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Inadequate public funding puts Europe’s broadband ambitions at risk

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new original report from the think tank Centre on Regulation in Europe (CERRE) reveals that the current level of public funds to support broadband deployment in Europe is insufficient compared against the ambitious targets for fibre to the home (FTTH). The report also suggests that the use of this funding is poorly co-ordinated, insufficiently monitored, and subject to rules which need to be simplified and updated.

In the first study of its kind, the authors – Richard Feasey, CERRE research fellow;Marc Bourreau, joint academic director of CERRE and Ambre Nicolle, research fellow at the Institute of Strategy, Technology and Organisation – have undertaken a systematic analysis of all of the 157 broadband measures notified to the European Commission by Member States over the past 15 years.

Based on this research, the authors have identified critical issues and provided recommendations on how to better support the deployment of broadband infrastructure in Europe.

The authors estimate that public funding from all sources to support broadband deployment in the period to 2020 amounts to around €7 billion per year. At this rate it will take Europe nearly 30 years to meet its FTTH targets.

Figure 1

They also find wide variations in public funding between Member States: in the period 2003-18 France spent around €215 per capita and Italy €145, whilst the majority of Member States spent less than €100 per capita and some less than €10.

 Figure 2

“We found that broadband infrastructure receives less than 5% of available European funds, despite being a strategic priority for Europe and for the Juncker Commission”, said CERRE research fellow Richard Feasey. “Current public funding is insufficient if Europe is to achieve its Gigabit Society targets. It is also important that whatever public funds are allocated, they are also used efficiently”.

Figure 3 sources of funding in Member States

The authors provide recommendations for EU and national policy makers, including:

  1. Mobilise grassroots interests in public funding of broadband with an EU-wide competition for funds.
  2. Improve coordination between the European Investment Bank and the European Commission’s DG Competition to ensure that in each case the appropriate public funding instrument is used.
  3. Increase the share of European funds allocated to broadband.
  4. Revise the existing ‘Broadband State Aid Guidelines’ now to clarify key elements such as:
  • When and how public funds can be used if commercial operators have no plans to deploy Very High Capacity infrastructure;
  • Require that State Aid can only be used once adoption rates for a new technology have achieved certain thresholds in areas where it has already been deployed by the private sector;
  • Consider allowing higher prices for broadband services provided by publicly funded networks in order to reduce the cost to the taxpayer and increase the coverage that can be obtained;
  • Explain how the universal service provisions of the new EU Electronic Communications Codewill ensure that all users can benefit from affordable access to publicly funded broadband networks;
  • Simplify the regime so that measures to protect competition align with those that already apply to commercially-funded networks under the Significant Market Power regime and ensure enforcement. 
  1. Require Member States to provide more data to enable the evaluation of the effectiveness of State Aid measures. ‘Effectiveness’ should be measured by whether public funds achieve the goal of extending broadband services to the greatest number for the lowest cost to the taxpayer, and not simply in terms of competition or the time taken to approve the project.

“If broadband infrastructure deployment is a priority for the EU, we think that the Commission should also explore how to formalise its Digital Agenda and Gigabit Society targets, to give Member States stronger incentives to meet those targets”, conclude the authors.

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