What is the problem?
Lack of funding = slow deployment of broadband internet
High speed internet enables businesses, especially small ones, to remain competitive by reducing transaction costs and allows consumers to benefit from many advanced online services that improve their quality of life.
However the private sector is reluctant to invest in the deployment of broadband networks because of:
- High risks: infrastructure deployment outside urban/high income areas by private sector operators or resulting from public-private co-operation, are perceived as higher risk transactions,
- Longer pay back periods,
- Insufficient experience: promoters may be too small and inexperienced to attract the interest of large financial institutions or to attract cheap financing,
- Lack of evidence substantiating the viability of the business model – broadband is still an emerging asset class as opposed to transport and energy sectors.
Furthermore, during the current programming period EU funds have programmed only about Euro 2.3 Billion of ERDF and about Euro 700 Million of the EARDF on broadband infrastructure. Most of the funds are being spent in a suboptimal approach (mainly in the form of grants by adopting a gap funding model of investment) without much consideration for alternative forms of financing and models of investment.
Why is EU Action required?
To help finance broadband deployment
EU and European Investment Bank (EIB) funds should be used alongside national funding instruments to compensate for the lack of private sector financing.
EU intervention is also necessary to ensure that areas outside urban conglomerations benefit from the deployment of ultra-fast internet.
EU funds should make a better contribute to the effort of financing high speed and very high speed broadband infrastructure for the next period 2014-2020.
What will the Commission do?
The Commission has made a series of funding proposals that are currently being discussed by the European Parliament and the Council as part of the negotiations for the multi-annual financial framework for 2014-2020. These include:
- a new Connecting Europe Facility(CEF) for funding of transport, Energy and broadband infrastructure as part of the new Multiannual Financial Framework for 2014-2020. A Regulation on the CEF along with Guidelines for Broadband was adopted on 19 October 2011; The Commission has proposed a budget of € 9.2bn for CEF digital, including broadband. In February the European Council reached a political agreement to reduce the funding to € 1bn.
- a Communication on Project Bonds, adopted on 19 October 2011 following a public consultation, along with a Regulation amending the CIP and TEN Regulations to enable projects bonds to be available in 2013. Both the Council and the Parliament in Summer 2012 endorsed € 20 million credit line;
- a cohesion policy legislative package was presented in October 2011 and proposed Common Provisions Regulation for the ERDF, ESF, Cohesion Fund, EAFRD and EMFF (CPR). This provides clearer strategic direction to the programming process at the level of Member States and region in order to facilitate sectoral and territorial coordination of Union intervention under the CSF Funds and with other relevant Union policies and instruments.
While the discussions between the European Parliament and Council are still on-going, the Commission has mentioned its openness to make the funding of ICT infrastructure eligible to ERDF also in more developed and transition regions and to add ICT as a fourth Concentration thematic objective for ERDF. If this agreement is confirmed, it will likely increase the financing of ICT services and infrastructure in the next programming period of Structural and Investment Funds.