Financing models define how the deployment of broadband networks can be financed by public funds and private investments. Public intervention should focus on reducing the cost of investment and, where necessary, provide public funding within the policy 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 in building up and expanding high-capacity broadband infrastructure are required. While most of this investment must come from private operators, it is clear that in mainly remote and rural 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 a model is based on the economic situation. Four investment models can be identified:

  • publicly-run municipal network model
  • privately-run municipal network model
  • community broadband model, and
  • operator subsidy model/ gap-funding.

More information on investment models.

Main financing tools

There are a number of financing tools available for broadband development projects:

  • 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 through the European Structural and Investment Funds (ESIF).
  • Bottom-up community financing: 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 (ESIF) and how to exploit complementarities with other instruments of relevant EU 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 for 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.

State aid

In the broadband market, where investment should generally come from private operators, state aid by national, regional, and local authorities is in principle prohibited. However, particularly in areas of proven market failure, state aid can be permissible if certain conditions are met.

More information on state aid.

Financing of the Gigabit Society

As the European Commission set out new strategic targets for 2025 to create a Gigabit Society, a number of financial measures are accelerated that provide monetary support to research and development activities for speeding up 5G development. In this context, the 5GPPP public-private partnership initiative receives 700 million EUR EU funding to be topped up with private funding to reach a total budget of 3.5 billion EUR by 2025. In general, the European Commission aims for increasing investments in the network infrastructure by implementing the Electronic Communications Code and the 5G action plan.

European Investment Project Portal (EIPP)

The European Investment Project Portal (EIPP) is the EU's online match-making portal enabling EU-based project promoters – public or private – to reach potential investors worldwide. EIPP enables project promoters based in the EU to reach potential investors worldwide and to boost the visibility of their projects to a large network of international investors. Investors looking for investment opportunities in broadband infrastructure are offered a broad choice of viable projects.

Team responsible
Published: 
14 August 2014
Last update: 
2 October 2017