High-speed broadband is recognised as a critical enabling technology which can help drive economic development. Its importance is reflected in the European Commission’s Digital Agenda for Europe, which includes two relevant targets: widespread 30 Mbps[1] coverage by 2020, and 50% take-up of 100 Mbps by 2020. Many densely populated areas should be able to reach these figures without external assistance, particularly in wealthier regions. However, where economies are weaker, and the population sparse, there are fewer operators willing to make the investments needed to achieve these speeds. Many regional economic development bodies see the digital superhighway as an alternative to fixed transport infrastructure: allowing remote communities in mountainous or coastal regions to provide services instantaneously across physical, national and international barriers. The Connecting Europe Broadband Fund was conceived, developed, and is now funded, with the objective of addressing market failure in the supply of what has become an essential piece of economic infrastructure.

Fixed broadband projects can have a risky profile, with high up-front costs, uncertain demand, and cashflows which take time to develop. This creates a potential financing gap which conventional lenders would seek to avoid. To bridge this, the EIB and the European Commission have joined forces to create the first European broadband infrastructure investment fund. The fund has been designed to allow different investors to accept levels of risk which are appropriate for their own business model. The highest level of risk is carried by the Connecting Europe Facility, managed by the European Commission, followed by the EIB with support from EFSI, and possibly national promotional banks as well. The third, and lowest, risk level targets institutional and other mainstream investors. The fund itself is to be managed by an experienced, professional fund manager with relevant sector experience and a sound track record in managing funds of this type.

The fund will be labelled as an “EFSI Investment Platform” and will focus on equity and quasi-equity investments, with leveraged debt financing coming from the financial sector. The average investment by the fund is expected to be EUR 10 million, offering the prospect of 50 new projects being supported during the commitment phase of the fund.

[1] Download/upload speed: megabits per second.