The EU State aid policy for broadband: An evaluation of the Italian experience with first generation networks

State aid (SA) measures for broadband have been flourishing in the EU, but our knowledge about the effectiveness and efficiency of this policy remains extremely scarce. We investigate the SA experience with the first generation of broadband services (FGB) in Italy, whose market was long plagued by extensive market failures, largely due to market power. By exploiting original open Government data and sources, we analyse the main domains of the EU SA policy, and assess whether its ex ante goals have been met in Italy. Four main results stand out. First, the plan extended the FGB coverage of rural areas, although with a substantial delay and incompletely, with respect to the ambitious targets of the Digital Agenda for Europe. Second, public consultations have significantly increased the transparency of the market and of the SA intervention, promoting investment and a gradual increase in the efficiency of public procurement. Third, the direct effects of SA on competitive entry appear less pronounced, at least in the static sense. Fourth, the final matching between allocative and dynamic efficiency of SA policy, and its coherence with industrial and innovation policies remain critical, based on the Italian experience: in fact, the persisting digital divide affecting the business-rich areas depicts another relevant instance of partial Government failure.