Public funds enable economic and social improvement and are available at local, regional and national government levels, as well as at EU level. The European Union is an increasingly important source of funding, providing mainly grants and loans, but even equity financing. As the volume and type of funding available have grown over the years, so has number of schemes.
The European Structural and Investment Funds (ESIF) include:
- The European Regional Development Fund (ERDF) that aims to strengthen economic and social cohesion in the EU by correcting imbalances between its regions. ERDF support to broadband deployment is primarily focusing on addressing market failures, targeting regions where investments are not taking place on a market basis alone.
- The European Agricultural Fund for Rural Development (EAFRD) that aims to support rural areas of the EU to meet the wide range of economic, environmental and social challenges. It may be used to support broadband projects in certain regions and Member States, depending on how the fund allocation has been designed.
- The European Social Fund (ESF) that supports jobs and employment opportunities for all EU citizens and can partly be used to support broadband rollout.
- The Cohesion Fund (CF) that aims to reduce economic and social disparities and to promote sustainable development.
A programme dedicated to connectivity is the Connecting Europe Facility (CEF), which supports broadband deployment via two financial instruments: Connecting Europe Broadband Fund (CEBF, equity) and the CEF debt instrument. The Connecting Europe Broadband Fund provides equity and quasi-equity to smaller-scale, higher-risk broadband projects, which do not have sufficient access to financing, in (under-served) suburban and rural areas. The CEBF is an equity fund of EUR 420 million, and the CEF Debt Instrument makes available approximately EUR 17 million in loans. The digital part of the Connecting Europe Facility (CEF Digital) will support and catalyse both public and private investments in digital connectivity infrastructures between 2021 and 2027.
The Recovery and Resilience Facility (RRF) is the key recovery instrument at the heart of Next Generation EU MFF which is meant to assist the EU in its recovery from the current crisis. The Facility will provide both loans and grants by frontloading financial support for the crucial first years of the recovery (a total of EUR 672.5 billion, distributed to MS in different measure; at least 20% earmarked for digital). The Member States should provide a detailed explanation of how the challenges identified in the country-specific recommendations, in particular the 2019 and 2020 semester cycles, are addressed by the proposed measures. They should also explain how the plans are consistent with the challenges identified in the most recent Council recommendation on the economic policy of the euro area for Member States whose currency is the euro.
The InvestEU Portal is the EU's online match-making portal enabling EU-based project promoters – public or private – to reach potential investors worldwide. InvestEU enables project promoters based in the EU to reach potential investors worldwide and to boost the visibility of their projects to a large network of international investors. Investors looking for investment opportunities in broadband infrastructure are offered a broad choice of viable projects.
Moreover, EU Member States have established national broadband strategies and policies, financial instruments and dedicated funds for investment in high capacity broadband projects.
Private capital and financial markets
Financial markets can be accessed for investment funds that provide equity or debt financing as well as hybrid solutions (mezzanine funding). Investment funds seeking a stable return on investment and may focus on safe, tangible assets such as high-capacity broadband infrastructure:
- banks, investment funds and private equity investors may be interested in providing early-stage financing, looking for a higher risk premium and an exit between 3 and 7 years once the business is established;
- infrastructure funds, pension funds and other institutional investors may invest in established infrastructure from the above after 3-7 years and seek long term investment at lower interest rates.
Other sources, such as venture capital, are usually not used for investing in infrastructure as they focus on short-term, higher risk opportunities and demand high interest rates with early exit options.
For further details and examples please refer to the Broadband Investment Guide.