With the investment package from Commission President Jean-Claude Juncker, the German government hopes to boost nationwide broadband expansion. But critics doubt the fibre optic cables will end up where they are most needed. EURACTIV Germany reports.
Jean-Claude Juncker has been prone to fantasy lately. “I have a vision of a new school in Thessaloniki equipped with brand new computers,” the Commission chief said at a presentation of his €315 billion investment offensive in November. “Europe needs “better broadband network coverage, faster internet and intelligent data centres.”
One of the focus areas of the European Fund for Strategic Investments (EFSI), as Juncker calls the investment programme, is to expand the EU’s broadband network. And here, the German government has followed suit.
With the help of €24 billion in public incentives, Berlin hopes to generate private investment for a nationwide expansion of high speed internet connections. The project is mentioned in the project funding “wish list” the German Finance Ministry recently sent to Brussels.
According to the plan, Germany has pledged €3.4 billion to reach 100% broadband coverage in North-Rhine Westphalia and €500 million to bring underdeveloped, rural regions on the Franco-German border up to snuff.
The most expensive item on the list, with a €20 billion price tag, is broadly labeled “broadband expansion”. The German Transportation Ministry called the point a “placeholder”, that it hopes to fill with concrete projects in the coming weeks after discussions with the regions and associations.
But before the discussion can take place, the European Commission and the European Investment Bank (EIB) have to respond to various points, including selection criteria, and modalities for allocation and requirements, a spokesman told EURACTIV Berlin.
But only a small portion of funding for the broadband projects will come from public sources. They will be subject to the familiar EFSI mechanism: Europe-wide, the EU and the EIB will contribute €21 billion. With this as a basis, the administration hopes grow the fund by collecting investments from the private economy. Commission calculations indicate that around 15-times as much private capital is expected to be secured over the next three years.
Rural areas to remain undersupplied
But this is precisely the point where critics find fault, saying broadband expansion through the EFSI will not work in all regions of the country.
“Structurally weak, rural, peripheral regions will remain under-supplied, because network expansion there is not worthwhile for private donors,” said Steffen Maretzke from the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBR) in a statement for EURACTIV Berlin. While a connection in large cities only costs around €500, operators in rural regions spend up to €3500, he explained.
“If we want to equally improve economic competitiveness in all regions, we must counteract this discrimination,” Maretzke contended.
But the public sector’s hedging within the framework of EFSI has so far been too low to attract private network operators to rural areas. The investment mechanism has caught on much more successfully in densely populated areas that already have access to high speed networks, the IT expert explained.
Germany’s regional administrations also have their doubts. “If you ask me, undersupplied areas in rural regions of Germany can hardly benefit from the EFSI, at least with the current regulatory framework,” said Baden-Wuerttemberg’s Minister of Europe, Peter Friedrich, in an interview with EURACTIV.de.
Private providers are already demanding connection guarantees before investing in certain regions, he pointed out. “In sparsely populated areas that will be difficult,” Friedrich warned.
Schäuble’s “party politics prey” on rural residents
His colleague Alexander Bonde, Minister for Rural Areas, criticised the way in which the German government’s project list was created.
“The responsibility for the EU project list is solely in the hands of the Federal Finance Ministry, which sent these projects to the EU according to incomprehensible, unclear criteria and without referring to the regions. Wolfgang Schäuble, alone, is responsible for this approach. When the Christian Democratic Union (CDU) in Berlin seeks out its prey, it does so according to party politics – to the detriment of citizens in the country who need high speed internet,” explained Bonde.
Meanwhile, experts like Maretzke from the BBR are certain that broadband expansion in rural regions can only function with strong assistance from the public sector.
Bavaria, for example, is promoting broadband expansion with €1.5 billion by 2018. One year ago, broadband coverage in urban areas was at 82%, with only 16% coverage in rural areas. The region saw this as too little, leading the administration to simplify complex support procedures, increase support funds and expand consultation opportunities for municipalities.
In retrospect, the regional government is proud of its achievements. In only one year, access to highspeed internet, with bandwidths of 50 MB per second, has increased in rural areas from almost 16% to over 24%.
“Subsidisation for broadband expansion is indispensable for rural areas,” the Bavarian Finance Ministry indicated. But here, the Federal Government also has an obligation, it stated. As a major territorial state, the regional finance ministry said Bavaria also benefits from additional assistance funds from the German government and the EU.
Municipal enterprises: “legal framework must change”
The Association of Municipal Enterprises (VKU) is calling for a readjustment of the legal framework conditions, in order to promote broadband expansion in rural areas.
“Municipal enterprises take on the responsibility for their region through public services and are also extensively involved – as opposed to listed companies – in sparsely populated regions for the expansion of efficient fibre optic networks,” explained the VKU’s managing director, Hans-Joachim Reck. But to do this, they must be able to generate revenue in more densely-populated, lucrative regions, he said..
“Subsidies, alone, are not enough. The legal and regulatory framework conditions also have to be right. The ‘cherry picking’ that has been recurring lately as well as double expansions through the Deutsche Telekom are making coverage for rural regions more expensive. All resources at hand must be employed in the most optimal way,” said Reck.
To prevent further “cherry picking”, Reck suggested elements from licence models, which have been popular in other infrastructure projects.
2018 target remains in tact
German Transportation Minister Alexander Dobrindt, on the other hand, does not consider such measures necessary. “The German government’s target still stands: by 2018, all of Germany will have highspeed internet at 50 MB per second. Regarding the momentum of broadband expansion, we are leading the pack in Europe,” he told Bild a week ago.
“Telecommunications companies will invest €8 billion this year. Wherever internet access is not economically feasible, the regions and federal government will intervene with subsidies. I expect an amount in the billions to result from the auctioning off of mobile frequencies in 2015,” Dobrindt said, “which can then be directly available for the digitisation of our country.”
Germany's government says it developed the Digital Agenda to take advantage of opportunities for digitisation and improve the country's chances at becoming a productive and innovative actor in the digital realm. At a time when the cyber community and its capabilities are swiftly growing and changing, the German government says, in the 2014 document, that it hopes to promote this technology's presence as "an open, free and secure space that fosters diversity and exchange of views" while protecting information of its users.
The EU also has such a strategy aimed at helping digital technologies, including the internet, to deliver sustainable economic growth is called the Digital Agenda.
The Commission estimates widespread adoption of cloud computing by businesses could boost EU gross domestic product by 160 billion each year, creating 3.5 million new jobs by 2020.
Europe has 20 million SMEs, seen as important drivers of economic growth, but these small businesses are slow to pick up on cloud computing, which uses the internet as a shared infrastructure to store data.