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Broadband: Main financing tools

The main financing tools for high-speed broadband development projects are own resources, revenue-based financing, loans, equity and grants.

Broadband initiative of the District of Calw, Germany

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Own resources

Public authorities or utilities owned by the local, regional or national government may already own key infrastructure assets, like ducts, fibre cables, poles, premises to be used for equipment location and data centres, and sites to be used for radio base stations.
Moreover, internal funds for infrastructure development may be available, as well as financial resources previously earmarked for large IT or other costs (like elderly care or administrative services) that are expected to be significantly reduced once a local/regional broadband network becomes available. These physical and financial assets can be invested in the project or the company created to run the project and can represent a significant part of the equity needed to get the project started and to leverage other types of financing.

Communities can raise own financial resources to support the deployment of high-capacity broadband infrastructure in their region. Typically, this takes place in community support model, particularly in rural communities or clusters of such communities and smaller urban communities, usually with a strong urge for high-speed connectivity.

Revenue-based financing

If the public authority chooses a direct investment model, it generally receives revenue from wholesale dark fibre lease and/or transmission services. It may also receive revenue from retail infrastructure leases or connectivity (or network) fees depending on the business model in place. This can become a major financing source once the network is complete and companies, public bodies and end users start using it.

This source of financing only materialises once the core of the infrastructure is in place and services are offered over the network. It is therefore suitable to recover public sector funds, to accelerate infrastructure deployment or lower costs. To start a project, other financial sources are needed.

Loans

Many projects have secured a large portion of their initial financing through loans with soft or commercial terms. Loans can be provided by EU or national government funds, a bank or other investors, for-profit or non-profit institutions, and private citizens. For this to be sustainable, a valid business plan must be presented in which medium- and long-term revenue exceeds the negotiated loans (principal + interest). Because a loan represents a debt, loans are often referred to as debt financing.

Equity financing

Equity financing means that a company gets investment without obligation to pay interest charges. However, the investor (private or public) gets a share of the company and takes part in the decision-making process. This is opposed to debt financing, which implies interest payment, but the investor has no control over the business, and when the debt is paid, the relationship with the investor is over.

Grant financing

European, national and regional public funds can generally be used to finance the project, subject to any specific conditions that may be attached to their use. Grants are focused on enabling economic and social improvement. The availability of public funds to finance broadband deployments may vary from Member State to Member State and from region to region. However, a number of European schemes exist which are available across the EU, even if in most cases the funds are administered by national or regional managing authorities.

For further details and examples please refer to the Broadband Investment Guide.

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