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A Retrospective Study of State Aid Control in the German Broadband Market

Author

Listed:
  • Tomaso Duso
  • Mattia Nardotto
  • Jo Seldeslachts

Abstract

We provide an evaluation of the impact of public subsidy schemes that aimed to support the development of basic broadband infrastructure in rural areas of Germany. Such subsidies are subject to state aid control by the European Commission (EC). While the EC increasingly recognises the role of economic analysis in controlling public aid to companies, there are to date no full retrospective studies performed on state aid control, especially assessing the so-called balancing test. In this study, we do not only analyse whether the aid was effective in solving a market failure – low broadband coverage in rural areas – but also study its impact on competitive outcomes, on both rival firms and consumers. We adopt a difference-in-differences framework after using a matching procedure to account for selection on observables. We find that the aid significantly increased broadband coverage. More importantly, we find that the number of internet providers has significantly increased in the municipalities receiving aid. This additional entry decreased average prices. Therefore, the subsidies complied with EU state aid rules, both in terms of effectiveness and competition.

Suggested Citation

  • Tomaso Duso & Mattia Nardotto & Jo Seldeslachts, 2021. "A Retrospective Study of State Aid Control in the German Broadband Market," CESifo Working Paper Series 8892, CESifo.
    • Handle: RePEc:ces:ceswps:_8892
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    Cited by:

    1. Joan Calzada & Begoña García-Mariñoso & Jordi Ribé & Rafael Rubio & David Suárez, 2018. "Fiber deployment in Spain," Journal of Regulatory Economics, Springer, vol. 53(3), pages 256-274, June.
    2. Marc Bourreau & Lukasz Grzybowski & Ángela Muñoz-Acevedo, 2023. "The Efficiency of State Aid for the Deployment of High-Speed Broadband: Evidence from the French Markets," CESifo Working Paper Series 10440, CESifo.

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    More about this item

    Keywords

    state aid; ex-post evaluation; broadband; coverage; entry; competition; prices;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments

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