European Union Budget Cuts Gut Broadband Funding

By Peter Bernstein February 11, 2013

It has been seemingly high on the priority list of Europe’s leaders that everyone, including rural areas, get at least 30 Mbps of broadband service by 2020. In fact, because of its importance, the European Union had set aside a $9.36-billion fund to stimulate deployment.

Turns out that was then and this is now.

In what others have called a “stunning” or “massive” blow, the European Union agreed on its budget for 2014-2020, and the broadband fund got axed. In fact, the policy makers used the fund to achieve more than a substantial chunk of the $45.6 billion in savings they are seeking. This formed the bulk of the $12.3 billion “digital part” of the Connecting Europe Facility (CEF) – a part that got trimmed down to $1.3 billion in budget negotiations.

That remaining billion will now go to a different subsection, to do with nailing down cross-border digital services like e-procurement and e-invoicing.

In short, the broadband fund is no more.

Reactions from the industry were, to put it politely, amazement. Digital Agenda Commissioner Neelie Kroes, who has spent years on the CEF plans, issued a statement promising to press on, and stated she was still shooting for the goals of having half of Europe surfing at more than 100 Mbps, and the rest on at least 30 Mbps, by 2020:

“It is clear that there can be no support for broadband with a pot of only €1bn, so this funding will be exclusively for digital services. Our 2020 fast broadband targets, agreed by everybody, may be harder to reach but I am not giving up on them. I will keep fighting, and I will support innovations that help roll-out fast broadband to underserved areas.”

She was not done. Kroes also warned that member states would now need to rigidly adhere to her recently-announced 10-point regulatory plan for upgrading Europe’s broadband infrastructure, in order to hit targets:

“National governments will not achieve their own ambitions if they fail to offer this support. And their own support schemes will come under great pressure to serve areas where the market alone will not act.”

Not only is this not sitting well with the industry, but several members of the European Parliament issued a lengthy four-point statement, saying they’ll take the fight to the Parliament. They did not mince words.

Joseph Daul, on behalf of the EPP Group; Hannes Swoboda, on behalf of the S&D Group; and Guy Verhofstadt, on behalf of the ALDE Group; Rebecca Harms, on behalf of the Greens/EFA Group; and Daniel Cohn-Bendit, leaders of the four largest political groups in the European Parliament, stated:

"The core priority behind Parliament's choices is the ambition to promote growth and investment in the EU, and thus to contribute to Europe's sustainable recovery from the crisis. 

This agreement will not strengthen the competitiveness of the European economy but weaken it. It is not in the prime interest of our European citizens.

The European Parliament cannot accept today's deal in the European Council as it is. We regret that Mr. Van Rompuy did not talk and negotiate with us in the last months. 

The real negotiations will start now with the European Parliament. We will maintain our priorities which we have clearly stated many times.We see with astonishment that EU leaders agree to a budget that could lead to a structural deficit. Large gaps between payments and commitments will only store up trouble for the future and not solve existing problems…”

Much has been made of the fact that Europe for the most part has chosen fiscal austerity over stimulation to regain its economic footing that has been the result of the prolonged economic recession and the sovereign debt crises. This is another example of that mindset.

So now it is on to the European Parliament. Whether that body has the wherewithal to undo the European Council’s deal is problematic.

What is also problematic is whether or not the European economies can rebound to a degree where the communications industry is generating enough revenue and profits to make up for the enormous stimulus they were banking on. Most observers think not.

This is going to be great political theater, and nasty. A lot of powerful political and business interests are involved, and the future vitality of Europe is core to the debate. Understanding the justification of how defunding the lifeblood that creates sustainable competitive advantage and jobs in an increasingly online world, where broadband connectivity is table stakes, certainly is going to be quite a show. Stay tuned!     

Edited by Braden Becker
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