Commission earmarks EUR 1bn for investment in broadband - briefing

28 January 2009
by eub2 -- last modified 28 January 2009

The European Commission aims to achieve 100 per cent high-speed internet coverage for all citizens by 2010 as part of the European Economic Recovery Plan. EUR 1 billion has been earmarked today to help rural areas get online, bring new jobs and help businesses grow. On average, 93 per cent of Europeans can enjoy a high speed online connection but in some countries broadband covers less than half of the rural population. Broadband internet connection is expected to create 1 million jobs and boost the EU's economy by EUR 850 billion between 2006 and 2015.

How can investment in broadband infrastructures stimulate Europe's economic recovery?

Investment in broadband has a positive impact on economic development, innovation and territorial cohesion. A recent study shows that, assuming a constant adoption rate up to 2015, broadband development will help create around 1 million jobs in Europe and a broadband-related growth of economic activity of € 850 bn between 2006 and 2015.

In areas with a lack of infrastructure, such as less populated areas or remote and isolated rural areas, increased spending on new telecom infrastructure boosts the productivity and employment potential of the local economy. Development and adoption of advanced broadband services help make businesses and public administration more efficient by enabling organisational innovation and facilitating access to markets. The impact on European industry is clearly positive: apart from civil work for networks which has a direct impact on local employment, sales of network equipment will also benefit global European suppliers (like Siemens, Ericsson, Nokia, Alcatel-Lucent), as well as telecoms or satellite operators. And areas with advanced broadband connections will see an increase in demand for products and services.

What is the current state of broadband coverage and speed in Europe?

Broadband access is increasingly widespread in the EU, following substantial EU efforts and a pro-competitive regulatory framework in place since the liberalization of the telecoms sector. In December 2007, broadband connection was available to around 93% of Europeans, mostly in densely populated areas.

However 30% of the EU rural population still has no access to high speed internet.

At the start of 2008, on average, more than half of European users enjoyed advertised internet speeds above 2 Megabits per second, which is considered the minimum to enable advanced services like television over the internet, and about 10% of users had access to more than 10 Megabits per second. This compares favourably with the USA, where 37% of broadband lines offer at least 2.5 Megabits per second and only 4% have speeds equal or above to 10 Megabits per second. These are however "advertised" speeds which overestimate actual speeds. In fact, internet speed worsens when the distance between the exchanges and the location where the user is based is great and/or when several users access the internet simultaneously.

Internet speeds increase with the share of fiber-based high-capacity access technologies. Fiber accounts for 45% of all broadband subscriptions in South Korea and 39% in Japan. These numbers are similar between the EU and the US (1.4% and 1.5% respectively) but much lower than in Asia.

In terms of penetration rate (broadband take up per population), which was 21.7% in EU27 in July 2008, Denmark, The Netherlands, Sweden and Finland lead the rankings in the OECD area penetration rates above 30%. The penetration rate in the US is 25%.

Why is it necessary to spend EU money on broadband investment? Could this not be better done by each Member State?

The EU money will be used in addition to private investments and national funding. It means that rural areas which are not covered by existing plans to roll out or upgrade broadband will be able to participate in the web economy very soon. In particular, this means that areas that are already at an economic disadvantage will be better placed for economic recovery already in 2009.

Which regions in Europe are in a particular need of broadband investment?

European rural areas suffer from much lower coverage rates than urban or suburban areas and this is where the European help should focus. In some countries, even traditional telephone networks are not available in rural areas (in Bulgaria or Romania for example). In others, lack of investment and difficult geographic conditions has limited broadband coverage to less than 50% of the rural population (Greece, Poland, Slovakia). Even countries with a more developed infrastructure still have rural coverage rates below 80%. This is the case of the Czech Republic, Estonia, Ireland, Latvia and Lithuania. Finally, even in the most developed countries (Germany, France, Italy, Austria), there are still areas that, due to their geographical location or mountainous landscapes, do not enjoy the same conditions as the rest of the country.

Finally, these figures relate to the coverage of DSL, which is the most widespread access platform in Europe. But they do not take into consideration people who live too far away from telephone exchanges to have access to DSL. This is around 3% of the population in the EU15 and much more in the new Member States. Thus, there is considerable scope for investment to ensure all Europeans have the right to broadband.

The attached table provides detailed figures on the level of coverage according to the type of area.

Table 1: Broadband coverage of population by urbanity, December 2007 (EU27, NO, IS)

Data source: IDATE Study “Broadband Coverage in Europe 2008”

Data for urban, suburban areas and for the national average in Bulgaria and Romania are not available. Rural coverage in these countries is 0 and this allows the calculation of rural coverage for EU27 + 2.

How will the EUR 1 bn of EU money reach rural areas with a particular need for broadband investments?

The money will be injected into the existing Rural Development Programmes, which have been drafted and approved on the basis of the rules established for the European Agricultural Fund for Rural Development. This means that no new instrument needs to be created and that they will be managed by the national rural development managing authorities. This will necessitate a modification of the Rural Development Programmes and Member States are called upon to do it by 30 June 2009 to allow projects to be identified and expenditure to be made already in 2009.

The European Council in December asked the Commission to specify concrete projects for investing the EUR 5 bn for infrastructure? Is there such a central list for broadband projects?

It is the responsibility of Member States and regions to select the projects that can best serve their areas following the established eligibility and selection rules within their rural development programmes. Projects are not imposed centrally by Brussels, but selected by the Member States and they should reflect the needs identified at national, regional and local level in the context of the National Strategy Plans for rural development.

What is the next step? Can the money now be paid out or do Parliament and Council first have to give their agreement? How long will it take until the first payments are made?

The legal proposals that the Commission has tabled today will make possible the spending of the EUR 1bn under the European Agricultural Fund for Rural Development and will increase its overall budget by the same amount. The proposal requires the approval by Council. The Commission calls on the Council to adopt these proposals as soon as possible so that money can already be committed in 2009.

How will each Member State apply for this extra funding?

By June 2009 Member States and regions will have to propose a modification of their Rural Development Programme, which have to incorporate the option for investments in broadband infrastructure. Member States and regions can authorise projects from the date of submission of the modification request.

What will be the distribution of funding among the Member States?

The amount of EUR 1bn for broadband to be spent under rural development would be distributed among all Member States on the basis of the current distribution key for the European Agricultural Fund for Rural Development. The distribution process will cover also another EUR 0.5bn that are to be spent under rural development for "new challenges" as identified under the Health-check of the Common Agricultural Policy.

Which is the co-financing rate of a broadband project within Rural Development?

Projects can benefit from higher co-financing rates in 2009:

• 90% in Convergence regions
• 75% in non-Convergence regions

If agreed by the Council, additional co-financing of 10% would also be temporarily possible in 2009 to promote the economic recovery in Member States and ease investments.

What are the types of measures related to broadband that can be supported through Rural Development?

The types of operations that can be supported are:

• Creation of new broadband infrastructure including backhaul facilities (e.g. fixed, terrestrial wireless, satellite-based or combination of technologies);
• Upgrade of existing broadband infrastructure;
• Laying down passive broadband infrastructure (e.g.: civil engineering works such as ducts, and other network elements such as dark fibre, etc.) also in synergy with other infrastructures (energy, transport, water, sewerage networks etc.).

Links:

Contact details of Rural Development Authorities for my Member State

Further information on the European Commission's broadband initiatives at "Bridinging the Broadband Gap" initiative

European broadband portal

Source: European Commission