European Commission plans ambitious €100bn fibre project

The European Parliament and the EU’s Council of Ministers is considering a proposal from the European Commission for an ambitious project, worth up to €100bn ($140bn), to fund the rollout of fibre broadband and associated services across the EU.

The Commission has proposed to spend €9.2bn from 2014 to 2020, to give EU citizens and business access to broadband speeds of 100Mbps. However, this initial €9.2bn will be used to attract additional investment to a total of between €50bn and €100bn, with each Euro spent expected to attract another private investment of between €6 and €15, according to the Commission.

The additional funding would come via innovative financing tools and the purchase of high-value blue chip bonds. A blue chip bond is one that is well-established, financially sound, and historically secure. Blue chip companies are known for their strong executive management teams that make intelligent growth decisions, and for their high-quality products and services.

“EU funding from the Connecting Europe Facility would leverage other private and public money by giving projects credibility and lowering their risk profiles,” the Commission explained in a statement. “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 to enhance digital service infrastructure that would be selected for grants by the Commission include 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 and pan-EU authentication of electronic identification (eID) so that citizens and businesses can access digital services in any member state.

It would also be used to fund electronic procurement projects, making it easier to complete administrative procedures to set up a business in another EU country, cooperation to take down illegal content, such as child pornography, from the internet, coordinated responses to cyber-threats, deployment of ICT solutions for intelligent energy networks and for the provision of Smart Energy Services.

The EU Commission claims that investment in fast and ultra-fast broadband network infrastructure would immediately boost employment related to construction and related equipment. It states that, in Germany alone, the construction of broadband networks is expected to create almost a million jobs 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 €20bn of added value.

The exact amount of funding available each year under the proposal to support broadband and digital service infrastructure will be set out in Annual Work Programmes.

According to FTTH Council’s European director general Hartwig Tauber, the proposed investment in fibre is crucial, despite the turmoil that Europe’s economy currently finds itself in.

“The amount set aside for ICT and Telecoms is quite small as a proportion the whole budget that the European Union intends to spend on upgrading Europe’s transport, energy and digital networks,” he said.

He added that he recently attended a meeting with the European Investment Bank, and found that broadband upgrades are high on Europe’s agenda.

“One main conclusion of the European Investment Bank meeting was that broadband and ICT are crucial for the productivity and success of the European economies in the next years. So saving on this side would make the current financial crisis worse, rather than better.”

He added that innovative financing instruments, such as blue chip bonds, will be instrumental in triggering additional private investment.

“This figure should not be taken as €9.2bn. If you look at how many households can you connect with fibre with just €9.2bn, you can see that it won’t satisfy the whole of Europe. But seeing it this way is a huge misunderstanding of the European budget and how financing of such a project works.”

The Commission’s proposals are now being submitted to the European Parliament and the EU’s Council of Ministers for adoption.