Commission proposes over €9 billion for broadband investment

Date: Thu, 10/20/2011 - 17:39

The European Commission has proposed to spend almost €9.2 billion from 2014 to 2020 on pan-European projects to give EU citizens and businesses access to high-speed broadband networks and the services that run on them

Commission proposes over €9 billion for broadband investment Image credited to the European Commission

The funding, part of the proposed Connecting Europe Facility, would take the form of both equity and debt instruments and grants. It would complement private investment and public money at local, regional and national level and EU structural or cohesion funds. At least €7 billion would be available for investment in high-speed broadband infrastructure. The Commission considers that this money could leverage a total of between €50 and 100 billion of public and private investment – i.e. a substantial proportion of the estimated €270 billion of broadband investment needed to meet Digital Agenda targets on broadband. The remaining CEF funding for digital infrastructure would support public interest digital service infrastructure such as electronic health records, electronic identification and electronic procurement. The proposed financial support is complemented by proposed new guidelines for trans-European telecommunications networks and services. These guidelines would establish new objectives, priorities, projects of common interest and criteria for identifying further projects of common interest.

Money for broadband infrastructure
In the case of broadband infrastructure, EU funding from the CEF would leverage other private and public money by giving projects credibility and lowering their risk profiles. The money would be largely in the form of equity, debt or guarantees. This would then attract capital market financing from investors; the Commission and international financial institutions such as the European Investment Bank would absorb part of the risk and improve projects' credit rating.
Projects are likely to be proposed by established telecoms operators as well as new players such as water, sewage, electricity utilities, cooperative investment projects or construction firms. Many projects are likely to involve several of these investors clubbing together. The Commission also expects public authorities to join projects as part of public-private partnerships.
The aim is to support investment in less obviously attractive broadband infrastructure projects, especially those outside urban or densely populated areas.
Access to CEF finance would speed up investment. It would also exert competitive pressure on telecommunications network companies to invest in their own networks.
The CEF would also provide financing for technical assistance or horizontal support such as mapping existing and future broadband networks.

Money for digital service infrastructure
The digital service infrastructure projects would be selected for CEF grants by the Commission from proposals received in such areas as:

• trans-European very high-speed backbone connections for public administrations
• cross-border delivery of eGovernment and e-Health services
• enabling access to public sector information and multilingual services
• pan-EU authentification of electronic identification (eID) so that citizens and businesses can access digital services in any Member State
• electronic procurement
• making it easier to complete administrative procedures to set up a business in another EU country
• cooperation to take down illegal content (e.g. child pornography) from the Internet
• coordinated responses to cyber-threats
• enabling access to Europe's cultural heritage (Europeana)
• deployment of information and communication technology solutions for intelligent energy networks and for the provision of Smart Energy Services.
Projects would be evaluated on the basis of their ability to contribute towards a digital Single Market in the EU. They would be financed primarily by grants. The money would be used to promote pan-European interoperability and meet the costs of linking up existing, often national, infrastructures and of running dedicated European-level components of digital service infrastructures.
The exact amount of funding available each year in the CEF to support both broadband and digital service infrastructure will be set out in Annual Work Programmes.

Benefits for business
The Digital Agenda sets 2020 targets of broadband access for all at speeds of at least 30 megabits per second (Mbps), with at least 50% of households subscribing to speeds above 100Mbps, because access to the services made possible by fast and ultrafast broadband is crucial to boosting productivity and competitiveness on world markets and to creating jobs (2.6 jobs are created for every one lost by investing in information and communications technologies). McKinsey & Company estimates that a 10 percentage point increase in broadband household penetration delivers a boost to a country’s gross domestic product that ranges from 0.9 percent to 1.5 percent.
For example, fast broadband access can unlock the potential for substantial productivity gains for the EU's 23 million SMEs by giving them access to state-of-the-art software, data storage and other potential benefits of cloud computing.
Fast broadband access also allows for remote working, so that firms can source the best workers regardless of their location and workers can maximise the return on their knowledge and experience. Remote working can also make it easier to reconcile work and family life. Increasingly, users will be able to generate content which will become a source of income, especially in the creative and entertainment fields.
Investment in fast and ultra-fast broadband network infrastructure would immediately boost employment related to construction and related equipment. In Germany alone, the construction of broadband networks is expected to create almost a million jobs (968,000) over the ten years up to 2020. In France, the construction of a fibre-to-the-home (FTTH) network would generate 360 000 jobs per year, which translates into some €20 billion of added value.
Access to pan-EU eGovernment services through broadband networks would accelerate and reduce the costs of administrative procedures, particularly for businesses operating in more than one Member State.

More incentives to invest
Providing access to financial markets is expected to speed up investment by telecom companies who at the moment may not have enough incentives to invest. The Commission estimates that each euro invested by the CEF in broadband via innovative financing could leverage gross private investment of between €6 and €15. Exact figures would depend on the financing needs and risk profiles of individual projects. Credit enhancement would provide additional capital for investors like utilities, public private partnerships, established concession holders and network operators who are looking to recoup their investment over the long term. By providing substantial funding and lowering investment risks, the CEF would encourage these investors to rollout high-speed broadband infrastructure outside of densely-populated areas.

Citizens – more and better online services
Access to innovative interactive services over high speed and very high-speed broadband networks not only enables citizens to shop, create, learn, socialise and interact online in new ways, but also brings radical solutions to societal challenges in areas such as health and demographic change, energy and resource efficiency, as well as improving transport, relieving congestion and tackling climate change.
For example, in the area of health care, connection speeds over 50Mbps per second allow remote diagnostic examinations. This makes it possible to offer the world's best diagnostics to a patient wherever they are in the EU, and to ensure always-on remote back-up to health professionals looking after frail or ill people living at home.

Next steps
The Commission's proposals will now be submitted to the European Parliament and the EU's Council of Ministers for adoption.

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