Commission - invest €9.2bn in broadband 'urgently'

Details of the European Commission's "Connecting Europe" initiative, which could eventually invest around €9.2bn in super-fast broadband and "pan-European digital services", have been revealed by José Manuel Barroso. The fund aims to encourage the private sector and national governments to invest a further €50bn. The plans would still need approval from the European Parliament and the Council of Ministers, but supranational money has already funded ambitious broadband development programmes in a number of member states – setting a precedent for future investment.

Speaking at the launch, the commission President insisted that the proposal would create much-needed jobs and the conditions for economic growth. He claimed that investment was "part of the answer" to dragging Europe out of its current financial malaise. "Today, we are making a down payment for Europe's future growth and jobs," said Barroso. "We have also adopted the terms for the project bond initiative. From 2014 on, it will be embedded in the Connecting Europe facility - for which significant budget resources will be available." An initial pilot phase would see €230 million from the EU budget used to mobilise private investment of up to €4.5bn for a number of projects, including broadband. Connecting Europe would also be backed by the European Investment Bank. "Targeted investments through the Connecting Europe facility will help to close the missing links in Europe's infrastructure," added Barroso.

Commissioner for the Digital Agenda Neelie Kroes claimed that the project would boost innovation as well as investment. "This €9.2bn would be a completely new digital infrastructure investment programme, to build the trans-European networks of the future," said Kroes. "In this time of crisis, we must focus our efforts on sectors which can drive growth. Information and Communications technology has this potential. Benefiting innovation through new products, new services, and new business models. Benefiting businesses, big and small, through improved productivity and flexible working. And benefiting citizens, giving them new ways not just to shop or socialise - but to learn, receive healthcare, or interact with their governments.

"The world's future is digital. Already, in places like Japan, 12 per cent of citizens, consumers and companies have access to ultra-fast internet via fibre networks. In Korea, the figure is 15 per cent. Europe must have the infrastructure essential to compete on the global stage. But, we face several problems in deploying broadband - with insufficient investment, problems in accessing capital and a weak business case for roll-out in less populated areas. This is potentially a serious barrier to growth. So, first, at least €7bn would be made available for investment in high-speed broadband infrastructure.

"Over just ten years, the right broadband development could give Europe more than €1 trillion in additional economic activity and create millions of jobs. An increase in broadband penetration of 10 percentage points would increase Europe's annual GDP growth by between 0.9-1.5 per cent." Explaining the practical workings of the fund, she added: "We would competitively engage new players — like non-telecoms utility companies, or construction firms. Where projects were profitable, public funds could be recuperated and reinvested. And, by giving projects credibility and lowering risk profiles, we could leverage other private and public money. Indeed, each euro invested in broadband by such innovative financing could leverage gross private investment of between €6-15. In concrete terms, this means that the facility could leverage a total of between €50-100bn."

Under the digital agenda, the commission has set a target to get coverage for every European to fast broadband of over 30 megabits per second by 2020, and to achieve 50 per cent of households subscribing to ultra-fast speeds over 100 megabits per second. Kroes said: "The remaining part of the proposed €9.2bn would be invested in the joined-up infrastructure needed for pan-European digital public services. Funding, primarily through grants, would be provided to projects which help to build the digital single market. Such projects would make it easier to provide cross-border online public services: whether setting up a business, authenticating identity, delivering government or health services, accessing cultural heritage, setting up an intelligent energy network or responding to cyber-threats across borders. By ensuring systems can talk to each other, and avoiding fragmentation, we can best serve the needs of an increasingly mobile population. I call upon the European Parliament and the EU's Council of Ministers to approve the measures as a matter of urgency."

The Socialists and Democrats Group in the European Parliament welcomed the proposal because of its potential to boost employment and competitiveness, in contributing to the completion of the single market. Vice-president of the S&D group Marita Ulvskog said: "The new facility will simplify procedures, shorten project planning and introduce more flexible financial instruments. We are glad to see the commission bring forward a plan for growth, as we have been saying over and over that austerity will not take us out of the crisis and will not create jobs. High-speed broadband as it is essential in today's IT society." British Liberal Democrat MEP Sir Graham Watson welcomed the "combination of direct investment and project bond guarantees" and the plans "to set up a 'project bond' pilot project". He added: "If done cleverly, a small amount of public money can be used as a lever to raise much more private financing."

Alliance of Liberal Democrats and Democrats for Europe Group leader Guy Verhofstadt, who has repeatedly argued for the introduction of project bonds to finance big infrastructure projects, said: "It is right to start a pilot phase now rather than wait until 2014 to mobilise private investment. The decline of the public investment ratio by more than 1 per cent of GDP in the last three decades has turned the eurozone into a low-growth area. If we want to stimulate growth and job creation in Europe, we have to get on with upgrading our major infrastructure networks and be creative about attracting third party investments. Using the EIB as a main partner both for the expertise and for the strong AAA rating that it enjoys will substantially increase investment attractiveness."