COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-10-19
Institutions: European Commission
Subjects: exchange of information, international cooperation, investment project, project of common interest, single market, trans-European network, transmission network

EUROPEAN COMMISSION 

Brussels, 19.10.2011 
SEC(2011) 1230 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Regulation of the European Parliament and of the Council  

on a series of guidelines for trans-European telecommunications networks 

{COM(2011) 657 final} 
{SEC(2011) 1229 final} 

 
 
 
 
  
 
The  present  document  is  the  executive  summary  of  the  impact  assessment  concerning  the 
legislative  proposal  for  the  Regulation  on  a  series  of  guidelines  for  trans-European 
telecommunication  networks,  as  part  of  the  Connecting  Europe  Facility  (CEF)  in  the  post 
2013 programming period.  

1. 

POLICY  CONTEXT,  PROCEDURAL  ISSUES  AND  CONSULTATION  OF  INTERESTED 
PARTIES 

The legal base for intervention in this area resides in article 172 TFEU. Articles 170-
172  provide  for  the  EU  intervention  supporting  the  establishment  and  development 
of trans-European networks in the areas of transport, telecommunications and energy 
infrastructures.  While  the  separate  (umbrella-)  Regulation  establishing  the  CEF 
defines the conditions, methods and procedures for providing Union financial aid to 
trans-European  networks,  the  guidelines  proposed  here  lay  down  the  objectives, 
priorities and broad lines of measures envisaged for broadband networks and digital 
service infrastructures in the field of telecommunications. 

As part of the Europe 2020 strategy, the Digital Agenda for Europe (DAE) flagship 
initiative1,2 aims "to deliver sustainable economic and social benefits from a Digital 
Single Market based on fast and ultra fast internet and interoperable applications."  

In  its  Communication  "A  Budget  for  Europe  2020"  (hereinafter  the  MFF 
Communication),  adopted  on  29  June  2011,  the  Commission  proposed  to  establish 
the  CEF.  Numerous  consultations  with  Member  States,  industry  and  social 
stakeholders  have  been  carried  out.  Notably,  these  included  a  roundtable  of  VP 
Kroes with CEOs from content providers, equipment makers, investors and telecoms 
operators  from  the  world's  leading  companies,  and  the  first  Digital  Agenda 
Assembly, which took place in Brussels on 16th and 17th June 2011.  

2. 

PROBLEM DEFINITION 

Broadband internet and cross-border digital services are the digital infrastructures of 
the future. They are pre-requisite to a competitive, inclusive and sustainable society, 
as acknowledged in the Europe 2020 strategy.  

The  IA  generally  identifies  certain  problems  that  affect  the  provision  of  broadband 
networks  i.e.  lack  of  investment  leaves  potential  for  growth  and  societal  benefits 
untapped;  little  competitive  pressure  on  incumbents  to  invest  in  modern  broadband 
networks  and  no  adequate  strategy  to  publicly  support  the  rollout  of  broadband 
networks in areas where there is no business case. For the digital services, the private 
sector  will  not  replace  public  investment  in  the  digital  services  central  elements 
(platforms, generic services etc) and despite efforts on technical interoperability, on-
line public services may stop at the border.  

1 
2 

COM(2010) 2020. 
COM(2010) 245. 

EN 

2 

   EN 

 
                                                 
3. 

OBJECTIVES 

In addition to addressing the Treaty mandate as stated above, the overall objective 
of the proposed initiative is: delivering sustainable economic and social benefits from 
a  Digital  Single  Market  based  on  fast  and  ultra  fast  internet  and  interoperable 
applications, as elaborated above. 

In order to achieve the overall objective, the Union should aim at achieving achieve 
the following operational objectives: 

(a) 

Influence the market dynamics for broadband investment, by encouraging both 
traditional and new investors to engage in broadband infrastructure roll-out and 
ensuring a level playing field among them.  

(b)  Facilitate  additional  effort  by  Member  States  needed  for  the  use  of 
interoperable  digital  services  in  order  to  permit  for  these  essential  services  to 
function  in  a  cross-border  manner  and  to  unlock  the  digital  content  resources 
generating opportunities for business development. 

4. 

POLICY OPTIONS 

Two  main  policy  options  have  been  identified  for  the  impact  assessment.  The  first 
policy option advocates for the continuation of the current course of action (no policy 
change).  Option  two  assesses  the  financing  of  broadband  networks  and  digital 
service  infrastructure  through  the  CEF.  Option  two  is  split  into  three  sub-options, 
proposing  different  ways  of 
field  of 
implementing 
telecommunications. 

the  CEF 

the 

in 

Under  option  1-  no  policy  change,  for  broadband,  this  baseline  scenario  would 
entail reliance on regulatory approaches to stimulate investment, to continue capital 
constraints for alternative investors that would struggle to fill an investment gap of 
up to EUR 220bn. EU support would continue mainly through Structural Funds, with 
the  persisting  challenge  of  absorption  capacity,  and  on  grant  funding.  For  digital 
service  infrastructures  the  baseline  scenario  would  mean  the  continued  limited 
support  through  project  pilots  (although  most  of  the  technological  solutions  have 
reached  maturity  and  are  ready  for  deployment)  and  policy  coordination  efforts, 
whereby Member States have no incentive to make existing solutions interoperable 
across borders. 

Options  2  –  CEF  broadly  consists  of  (i)  broadband  networks  covering  a 
geographically diversified portfolio of projects which contribute to the objectives set 
out  by  the  DAE,  and  (ii)  the  development, deployment  and  sustainability  of  digital 
service  infrastructures.  Option  2  might  be  implemented  in  three  different  fashions 
(sub-options): 

(1)  Grants only: financial support for both broadband networks and digital service 
infrastructures  would  uniquely  take  place  through  grants.  The  operational 
implementation  would  mainly  be  outsourced  to  an  existing  executive  agency, 
such as the TEN EA. 

EN 

3 

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(2)  Financial  instruments  only:  under  this  sub-option,  the  Commission  would 
work closely with relevant International Financial Institutions (IFIs). The IFIs 
would  select  projects  based  on  their  financial  viability  and  would  follow 
established  practices  of  due  diligence.  The  following  financial  instruments 
could  be  used:  capital  participations  for  investment  funds;  a  financial 
contribution  to  the  provisioning  and  capital  allocation  for  loans  and/or 
guarantees or other risk-sharing instruments (this include but are not limited to 
project  bonds)  and  other  specialised  financial  instruments,  be  they  of  loan, 
guarantees,  counter  guarantees,  risk  capital  and  any  other  legal  forms  of 
instruments. 

(3)  Combined  approach:  Sub-option  three  would  combine  the  two  approaches. 
Accordingly,  the  governance  structure  would  combine  elements  of  both  sub-
options presented above. The decision concerning the appropriate blending of 
grants  and  financial  instruments  would  be  included  in  the  annual  work 
programmes, in line with the policy and sector necessity. 

5. 

ANALYSIS OF IMPACTS 

5.1. 

Impacts from the adoption of option 1 

Low absorption of Structural Funds and lacking administrative capacity of funds as 
reported  by  the  2010  Strategic  Report  on  Cohesion  policy3  would  continue  to 
undermine the construction and take up of broadband networks.  

In terms of facilitating additional efforts by Member States for the deployment 
and use of interoperable cross-border digital services, this option would entail the 
continuation  of  the  current  CIP  ICT  PSP  programme.  It  would  be  impossible  to, 
build  on  the  experience  gathered  during  the  pilot  phase,  deploy  digital  service 
infrastructures Europe-wide.  

Hence,  this  option  would  fail  to  remove  a  crucial  remaining  obstacle  to  the  digital 
single  market.  An  estimate  by  Copenhagen  Economics4  situates  the  cost  of  non-
completing  the  European  digital  single  market,  in  the  region  of  4.1%  of  GDP  by 
2020.  

5.2. 

General impacts from the adoption of option 2 

The  impacts  generated  by  option  2  can  be  classified  into  economic,  social  and 
environmental impacts: 

(1)  Economic  impacts:  a  number  of  studies  report  that  the  availability  of  high 
speed broadband networks will have significant effects on labour productivity 
and  on  GDP  per  capita.  Broadband  networks  would  also  trigger  important 
positive externalities that would accrue to the society as a whole. As a General 
Purpose  Technology  enabler,  broadband  diffusion  positively  affects 

3 

4 

COM(2010) 110, 31.3.2010. Available at 
http://ec.europa.eu/regional_policy/policy/reporting/cs_reports_en.htm 
The Economic Impact of a European Digital Single Market, 2010. 

EN 

4 

   EN 

 
                                                 
productivity  (a  ten  per  cent  higher  broadband  penetration  in  any  year  is 
correlated with a 1.5 per cent increase in labour productivity over the following 
five years5), capital accumulation, and ultimately, GDP growth. Digital service 
infrastructures  can  substantially  contribute  to  reducing  costs  for  the  public 
sector and transaction costs for businesses and citizens.  

(2)  Social Impacts: the combined upgrade of broadband infrastructure and digital 
service  infrastructure  will  ultimately  improve  quality  of  life  for  European 
citizens. The main benefits accrue through the implementation of services such 
as  eGovernment,  eHealth  and  eCommerce  applications.  Also  there  is  an 
important social component in terms of direct and indirect job creation. 

(3)  Environmental  aspects:  Broadband  networks  can  reduce  emissions  by 
decreasing  the  need  for  transportation  (tele-working)  or  by  optimising  energy 
consumption (smart grids). 

Other important impacts are generated from the spillovers that broadband networks 
and  digital  service  infrastructure  would  have  on  other  sectors.  Among  the  sectors 
most  affected  by  these  positive  externalities  are  education  and  skills,  health, 
employment, transport and energy. 

5.3. 

Sub-option specific impacts 

Sub-option 1 

The adoption of sub-option 1, grants only would achieve only partially the objectives 
set  up  by  the  guidelines.  With  regard  to  the  objective  of  influencing  the  market 
dynamics for broadband, grants are likely to be only partially efficient and effective. 
In terms of efficiency the co-financing ratio needed by broadband networks is going 
to be high relatively high. Grants would trigger only limited leverage effect. Grants 
can  be  effective  in  supporting  and  providing  technical  assistance,  but  are  not  the 
most efficient tool to mobilise private investment. 

However, grants are an effective mechanism to facilitate efforts by Member States 
to deploy cross-border digital services. In this case grants would serve as a pivot 
investment  that  grants  EU  co-financing  towards  infrastructure  that  Member  states 
alone  would  not  develop.  Co-financing  rates  for  digital  service  infrastructures  are 
typically  rather  high.  Nevertheless,  private  investors  have  only  a  limited  interest  in 
the deployment of this type of infrastructure. 

Sub-option 2 

The  adoption  of  sub-option  2  financial  instrument  only,  would  mostly  achieve 
objective of influencing the market dynamics for broadband investment. In areas 
where  broadband  networks  projects  are  potentially  financially  viable,  financial 
instruments  would  act  as  an  enabler  of  investment  by  public  and  private  investors, 
lowering de facto their Weighted Average Cost of Capital (WACC) and shortening 

5 

Roman  Friedrich,  Karim  Sabbagh,  Bahjat  El-Darwiche,  and  Milind  Singh  (2009):  Digital  Highways. 
The Role of Government in 21st Century Infrastructure. Booz & Company. 

EN 

5 

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their payback time. Using financial instruments would also foster efficiency through 
the higher leverage they can ensure. Based on RSFF and project bonds estimations, a 
financial  contribution  of  €1bn  from  the  EU  budget  is  likely  to  attract  other  funds 
from  public  or  private  sectors  which  could  underpin  gross  investment  of  €6bn  - 
€15bn in broadband networks depending on the  financing needs and the risk profiles 
of  the  underlying  investments.  However,  without  any  grants,  projects  in  urban  or 
sub-urban  areas,  which  are  generally  more  profitable,  would  always  be  preferred  – 
other things being equal - to projects in rural areas. Also, financial instruments would 
probably  struggle  in  mobilising  a  significant  leverage  effect  through  technical 
assistance,  planning,  mapping  and  other  support  activities  which  are  typically  co-
financed by grants. 

Finally, financial instruments are unlikely to be an effective mechanism to facilitate 
efforts by Member States to deploy cross-border digital services. The experience 
from the CIP has shown than in this field it is already difficult to have the Member 
States  engaged  in  the  process.  Private  investors  might  show  some  interest  in  the 
application  layer,  but  they  are  not  likely  to  commit  to  invest  in  the  core  layer  of 
digital service infrastructure, as this architecture cannot be commercially exploited.  

Sub-option 3 

Sub-option 3, combined financial approach would, if adopted, strike a good balance 
between  grants  and  financial  instruments.  This  sub-option  implies  that  the  main 
effort of investment relies on financial instruments, leaving the remainder for grants. 
In this scenario, grants and financial instruments would combine not only vertically 
(both  funding  schemes  would  be  available  for  broadband  networks  and  digital 
service infrastructures) but also horizontally, within a project.  

The  objective  of  influencing  the  market  dynamics  for  broadband  investment 
would be fully achieved under this sub-option. In the field of broadband the bulk of 
funding  would  be  allocated  through  financial  instruments,  so  that  the  market 
potential  is  exploited  to  the  full  and  that  the  widest  possible  range  of  actors  is 
involved in the consortia to be funded. The solution would be effective as public and 
private  actors  would  get  access  to  capital  at  lower  cost  and  would  have  sufficient 
long-time horizon for their investment. Under this sub-option there would be a clear 
synergy  between  the  CEF  and  the  Structural  Funds  both  in  terms  of  grants, 
financial engineering and support for streamlining project implementation that has so 
far  prevented  absorption  of  EU  funds  both  in  the  cohesion  and  rural  development 
domains. 

As  for  the  objective  of  facilitating  efforts  by  Member  States  to  deploy  cross-
border  digital  services,  this  approach  would  allow  the  Commission  to  be  flexible 
towards  financial  instruments  in  calls  for  proposals  dealing  with  applications, 
without the risk of crowding out private investors from digital service infrastructure. 
On the other hand it would ensure the disbursal of grants at high funding rates for the 
top layers (core services). 

EN 

6 

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6. 

COMPARISON OF OPTIONS 

The impact assessment report concludes that option 2 with sub-option 3 (combined financing) 
is  more  suitable  to  meeting  the  DAE  and  the  Europe  2020  targets  in  the  field  of  ICT  than 
option 1 as can be seen from the table below. 

Option  1  no 
policy 
change 

Option 2 CEF 

Sub-option 1 
grants 

Sub-option 2 
financial 
instruments 

Sub-option 3 
combined 
approach 

Overall objective 

0 

+ 

+ 

++ 

Objectives 

Delivering  sustainable  economic  and 
social  benefits  from  a  Digital  Single 
Market  based  on  fast  and  ultra  fast 
internet  and  interoperable  applications, 
with  broadband  access  for  all  by  2013, 
access  for  all  to  much  higher  internet 
speeds (30 Mbps or above) by 2020, and 
50%  or  more  of  European  households 
subscribing 
internet  connections 
to 
above 100 Mbps. 

Specific  objective  1:  Influence  the  market  dynamics  for  broadband  investment,  by  encouraging  both  traditional 
and new investors to engage in broadband infrastructure roll-out and ensuring a level playing field among them.  

are  potentially 

1a  In  areas  where  broadband  network 
projects 
financially 
viable,  ensure  that  investors,  including 
alternative  public  and  private  investors, 
have  access  to  capital,  at  reasonable 
costs 
rates)  and  with  a 
sufficiently long time-horizon. 

(interest 

1b  In  areas  where  the  business  case  is 
weak, provide sufficient levels of public 
financial  support  for  the  roll-out  of 
broadband networks 

investors  develop 

1c  Across  the  Union,  ensure  that  public 
and  private 
the 
broadband 
to 
capacity 
infrastructure  projects,  by  providing 
technical  assistance,  e.g.  for  planning 
and mapping 

conduct 

1d  In  supporting  infrastructure  projects, 
ensure 
funds  have  a 
maximum  mobilising  (leveraging)  effect 
on private and (other) public investment. 

that  Union 

0  

(N/A) 

0 

0 

0 

+ 

++ 

++ 

++ 

+ 

- 

+ 

0 

++ 

+ 

++ 

++ 

Specific  Objective  2:  facilitate  additional  effort  by  Member  States  needed  for  the  use  of  interoperable  cross-
border  digital  services  and  unlock  the  digital  content  resources  generating  opportunities  for  business 
development. 

EN 

7 

   EN 

 
Facilitate  additional  effort  by  Member 
States needed for the use of interoperable 
cross-border  digital  services  and  unlock 
the  digital  content  resources  generating 
opportunities for business development. 

0 

++ 

- 

++ 

7. 

MONITORING AND EVALUATION 

The  Commission  and  other  implementing  bodies,  such  as  EIB,  EBRD  and  the  TEN-T  EA, 
will continuously monitor the impact of CEF investment in broadband (as well as in transport 
and  in  energy)  in  line  with  the  indicators  proposed  in  the  CEF  general  Regulation.  The 
indicators will cover areas such as (non-exhaustive list): 

• 

• 

• 

• 

Supply:  Broadband  access  (to  be  checked  against  the  DAE  targets  of  access  to  30 
Mbs for all citizens by 2020 and access to 100 Mbs for at least 50% of citizens by 
2020) 

Demand: Broadband uptake (to be checked against the DAE target of 50% of citizens 
having subscriptions for 100 Mbs by 2020) 

General  monitoring indicators for  investment  programmes  such  as  uptake  of  funds, 
time to grant etc 

proportion of grants vs. Innovative financial instruments 

The  Commission  will  regularly  publish  a  progress  report  on  CEF  broadband  networks  and 
digital service infrastructures investment, which will be submitted the European Parliament, 
the  Council,  the  European  Economic  and  Social  Committee  and  the  Committee  of  the 
Regions.  

In addition to continuous monitoring by the Commission and other implementing bodies, an 
independent  evaluation  of  general  CEF  framework  shall  be  carried  out  at  mid-term,  taking 
into consideration the timing and advancement of programming as well as ex-post, a certain 
number  of  years  after  the  end  of  the  programming  period.  The  evaluations  will  assess  the 
intervention's relevance, efficiency, effectiveness, and preliminary impact. Specific emphasis 
shall be put on issues of governance and the appropriateness of implementation mechanisms. 

EN 

8 

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