Digital Single Market
Digital Economy & Society

Financing the broadband project

Article
Financing the broadband project
Financing models define how the deployment of broadband network can be financed by public and private funds. Public intervention should focus on reducing the cost of investment, and where necessary provide public funding within the framework of national strategies, while making sure that private investment is not displaced.

Access to adequate broadband services has crucial importance to our economic and social development. To achieve a Digital Single Market, substantial investments are required. While most of this investment must come from private operators, it is clear that in certain areas some form of public financing will be necessary.

Investment models

Investment models present involvement opportunities especially interesting for a public authority that engages in regional broadband development. The choice of one model over another is also based on the economic situation. Based on these aspects, four investment models can be identified:

  • Municipal Network model (public)
  • Municipal Network model (private)
  • Community Broadband model
  • Operator Subsidy model.

More information on investment models.

Main financing tools

  • Revenue-based financing: investor receives revenue from wholesale dark fibre lease, transmission services and retails infrastructure lease or connectivity fees.
  • Private capital and financial markets: investment funds that provide equity or debt financing as well as hybrid solutions, i.e. mezzanine funding.
  • Government-backed bank loan and bonds: also known as guarantees.
  • Public funds: available at local, regional and national government levels. In this context state aid rules might apply.
  • Public financing (at EU level): The European Structural and Investment Funds (ESIF) are managed locally by managing authorities and can be combined with financial instruments, Connecting Europe Facility (CEF) broadband supports EIB blending activities such as structured finance, guarantees or project bonds and the European Fund for Strategic Investment managed by the EIB. Information on how to combine European Structural and Investment Funds with the EFSI may be found hereIn this context state aid rules might apply.
  • Bottom-up community financing: “stock” or shares are sold to a community company, which either implements and runs the network itself or commissions this through suppliers.

More information on main financing tools.

A Guidance for Beneficiaries of European Structural and Investment Funds and related EU instruments explains how to effectively access and use the European Structural and Investment Funds and how to exploit complementarities with other instruments of relevant Union policies.

Financing of public-private joint ventures and private-run deployments

In case private actors owning existing infrastructure are willing to cooperate with the public authority to build a municipal network (public or private-run), the investment effort is partly supported by the private actor concerning the deployment and operation of the passive infrastructure.

This attracts other private investors as it provides greater stability to the equity base and improves the credit rating of the project company or joint venture. This category of financing can be further split into equity finance, debt finance, and grants.

More information on financing of public-private joint ventures and private-run deployments.

Last updated on 24/08/2016 - 12:03