concretely planned network roll-outs.

(105) The measure requires that by 2022, the extension of coverage of NGA networks

capable of providing services of very high-speed broadband (at least 300 Mbps

downstream and upstream, upgradeable to 1Gbps symmetrical) be accelerated in

areas which have no coverage of NGA networks for high-speed or deployment

plans by any operator in the next three years (NGA white areas), and to extend

the eligible areas of the scheme to areas currently served by one network

providing between 30 and 100 Mbps, or where one operator has plans to provide

such a network in the three years following a public consultation (NGA grey

areas), where also at least 300 Mbps symmetrical, upgradeable to 1Gbps

symmetrical, will be provided through the measure (recital (19)).

(106) The increased speeds ensure that advanced and extended applications can be used

by households and companies. The target infrastructure will allow households

and companies to use, on an advanced basis, applications such as cloud

computing, home office and applications in the field of virtual reality, for which,

in particular, a future demand of high upload speeds is expected.45

(107) The target speeds also ensure that the new infrastructure does not provide only

limited improvements to below 100 Mbps download which, in any case, would

fail to meet the objectives of the Gigabit Communication, namely to move

towards very high capacity networks and towards at least 100 Mbps download

(upgradeable to 1Gbps symmetrical) for all households in Europe.

(108) In reply to the public consultation on the measure carried out by Spain, one

operator claimed that it was already present with FTTH networks in parts of the

target areas. As a consequence, Spain decided to exclude all areas covered by

such claims from the target areas of the scheme. The main criticism of the

scheme received from stakeholders within the public consultation concerned the

definition of target areas as too large to enable smaller operators to participate in

the competitive selection procedures. This has been rebutted as a

misunderstanding by the Spanish authorities, which have explained that tendering

will be carried out annually per province with the aim of selecting one

beneficiary per province. However, the intervention area of a selected project will

normally not cover all white and grey NGA areas in the entire province due to

45 See Staff Working Document to the Gigabit Communication, SWD (2016) 300, in particular Figure 15 on page 17

and Table 1 on page 18.

27

budgetary limitations imposed by the authorities and due to the objective to

ensure that as many operators as possible can participate in each tender

procedure. Every bidder is free to propose its intervention area within the

province. The bids are compared according to the overall amount and the cost per

premises covered, as described in the section on competitive selection procedure

(recitals (31), (36)-(37)).

(109) Any potential risk of crowding out of private investments is contained by the

design of the measure. Black NGA areas, where more than one NGA network

exists and where therefore sufficient demand for very high capacity is expected to

occur in the future, are excluded from the measure. To the extent that the measure

concerns grey areas with one other NGA network being already available, only

those NGA areas which do not reach 100 Mbps download, and therefore do not

meet the objective of very high capacity networks, are targeted. Based on the

eligibility criteria and target speeds set by Spain, the target infrastructure will

connect households and companies, unless they already have access to 300 Mbps,

symmetrical, upgradeable to 1Gpbs symmetrical. Existing technologies in this

range, including those which were in recent years upgraded to this speed level,

are therefore not part of the target area. More importantly, no potential very high

capacity infrastructure (such as FTTH/B or Docsis 3.1) will be overbuilt by the

measure. Areas with existing fibre networks (FTTB / FTTH) or fibre networks

being planned by private investors within the next three years are not covered by

the measure either, since such fibre networks regularly allow more than 100

Mbps download, but also 300 Mbps symmetrical, or can easily be upgraded

(recital (18)).46

(110) The selection procedure ensures an open, transparent and non-discriminatory

procedure. The weighing criteria ensure that the economically most advantageous

offer is selected. The fact that the tender at provincial level allows for bids

regarding smaller target areas than the entire province ensures that also smaller

network operators can participate in the tenders and further limits any negative

effects on competition. Open wholesale access will allow third party

telecommunication operators to enter the market and offer services at retail level.

(111) The Commission therefore concludes that, as also set out in points 68-70 of the

Broadband Guidelines, the conditions for a step change are fulfilled and that the

negative effects on competition on this basis are limited.

6.3.7 Transparency

(112) As set out above (recitals (46)-(48)), Spain commits to comply with the

transparency obligations of the Broadband Guidelines as amended by the

Commission Communication 2014/C 198/02 and to publish the relevant

information relative to the measure on the relevant Commission internet site47. It

will be made available to the general public without restrictions. Spain also

commits to submit to the Commission annual reports, as required under

Article 26 of Council Regulation (EU) 2015/1589 as well as reports on the

implementation of the measure every two years from the date the network is put

46 Apart from that, FTTB and FTTH infrastructures could be regarded as easily upgradeable to 1 Gbps symmetrical

which would exclude them as target areas for interventions in grey NGA areas.

47 https://webgate.ec.europa.eu/competition/transparency/public/search/home

28

in use in line with the requirements set in point 78 (k) of the Broadband

Guidelines.

6.3.8 Overall balancing: Positive effects expected to outweigh potential

negative effects

(113) The objective of the measure is to provide access to very high capacity broadband

infrastructure in NGA white and grey areas where no such private investment is

present or planned. The measure is designed in a way that its targeted

infrastructure contributes to the achievement of the objectives of common interest

since it aims at putting in place very high capacity networks as required in the

Gigabit Communication while providing a step change. Both households and

companies will dispose of a new infrastructure which allows for the use of

extended applications and which can respond to increasing demand for higher

speeds in the coming years. The targeted infrastructure is not provided by the

market - neither via existing nor via planned private investments as verified by

the public consultation. It consequently addresses a market failure.

(114) Spain has designed the measure under examination in such a way as to minimise

the potential distortion of competition arising from the measure in grey NGA

areas and excludes any coverage of black NGA areas. The mapping and public

consultation ensure that no comparable private investments are crowded out.

(115) On balance, the measure is in line with the objectives of Article 107(3)(c) TFEU

as it facilitates the development of wholesale and retail broadband services in

underserved areas, where such aid does not adversely affect competition to an

extent contrary to the common interest.

(116) The Commission therefore considers that the notified measure will support the

objectives of the Gigabit Communication, notably the deployment of very high-

speed networks, and is objectively justified addressing the market failure in the

targeted areas.

(117) The Commission concludes that the now notified measure meets the compatibility

criteria set out in the Broadband Guidelines. Hence the aid involved is compatible

with the internal market in line with Article 107(3)(c) TFEU.

(118) The Spanish authorities are reminded that, pursuant to Article 108(3) of the

TFEU, they are obliged to inform the Commission of any plan to extend or

amend the measure.

7. DECISION

The Commission has accordingly decided:

not to raise objections to the aid on the grounds that it is compatible with the

internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of

the European Union.

If this letter contains confidential information which should not be disclosed to third

parties, please inform the Commission within fifteen working days of the date of receipt.

If the Commission does not receive a reasoned request by that deadline, you will be

29

deemed to agree to the disclosure to third parties and to the publication of the full text of

the letter in the authentic language on the Internet site:

http://ec.europa.eu/competition/elojade/isef/index.cfm.

Your request should be sent electronically to the following address:

European Commission,

Directorate-General Competition

State Aid Greffe

B-1049 Brussels

Stateaidgreffe@ec.europa.eu

Yours faithfully,

For the Commission

Margrethe VESTAGER

Executive Vice-President