Wireless Prague : A Lesson for Other Muni-Wireless Projects in Europe

The recent EU decision concerning the Prague Wi-Fi project gains considerable importance because that decision has clarified when a municipality may set up its own network even when there are adequate services available from private network operators.

by / July 30, 2007
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Even as the controversies regarding Prague's municipal wireless network (Wireless Prague) remain unresolved despite the European Commission's approval at the end-of-May on the use of public funds for the project, there seems to be another dispute brewing in Europe. France Telecom, one of France's main telecom operators, filed a complaint last week against the city of Paris for allowing free Wi-Fi access in about 105 public areas that the Town Hall of Paris (the municipality) announced on July 16. This roll out is the first phase of "Paris WiFi", a free citywide wireless project initiated and funded by the municipality, which has an ambitious plan to allow free Wi-Fi access in 400 public spaces like libraries, museums and parks by the end of August.

But while the Paris municipality regards this network as a public utility and claims that the Wi-Fi service does not provide unfair competition to private telecom operators (since the services would be restricted to public places during opening hours), France Telecom, which owns 2250 paid-for hotspots throughout the city, has sued the Town Hall in the administrative Court alleging that the roll out is illegitimate. According to FT, since there are adequate Wi-Fi services available in the whole of Paris already, the municipality's free wireless service distorts competition.

Indeed broadband services and networks are evolving fast, moving Europe towards a "knowledge based society." Here many public initiatives are taking place at national, regional or even at local levels -- there are about 30 of them under implementation or being envisaged to advance the development of fast Internet access and the widespread deployment of broadband infrastructures. But, although such initiatives are in line with making broadband access crucial for growth and quality of life, many such initiatives will inevitably clash with private investments.

It is time now then, says Audrey Lemonnier of the European Commission, to raise the pertinent question of "whether a public authority has to build and operate its own network rather than procuring broadband services from the market, when such services are abundantly available."

So is there a lesson to be learnt from the EU decision on 'Wireless Prague', which according to the European Commission is the first municipal wireless project in Europe to be subject of arbitration?

"Primarily," says EU Competition Commissioner Neelie Kroes, "investment in broadband networks is a matter for private companies. [But] subsidies for such networks are acceptable only if they address a well-defined market failure or cohesion problem."

In that respect the decision of the Prague project gains considerable importance because in that decision the EC has clarified when a public authority (like a municipality) may set up its own network even when there are "adequate services available from private network operators."

It is important to note here that while the EC encourages State intervention in broadband networks to bridge the "digital divide" between more affluent areas and remote regions without appropriate broadband services, it is also concerned about the fact that a "State intervention does not crowd out existing and future investments by market players." This is the main reason why the EC has crafted a concept of "State Aid" under Article 87(1) of the EC Treaty, which ensures that "state grants provided to an undertaking or groups of undertakings which would not have been granted under normal market conditions, does not distort competition and trade."

According to the EC, the mere fact that a municipality decides to "build its own public-sector network in order to satisfy its own needs for Internet connectivity instead of procuring such services from private operators does not raise concerns under Article 87 (1) of the EC Treaty," since that is an autonomous organizational decision by a public authority.

Moreover, it isn't a problem either if a public authority builds its network for providing public services (like e-Government) for free. "The Czech authorities informed

the Commission that only public services and public-sector content will be accessible over the network and that the Czech authorities will monitor to ensure there is no distortion of competition vis-à-vis third parties offering similar content and/or services," said the EC decision paper on Prague. "The public-sector organizations running the websites that can be accessed for free are not considered to exercise a commercial activity and hence do not qualify as undertakings under Article 87 (1) EC Treaty [either]."

In fact, in that decision, the EC has also gone ahead and recommended a business model for hotspots deployment of a municipality in Europe. "The Commission would also like to emphasize that many other possibilities exist for public authorities to facilitate the provision of (wireless) broadband services by commercial operators without granting State aid," said the decision. "Apart from measures boosting broadband uptake on the demand side (such as vouchers, awareness raising and educational measures), municipalities may streamline permissions and other administrative procedures, facilitate the deployment of hotspots by allowing non-discriminatory access to public infrastructure, coordinate the deployment of hotspots or develop public content for citizens. All these measures can be implemented without interfering with the market and limit the potential distortion of competition with existing market operators."

According to Prague City Hall, the EC's decision on 'Wireless Prague' is a landmark decision in the sense that it has provided a common language for development of further services with telecommunications operators in Europe, and, as says Rudolf Bla?ek, Deputy Mayor of the City of Prague, "it is undoubtedly also important for other cities in Europe [that are] implementing or preparing similar networks."

Nevertheless a big question that still remains. Although the EC may allow public authorities in Europe to roll out captive networks for own-use or for e-Governance, would the EC allow roll out of a public infrastructure for captive use as well as open networks which can be offered to the commercial operators that can charge the network's users? And, if the EC does allow such a network, under what conditions would that be?

These are "sensitive issues" on which EC officials are unwilling to comment just yet. Moreover it is a complicated process as well. For instance, "The first step is to develop a transparent and non-discriminating model that can be accepted by telecom operators," says Jaroslav Solc, manager responsible for the Wireless Prague project, which has another phase in its plans. This phase has been planned as an open network which the private sector service providers too can use to provide wireless services to their end users. "The next step is to start discussions on this issue keeping in mind that open infrastructure is nothing unusual. The prerequisite is to get approval from the EC," adds Solc.

But going by EC's decision in the recent cases -- the Broadband in underserved Territories of Greece; Metropolitan Area Networks in Ireland; and the municipality of Appingedam, Netherlands -- what is evident is that EC will monitor all developments closely and would evolve policies in response to new patterns of public intervention.

Indrajit Basu is international correspondent for Government Technology's Digital Communities.