EU Establish New £420m Fund to Upgrade Broadband Infrastructure

The European Commission and the European Investment Bank (EIB) have today unveiled plans for a new €500m (£420m at today’s rate) Connecting Europe Broadband Fund (CEBF), which over the next 10 years will help the EU to reach their “Gigabit Society” objectives (e.g. 100Mbps+ for all by 2025).

At present the existing Digital Agenda for Europe (DAE) strategy is still trying to ensure that very home in the EU can access a 30Mbps+ capable superfast broadband connection (plus 50% subscribed to a 100Mbps+ service) by 2020. Interestingly the UK seems more likely than most to achieve this objective (here), while a fair few others may fall short (71% of the EU can access a NGA broadband connection and this rises to 90.5% for the UK, using old data).

However the EU has already started work on the next set of “non-binding connectivity targets” (here). Under the new plan the EC aims to ensure that “all European households” are able to receive a minimum broadband download speed of 100Mbps+ by 2025, with businesses and the public sector being told to expect 1Gbps+. Future 5G Mobile and WiFi services were also given support.

Obviously this is a major undertaking and at the time the EU suggested that it would need to be supported by an investment of €500 billion, most of which would “largely have to come from private sources“. Easier said than done and even the EU admitted that “there is likely to be a €155bn investment shortfall” (as compensation they’ve been trying to cut red tape for infrastructure builders).

As such today’s agreement between the EC, EIB and three National Promotional Banks and Institutions (NPBIs) – KfW Bankengruppe (Germany), Cassa Depositi e Prestiti (Italy) and Caisse des dépôts et consignations (France) – will form a key part of the new fund as anchor investors.

The figure of €500 million is still way short of the €500bn being talked about earlier (i.e. most of that will need to come from member states and private firms) and only €100 million of the initial investment will come from the EC’s Connecting Europe Facility (CEF), which in 2013 was shredded to pieces by budget cuts (here). At least it’s a start, albeit a very small one.

Günther H. Oettinger, EC Commissioner for Digital Economy and Society, said:

“I am grateful to our financial partners for the establishment of this broadband Fund. It is an important development for smart and efficient funding of broadband projects, especially in underserved areas, in line with the spirit and the letter of the Investment Plan. It is a great step towards a European Gigabit Society for all.”

Werner Hoyer, EIB President, said:

“Until today, smaller-scale broadband projects did not have easy access to funding and EU financial instruments did not exist. Consequently, projects in less populated or rural areas, where purely private-led initiatives may not see the economic benefits of deploying broadband networks, were difficult to implement.

The new fund will help bridge this market gap, and I am glad that the EU Bank is part of this joint initiative.”

Notable by its absence from this is the United Kingdom, which is likely to complete its Brexit divorce from the EU just as the new “Gigabit Society” strategy is beginning to get underway. At this stage we still don’t know what that agreement will look like, although it seems likely that the UK will neither contribute nor directly benefit from the proposed investment (depending upon the settlement).

Never the less the UK Government does appear to be mindful of these developments and last month’s Autumn Statement committed £400m of extra public funding towards a new Digital Infrastructure Investment Fund (here). The fund, which could eventually be worth upwards of £1.5bn+ when matched with private investment, is designed to be made available to alternative fibre optic network (AltNet) providers. On top of that it’s supported by 100% business rates relief on new full-fibre infrastructure for a 5 year period from 1st April 2017.

Otherwise the new CEBF aims to invest in “equity and quasi-equity, including mezzanine and subordinated debt” (reflecting around 7 to 12 broadband projects each year from 2017 to 2021). The Fund’s investments will be of a size between €1m and €30m, for projects representing total costs of €150m or less.

Overall, the Fund is expected to unlock additional investments between €1bn and €1.7bn in broadband deployment in underserved areas, where very high-capacity networks are not deployed yet. The Fund aims to have invested in 20 countries by 2021.

The operational launch of the Fund is expected to take place mid-2017 and this will be managed by Cube Infrastructure Managers S.A. (i.e. their formal appointment is expected early in 2017), which means that some UK projects might still be able to benefit but don’t bank on it just yet.