The Commission has approved, under EC Treaty state aid rules, an initiative by the city of Prague to create a municipal wireless network for electronic communications. 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 publicsector 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 €12 million, spread over a period of five years and will cover approximately one-third of Prague with WiFi technology. WiFi is a Wireless Local Area Network technology using unlicensed spectrum. It offers broadband access at short distance around so-called "hot spots".

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 subsidised 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. [30 May 2007]