Many rural parts of the EU have poor or no broadband internet, even as lawmakers in Brussels discuss new rules to speed up connectivity.
The European Commission set up a small, little known support office in January to help national governments and regions use EU money to build broadband internet networks. It is tasked with helping member states meet an EU goal for there to be broadband coverage everywhere in the bloc by 2020, with a speed of at least 30 megabits per second.
EURACTIV spoke about broadband funding and rural areas with Jan Dröge, who started the Brussels-based support network for broadband competence offices.
Why did the Commission set up this network of broadband support offices this year? There are negotiations going on now over new EU rules to regulate the telecoms sector. Is the timing a coincidence?
I think it’s not directly linked to the negotiations. It’s more linked to the fact that the EU has invested €2.5 billion for broadband roll out and connectivity through structural funds from 2007 to 2013. And a significant amount of that money was not used even though significant connectivity challenges in underserviced areas remained. And now in this period from 2014 to 2020 the member states have approved €6 billion, more than twice the amount, for broadband. There was a real concern of, “Okay, how can we make sure this money is really being taken up and has the highest possible impact to make sure we have universal coverage by 2020?” I think this was the motivation more than the telecoms package. The telecoms package is the regulatory environment that will shape the way broadband works, but the idea around the BCO [broadband competence office] network was really to ensure that the public subsidies reach underserviced areas.
What happened to the billions of euros that were not used for broadband in the last funding period?
Money that’s not used gets reallocated to other types of investments, which happened in Slovakia in the last period. Or if the country really doesn’t use it it returns back to the pot, but that’s the exception. What happened is that money that was planned for broadband was used for other investments. But in fact, the need for connectivity in underserviced, mainly rural areas, is still there.
Why weren’t the funds always used in the past?
We don’t have a definite answer, but we think there are three main hurdles. One has to do with capacity, one has to do with knowledge about technology and another one has to do with public procurement requirements. And this is intimately linked with state aid. In the past, and this is often still the case, in order to make an investment possible in rural areas, structural funds or national subsidies were used as an incentive. But this is a highly regulated sector, so it needs state aid approval from the European Commission. This process of receiving state aid approval was a delaying factor in some member states and some projects didn’t materialise.
How much of the €6 billion set aside for broadband is going to build networks in rural areas?
The majority. Because the EU state aid rules say that public support can only go to “white areas”, which are basically areas with no current infrastructure. The vast majority of these are in rural areas and are either remote, islands or ultra-peripheral regions. They’re the main beneficiaries of these funds.
Is that €6 billion enough to meet the goal of universal broadband coverage across the EU by 2020?
No. The estimation of the needs for investment is much higher and structural funds are only one of the instruments available to reach the targets. Many member states have set up their own support schemes that work hand-in-hand with structural funds. This is the case in Germany, France, Italy, the UK and Spain, where there are very large national broadband support schemes. We’re talking between €2 or 3 billion just for one member state. In addition, several regions have their own support schemes.
What we see more and more, and France is probably a precursor in this, is that grant funding can be used as a leverage to attract loans, notably from the European Investment Bank or the Strategic Investment Fund—the famous Juncker plan. Those are loans and therefore the project needs to have a business case that allows reimbursement. By definition, the reason the structural funds go to the white areas is because currently, there is no business case there and the private sector does not invest in those rural areas. Until two years ago, the philosophy was that, if no private investor comes here then we’ll invest with public subsidies. More and more, what we see is that public subsidies are used only to cover the gap on the risk and then the bulk of the investment can still be made with loans. The grant needs only to cover the difference so the project becomes bankable and profitable. This means that with the €6 billion, you can actually reach a much higher amount.
We’re just at the beginning of this, but we have a couple of examples of this in France, where the region of Grand Est, which used to be the Alsace region, and Nord-Pas-de-Calais have planned quite large investments using grants, but also attracting private investors. We’ll probably see similar approaches in other member states in the near future.
Where is there the greatest need for more broadband infrastructure in rural parts of Europe?
Rural areas are still underserviced in most EU member states. There are few exceptions, like Belgium, where connectivity is quite outstanding. Some of the Nordic countries have very good indicators. But most member states still have very vast spots in their territory that are underserviced. France, Spain, Germany, the UK, but also Poland, Romania, Hungary.
Part of the telecoms policy debates going on in Brussels right now is about building very high capacity, high speed internet networks. Would you say those high capacity networks or networks made fully out of fast fibre are very far from the reality in rural areas?
It’s true that it’s not the reality right now. In most rural areas fibre to the home is far, far, far from what we can expect. So I think in many member states we won’t see this in the foreseeable future. But Sweden has a public policy now to build this proactively. We see certain governments that are committed to making fibre connectivity a priority. It might be possible and Sweden is a country with very specific geographic challenges and very low population density in the majority of its territory.
Our main mandate is to work with public authorities, but what we have discovered is that citizens in some countries have taken their fate into their own hands where villages were not being served and existing subsidy schemes did not meet their investment needs. So they started citizen-driven infrastructure projects. This happened in several member states. We’ve seen it in Denmark, Germany, the UK. So this is just to say, I agree we probably won’t see fibre to the home everywhere in Europe, but the fact that it’s rural doesn’t mean that it’s impossible.
The Commission set this goal to reach universal broadband coverage across Europe by 2020 and last year also set internet speed goals. Do you see the funding policy also changing with the new broadband programme from the European Investment Bank and the Juncker plan?
The Commission certainly has contributed to raising awareness in all member states that in order to invest in rural areas, you have to be proactive, you can’t wait for the private sector to make all the investments. And I think the Commission has also learned from lessons from the past and adapted some of the funding schemes. Blending of loans and grants has become more feasible. And then there is a new scheme that we will hopefully see take off after the summer, which is the EIB’s Connecting Europe Broadband Fund.
They have mandated an investment management fund to specifically invest in smaller-scale broadband schemes because the EIB and notably the Juncker plan generally invest only in projects above a certain level, €25 to 100 million. That is good for national schemes and there has been quite a bit of uptake. But if municipalities in underserviced areas want to drive investments, then we’re talking about projects of a much smaller scale. There was a gap here, so the Connecting Europe Broadband Fund is a new support scheme specifically for broadband loans for mid-sized investments. So the EU has really adapted schemes that existed and diversified in order to cover this gap of mid-sized investments.