Is the aim of technology neutrality nothing but empty verbiage?

Technology neutrality has been a strong guiding principle in many of the European Union’s operations. The principle dictates that projects must ‘use the most suitable state-of-the-art technologies for addressing the needs of the geographical area in question’. Additionally, they must ‘offer the best balance with cost efficiency and respect technology neutrality.’

The Connecting Europe Facility programme ‘aims to accelerate investment in the field of trans-European networks and to leverage funding from both the public and private sectors, while increasing legal certainty and respecting the principle of technological neutrality’.

Conflicts between theory and practice

In a Government Report on EU Policy, Finland brings up many ideas for developing the Union. One central idea is to promote innovation and investment in a technologically neutral manner.

In contravention of its own policy, however, the Finnish government has announced a change in the allocation of state aid for broadband. In future, aid will only be available for optic fibre projects.

Another unfortunate example is the Commission’s proposal on state aid regulation, which is also planning to remove technology neutrality from the regulations of broadband subsidies.

Thus, there is still a long way to go from fine speeches and professed principles to practical action and implementation. This conflict erodes the credibility of politics, and such vacillating progress does not form a farsighted and predictable regulatory framework for business. It is also problematic that the Commission will alter regulations – occasionally very significantly – without parliamentary procedure. Increases to the Commission’s power should not be unquestioningly accepted.

Concerns over amendments to the Block Exemption Regulation

FiCom issued a statement on the Commission’s proposal to amend the General Block Exemption Regulation. The proposal is likely to be approved before the summer. It represents a significant step back for the EU in promoting innovation, cost efficiency, and the most suitable state-of-the-art technologies.

The proposed amendments related to broadband networks and aid for broadband infrastructure contain substantial problems, especially in terms of technology neutrality, but also regarding non-discrimination and competition neutrality, and therefore call into question the effective utilisation of potential subsidy funds.

1. Competition neutrality

In Finland, telecom companies invest approximately half a billion euros each year into expanding and improving communication networks, with over half of this spent on fixed networks and under half on mobile networks. The investment rate for telecom companies (21%) is significantly higher than for the rest of the business sector (12%).

Additionally, Finnish telecom companies signed a commitment last year with the Ministry of Transport and Communications, to further improve the availability of the high-speed broadband connections needed by modern society, all over Finland and independently of time or place. In line with the commitment, high-speed connections are to be constructed primarily on market terms and only secondarily using public funds. The starting point is technological neutrality, which means that the development of fixed and wireless connections must be parallel.

The Ministry of Transport and Communications aims to allocate funding from the Recovery and Resilience Facility (RRF) to the construction of advanced communications connections. However, from the point of view of effective recovery, it is important to ensure that the recovery money does not replace commercial investments and thereby adversely affect the highly competitive communications market.

Considering the significant investments and the terms of the commitment made with the ministry, the proposed regulation causes very significant uncertainty factors for the broadband network market and investments from the perspective of Finnish commercial telecom companies.

2. Non-discrimination and technology neutrality

The proposal is not technologically neutral and non-discriminatory because it discriminates between fixed broadband and mobile broadband. For example, the criteria for receiving aid are different for fixed and mobile networks. According to the proposal, fixed networks could receive aid even if the area in question had a pre-existing fixed network, but mobile networks could not.

It is problematic in terms of competition neutrality that an existing fixed network in the assisted area could have been built entirely commercially and on market terms, after which a competing network would be built in the same area with state aid. In practice, this operating model would cannibalise market-based construction. The proposal is counterproductive because it creates a significant uncertainty factor and does not encourage the market-based construction of a fixed network. It would also permit the construction of a second subsidised network in an area with an existing subsidised one, which is a highly inefficient use of public funds.

3. Effective use of aids

The regulation should allow for the construction of different networks in each area, in a technologically neutral manner and with the most appropriate and cost-effective technology and take into account that advancements will result in connection speeds growing in different technologies. In fact, in prior policies, the EU has emphasised the need for regional considerations.

FiCom believes that the regulation should be changed so that it covers 5G networks, as well as fixed wireless access networks. 5G networks are considered one of the basic pillars of digitalisation, and various EU institutions and member states are strongly backing their construction.

5G network technology differs significantly from prior mobile network generations, so it should be eligible for aid regardless of whether an area already includes mobile networks. It is not expedient to provide aid to the previous generation’s 4G networks; instead, aid should be directed principally at 5G networks.

Elina Ussa, Managing Director, FiCom