New €500M Fund to Drive Europe's 'Gigabit Society'
The European Commission (EC) and European Investment Bank (EIB) have launched a new fund that is designed to finance the deployment of high-speed broadband networks in underserved and rural regions of the European Union (EU).
The Connecting Europe Broadband Fund is expected to raise at least €500 million (US$530.4 million) from both private and public investors, including the EIB and the EC. The EC is to provide around €100 million ($106 million) from the Connecting Europe Facility, for example. KfW Bankengruppe, Cassa Depositi e Prestiti and Caisse des dépôts et consignations have already expressed their interest in a possible contribution to the fund, which is one of the first investment platforms under the European Fund for Strategic Investment (EFSI).
Once it has been launched, in mid-2017, the fund aims to invest in 20 countries by 2021. It will primarily focus on seven to 12 broadband projects each year, investing between €1 million and €30 million per project. The expectation is that by funding such projects, additional investments of between €1 billion and €1.7 billion will be "unlocked" for broadband deployments in underserved areas, where very high-capacity networks are not yet deployed.
Details are still thin on the ground about the types of companies that the fund would support. The EC, though, has told UBB2020 that the fund will be "technologically neutral, hence a range of technologies are in principle eligible, provided they contribute to end-user connections of at least 30 Mbit/s. The projects financed by the Fund should contribute to the increased availability of connections of 30 Mbit/s and higher, with priority given to projects that contribute to actual broadband speeds for end user access at 100 Mbit/s or above. They should use state-of-the-art technology, meaning a technology, or a mix of technologies, whose performance features are comparable to the best-performing commercially available technologies."
The FTTH Council Europe has, not surprisingly, already urged the fund to invest in "future-proof" fiber-based networks, noting that these would support smaller, local fiber projects that aim to connect households and businesses in more remote communities.
Council President Ronan Kelly added that fiber is "the only future-proof broadband solution enabling fixed and wireless gigabit networks."
Fiber-based networks would certainly support EC broadband targets for 2025, when all schools, transport hubs, main providers of public services and "digitally intensive enterprises" should have access to Internet connections of 1 Gbit/s. For households, the objective is to ensure speeds of 100 Mbit/s by this point.
Alternative technologies such as G.fast or vectoring -- which seek to exploit existing copper lines -- as well as future DOCSIS 3.1-based cable networks are also capable of providing very high-capacity broadband services. However, many regard the copper-based alternatives as an unsatisfactory compromise that falls short of a "full-fat" fiber-based network upgrade.
The EC and EIB said the establishment of the new investment platform is in response to the growing demand for financing of "smaller-scale, higher-risk broadband projects across Europe, which currently do not have access to EU finances."
The fund aims to invest in equity and quasi-equity, including mezzanine and subordinated debt. Investment firm Cube Infrastructure Managers has been appointed to manage the fund through a public procurement process carried out by the EIB over the summer of 2016.
Werner Hoyer, president of the EIB, said smaller-scale broadband projects did not have easy access to funding and EU financial instruments did not exist until today.
"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," Hoyer said.
— Anne Morris, Associate Editor, UBB2020
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