MuniWireless

The European Commission has approved the use of public funds for Prague’s municipal wireless network and ruled that these do not constitute state aid. Unfortunately, the network can be used only to serve the public sector (municipal purposes).
The European Commission has approved the use of public funds for Prague’s municipal wireless network and ruled that these do not constitute state aid.

Since the initial plans raised competition concerns, key modifications were made. In particular, the project will only serve the public sector and provide citizens with free broadband access limited to public-sector websites and public-sector non-commercial content, such as eGovernment services. In light of the amendments made to this wireless network project, the Commission found that the project does not involve state aid.

EU Competition Commissioner Neelie Kroes commented: Investment in broadband networks is primarily a matter for private companies. State subsidies for such networks are only acceptable if they address a well-defined market failure or cohesion problem. I am glad that the city council of Prague modified its plans so that the project can go ahead without distorting competition.

Following a complaint by private operators, the Commission conducted a preliminary investigation of the plans of Prague City Hall to build a municipal wireless network. The project has an overall budget of about ‚Äö?ᬮ12 million, spread over a period of five years and will cover approximately one-third of Prague with Wi-Fi technology.

Initial plans for the commercial use of the network could have raised doubts from a state aid point of view as the project could have crowded out investment from private operators by providing unrestricted free or subsidized internet access to the public. During the Commission’s preliminary investigation, and following the opinion of the Czech Competition Authority (UOHS), the Czech authorities considerably modified the project.

The Czech authorities have also confirmed that they would notify any future plans for commercial exploitation of the network to the Commission for state aid clearance, before putting them into effect.

The Commission has therefore concluded that the project in its current form does not involve state aid as no economic advantage within the meaning of Article 87 (1) EC Treaty is granted to the selected service provider, to public-sector content providers or citizens and businesses using the network.

My opinion of the Commission’s decision: I don’t see why Prague cannot build a network for their own use and at the same time, lease out access to private providers on a wholesale basis. The municipality need not act as an ISP, but it can be a wholesaler. In this way, it can recoup the cost of its investment more quickly AND increase competition in the market for broadband services, which is exactly what Competition Commissioner Neelie Kroes wants to see in the first place.

Source: European Commission

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