Supporting the implementation of CEF2 Digital : executive summary.
Date: 2020-02-12
Institutions: Directorate-General for Communications Networks, Content and Technology
Subjects: cloud computing, digital single market, digital technology, financing, information technology applications, information technology user, intelligent transport system, investment, private investment, public financing, radio telecommunications, telecommunications equipment, trans-European network, transmission network

Supporting the 
implementation of CEF2 Digital 
- Executive summary - SMART 
2017/0018 

Executive Summary 

Prepared by Ecorys in cooperation with IDATE, CBO, VVA and WIK 
January – 2020 

The views expressed in the report are those of the consultant,  
and do not present an official view of the European Commission. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

EUROPEAN COMMISSION 
Directorate-General for Communications Networks, Content & Technology 
Directorate B — Electronic Communications Networks & Services  
Unit B.5 — Investment in High-Capacity Networks  

E-mail: cnect-b5@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Supporting the 
implementation of CEF2 Digital 
- Executive summary - SMART 
2017/0018 

Executive Summary 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

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ISBN: 978-92-76-14575-2 

Doi: 10.2759/933269 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

ABSTRACT 

This study aims to support the European Commission in scoping the required budget needed to 
meet the actions identified under CEF Digital as well as aiding preparations for the 
implementation of the forthcoming CEF Regulation, by identifying key areas of market failure 
and potential priorities and structural models for funding. 

Our analysis suggests that funding well in excess of €3bln would be needed to address gaps 
that are expected to persist in fixed and mobile VHC connectivity across the EU over the coming 
decade. Based on our analysis of the degree of market failure and potential spill-over effects for 
the single market, we recommend that a share of €1.3bln should be devoted to connecting 
households and socio-economic drivers with Gigabit fixed and wireless connectivity. Use of 
blending calls could help to leverage available private funds to achieve maximum benefits, 
enabling connectivity to nearly 6m households and more than 50,000 schools, hospitals and 
other socio-economic drivers. The needs to support future-proof 5G connectivity infrastructure 
for connected and automated mobility for the estimated 26,000km stretch of cross-border 
corridors are in excess of €1bln. Remaining funds would be split between funding for local WIFI 
and 5G initiatives, connectivity for high performance computing, cloud connectivity and 
submarine cables. 

 
 
 
 
 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

EXECUTIVE SUMMARY 

Context 

In  March  2019,  the  Council  and  Parliament  provisionally  agreed  on  a  Regulation  to  extend  the 
“Connecting Europe Facility” and adapt it to the needs of the gigabit society. 

The main objective in the digital sector1 is “to contribute to the development of projects of common 
interest relating to the deployment of safe and secure very high capacity digital networks and 5G 
systems, to the increased resilience and capacity of digital backbone networks on EU territories by 
linking  them  to  neighbouring  territories,  as  well  to  the  digitalisation  of  transport  and  energy 
networks.” In turn, the development of digital infrastructure should contribute to the development 
of  the  single  market  and  the  implementation  of  smart  applications  and  efficiencies  which  could 
contribute to achieving environmental goals. 

Funding for digital initiatives should contribute inter alia to the following actions: 

i. 

ii. 

iii. 

iv. 

Actions contributing to deployment of and access to very high capacity networks for Socio-
economic drivers and households, including 5G and other state-of-the-art connectivity; 

Actions contributing to the provision of very high-quality local wireless connectivity in local 
communities; 

Actions contributing to the deployment of 5G corridors along major transport paths; 

Projects aiming at the deployment or significant upgrade of cross-border backbone 
networks and reinforcing links between electronic communications networks within the 
Union. 

The digital sector objectives will be funded to a maximum of €3bln. 

This study is aimed at supporting the European Commission in scoping the required budget needed 
to meet the actions identified under CEF2 as well as to aid future preparations for the implementation 
of  the  CEF2  Regulation,  by  identifying  key  areas  of  market  failure  and  potential  priorities  and 
structural models for funding. 

VHC networks including 5G to SEDs and households 

Over  time,  schools  and  hospitals  as  well  as  other  public  facilities  are  likely  to  require  increasing 
bandwidth  and  high  levels  of  quality  of  service  to  support  file  sharing  and  streaming  for  multiple 
users as well as new applications requiring low latency. A high proportion of households and small 
business are also likely to require Gigabit capabilities by 2025. 2  

Data from GEANT and interviews conducted for this study confirm that few schools currently benefit 
from  Gigabit  connectivity.  Bandwidths  available  to  hospitals  are  greater,  but  gaps  persist  in  a 
significant number of countries, with particular challenges in rural areas.3  

Coverage  of  Gigabit  connectivity  (via  FTTP  or  Docsis  3.1)  is  also  patchy,  with  many  gaps  across 
Europe, especially in more remote areas. Although coverage is expected to expand with investments 
by commercial operators as well as through state aid interventions, projections suggest that Gigabit 

1   Article 

3.2(c) 

Draft 

CEF 

Regulation 

https://www.consilium.europa.eu/en/press/press-

releases/2019/03/13/connecting-europe-facility-coreper-confirms-common-understanding-with-the-
parliament-on-extending-the-programme/. 

2   Strube Martins, S.; Wernick, C.; Plückebaum, T.; Henseler-Unger, I. (2017): Die Privatkundennachfrage nach 
Jahr  2025,  WIK  Bericht,  Bad  Honnef,  März  2017: 

hochbitratigem  BreitbandInternet 
https://www.wik.org/fileadmin/Studien/2017/Die_Privatkundennachfrage_nach_hochbitratigem_Breitbandi
nternet_im_Jahr_2025_FINAL.pdf;  Wik  Consult  (2018).  The  Benefits  of  Ultrafast  Broadband  Deployment: 
https://www.ofcom.org.uk/__data/assets/pdf_file/0016/111481/WIK-Consult-report-The-Benefits-of-
Ultrafast-Broadband-Deployment.pdf. 
3   Further details in chapter 2 of the study. 

im 

 
 
 
                                                 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

coverage gaps will persist in Europe into the next decade, threatening the achievement of Europe’s 
Gigabit society goals. 

Four broadband categories of market failure can be identified: 

•  Most households and SEDs fall within areas which are considered to be relatively well 

served with Gigabit-capable broadband. However, white spots persist e.g. in the periphery 
of cities. We have called these zones A areas with leopard spots; 

•  Some households and SEDs fall within areas which are unprofitable, but where FTTP 

deployment could be made viable with relatively limited amounts of public funding. We 
have called these zones B areas; 

•  Certain zones (C areas) experience significant challenges and are likely to require 

considerable subsidies to support FTTP deployment; 

• 

FTTP is unlikely to be viable in the most remote and sparsely populated areas (D zones), 
but these zones could be served with Gigabit wireless technology. 

Our cost estimates suggest that investments of around €200bln would be needed to deploy FTTP to 
households and SEDs in NUTS3 areas which are not projected to be served via commercial means or 
existing public funding plans and which have been identified as exhibiting enduring market failure 
(i.e. lack of commercial viability). The total subsidies required to install FTTP to all unserved 
households and SEDs in areas where market failure has been identified are estimated at 
around €22bln. It should be noted that this estimate is conservative.4 

Considerable  savings  could  be  made  by  focusing  FTTP  deployments  on  SEDs  alone  and  providing 
dark fibre for 5G backhaul in areas where more widespread FTTP deployment is not viable. However, 
even in this case, there are areas where our models suggest that 5G wireless deployment would not 
be commercially viable and subsidies would be needed to support fibre backhaul. Our cost models 
suggest that focusing on SED connectivity and 5G backhaul in very sparsely populated areas 
rather than FTTH in those area would reduce the subsidy requirements for EU-wide VHC 
coverage from €22bln to around €9bln.  

EU  funds  (mainly  ERDF)  have  been  used  successfully  in  many  countries  to  support  broadband 
deployments  to  schools,  households  and  for  backbone  infrastructure.5  In  many  cases,  European 
funds  have  served  to  reduce  risks  and  thereby  support  complementary  funding  from  national 
governments,  national  investment  banks  and  commercial  operators  and  lenders.  Achieving  the 
Gigabit society connectivity goals EU-wide is also important in enabling all citizens and businesses to 
benefit from the single market in digital services.6 

Interviews  conducted  for  this  study,7  suggest  that  there  is  demand  for  further  funding  to  cover 
currently  unserved  areas  and  to  upgrade  connections  to  Gigabit  speeds,  as  well  as  demand  for 
funding for Wi-Fi and 5G connectivity. 

5G cross-border corridors for CAM 

A key challenge for the  development of connected  and automated mobility (CAM) is the need  for 
connected vehicles to move seamlessly from one country to another. The draft CEF2 Regulation aims 
to provide support for actions which will contribute to the deployment of 5G corridors along major 

4   Our estimate takes into account deployment that may occur through other means (private investment and 
existing public funding) and tends to underestimate the real subsidy demand because the size of the NUTS3 
areas is large and will lead to densely populated areas first subsidising sparsely populated areas within the 
same NUTS3 area before any net deficit for the whole area is will be shown. In reality, regions within a NUTS3 
area that are not profitable will typically not be served by an commercial provider. 

5   Case studies are included in the Annex. 
6   White spots at a national level could impede the ability of firms to provide digital services across the single 
market as well as undermining the potential for citizens and businesses in underserved areas to benefit from 
digital services and applications as consumers or entrepreneurs. EU funding is often required to complement 
national  funds  in  poorer  regions,  and  can  serve  to  reduce  risks  for  other  public  and  private  investors, 
unlocking funding that would not otherwise materialise. EU funding and the associated frameworks can also 
facilitate transfer of best practice, support economies of scale and serve to ensure that investments in the 
sector are aligned to EU-wide objectives. 

7   See Annex. 

 
 
                                                 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

transport paths, including roads and railways, enabling the uninterrupted provision of digital services. 
An indicative list of 5G CAM projects is included in the Annex of the Regulation. 

We have modelled various scenarios to estimate the costs and business case for deploying 5G along 
cross-border  corridors  to  support  the  deployment  of  autonomous  vehicles  at  level  4-5 
automation.85G will be needed in particular to support “Vehicle to Network” connections. 

Road operators are likely to be the main actors involved in provisioning the 5G backhaul network. 
Fibre  exists  in  some  highways,  but  not  in  all,  and  the  quality  varies.  Investments  by  public  road 
operators in particular may also depend on national priorities and funding. Other actors likely to be 
involved include telecom operators on both sides of the border, car manufacturers and application 
providers. 

Although some applications may emerge in advance – for example in the case of freight – interviews 
suggest that the development of autonomous cars  will be gradual, potentially reaching 4% of the 
European  market  in  2025.  Moreover,  if  infrastructure  to  support  connectivity  on  highways  is  not 
deployed early in the process, CAM take-up is likely to be further delayed as customers and other 
actors in the value chain, are likely to delay their own investments. 

We have estimated that the length of cross-border corridors that is potentially relevant for 
CEF Digital covers around 26,000km of highways. The costs of deploying 5G CAM depend on 
whether only a limited set of current services or a full range of potential future services would be 
supported. Investment for backhaul, 5G networks and vehicle to network infrastructure for a 
fully future-proof scenario could cost a maximum of around 210 000 Eur per km and 5.46 
billion Eur in total. 

Community wireless projects 

Offloading mobile traffic to Wi-Fi is a frequent occurrence. Users may deliberately switch to Wi-Fi to 
achieve  higher  bandwidths  and  reliability  at  lower  cost.  Mobile  operators  are  also  increasingly 
exploiting Wi-Fi offloading to improve service quality and reliability. 

Wi-Fi has different characteristics compared with mobile. Wi-Fi is well placed for  some smart city 
applications requiring high bandwidth e.g. video surveillance, while 5G may be better suited in other 
cases. 

Wi-Fi networks are being deployed by a range of providers including specialist players, broadband 
and cable operators and MNOs. Increasingly local authorities are also commissioning the deployment 
of public Wi-Fi networks. 

The Wifi4EU voucher scheme9 covers the equipment and installation costs of Wi-Fi hotspots and is 
available to municipalities or associations formed by municipalities. Given the high demand for the 
Wi-Fi4EU voucher system and benefits that EU funding of such initiatives can bring, there is a strong 
case to extend this programme. 

There has been significant demand for Wifi4EU funding. As of May 2019, 23,739 municipalities had 
applied for a voucher (one in four of all municipalities in the EU). However, a significant number of 
municipalities requesting a voucher were not successful.  

Interviews with some regional authorities (see annex) suggest that alongside continuing the current 
€15,000 Wifi4EU voucher regime, there could be interest in offering grants to authorities to develop 
regional backbone networks which can support public Wi-Fi across a wider area, similar to the Emilia 
Romagna project.  

8  

In level 4 CAM, an automated system conducts the driving and monitors the driving environment, without 
human  interference,  but  this  level  operates  only  in  certain  environments  and  conditions.  In  level  5,  the 
automated  system  performs  all  driving  tasks,  under  all  conditions,  that  a  human  driver  could. 
https://cor.europa.eu/en/engage/studies/Documents/State-of-play-CAM.PDF. 

9   https://ec.europa.eu/digital-single-market/en/wifi4eu-free-wi-fi-europeans. 

 
 
 
                                                 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

Questions have been raised about whether, under CEF2, the wireless programme could be expanded 
to  include  the  deployment  of  5G  active  equipment.  Although  coverage  obligations  included  in 
spectrum licences are likely to mean that 5G is effectively deployed in larger cities, our analysis of 
the economics of 5G deployment to households and SEDs suggests that there may be more remote 
areas in which 5G deployment is not viable without subsidies. There may also be challenges for less 
densely populated areas to support 5G small cells, and competitive deployment may not be possible 
in such areas.  

Drawing on the Dense Air model in Ireland, there could be a case for funds to be made available to 
support neutral 5G small cell deployments in areas where this may otherwise not be provided by the 
market. Such deployments could be  overseen by the municipality, and involve  the deployment of 
neutral networks providing community services and access to all operators in the areas concerned. 
As  5G  operates  based  on  licensed  spectrum,  the  system  would  need  to  function  either  via  the 
assignment of spectrum  to the  authority or  neutral  players, or through collaboration between the 
authority  and  a  mobile  operator  with  licensed  spectrum.  Interviews  suggest  that  such  rural 
deployment projects would require an average capital expenditure of €100,000.  

It should also be noted that there is potentially a high level of complementarity between support for 
investments in 5G active equipment and the potential for subsidies to be given for the deployment 
of fibre backhaul for 5G and SEDs (discussed above and in chapter 2 of this report).  

Connectivity for high performance computing 

There are various HPC use cases for research as well as for industrial users or SMEs. Beneficiaries 
may include the medical establishment, but also other industries involved in R&D and applications 
requiring big data. 

A number of HPC centres already exist in Europe. The HPC Joint Undertaking aims to support the 
upgrade of existing HPC centres and the development of new centres offering pre-exascale and then 
exascale computing power. 

Connectivity  to  HPCs  for  public  research  purposes  is  currently  provided  by  GÉANT  (cross-border 
connectivity)  and  at  national  level  by  National  Research  and  Education  Networks  (NRENs).  These 
providers typically make use of leased line capacity from commercial providers.  

Data transmission technologies are able to support the currently predominant bulk processes of data 
handling, yet terabit connectivity may be needed going forwards to support the real-time use of HPC 
capacities. These terabit links require dark fibre capacity instead of leased lines. 

Based on our analysis of available connections, there may be a lack of connectivity in cross-border 
fibre and/or a lack of commercial competition for such fibre in Eastern Europe, there may be a lack 
of redundancy between GÉANT and NRENs due to single location POIs and there could be missing 
connectivity within NRENs and/or to national islands. 

The  cost  of  addressing  gaps  in  connectivity  required  to  provide  terabit  connectivity  for  HPCs  is 
estimated at approximately €264m, of which half would be attributable to cross-border connectivity 
and the remainder to national. This subsidisation volume is aiming at purchasing IRUs of existing 
fibre links and upgrading node equipment. In cases where completely missing cross-border fibre links 
are identified this would require additional funding means. GÉANT and the NRENs would be the logical 
recipients of any EU funds. Connectivity would in turn be procured from commercial providers on the 
open  market.  In  cases  where  additional  investments  into  implementing  new  fibre  links,  HPC 
connectivity could provide an anchor tenant which supports private investment. 

 
 
 
 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

Efficient use of EU funds 

Our analysis suggests that funding well in excess of €3bln would be needed to address gaps that are 
expected to persist in fixed and mobile VHC connectivity across the EU over the coming decade.10 
However, €3bln has been identified as potential maximum limit for the funding of actions under the 
CEF Digital programme. 

We have made an estimation of the potential €3bn CEF budget split based on (1) the severity of the 
different  market  failures  and  (2)  the  potential  for  CEF  funding  to  create  financial  spillovers  and 
maximise  benefits  across  the  EU.  A  share  of  €1.3bln  would  be  devoted  to  HH/SED 
connectivity.  The  share  for  CAM  would  be  €1bln  and  the  rest  would  be  split  between 
funding for WIFI, HPC, cloud connectivity and submarine cables. Given the limited availability 
of funds in view of the funding requirements, choices may need to be made e.g. between supporting 
cloud  connectivity  or  subsea  cables.  A  summary  of  the  suggested  funding  splits  is  shown  in  the 
following table, and further detail is provided below. 

CEF2 Budget  Call type 

Calls 

Areas A 

Areas B 

Areas D (SED/5G) 

Total SED/HH 

Total CAM 

HPC 

WIFI4EU 

5G4EU 

Regional WIFI 

Total WIFI/5G 

Subsidy-only 

Blending call 

Major 
beneficiaries 
Private  entities  or 
Public authorities 
Private entities 

Subsidy-only 

Public Authorities 

Subsidy only 

Project consortia 

Global budget 

GEANT and NRENs 

Vouchers 

Municipalities 

Subsidy-only 

Municipalities 

Subsidy-only 

Public authorities 

€470m 

€700m 

€130m 

€1.3bn 

€1bn 

€264m 

€120m 

€100m 

€30m 

€250m 

Submarine cables and Cloud connectivity  €150m 

Subsidy-only 

Public authorities 

Technical Assistance 

TOTAL 

€30m 

€3.0bn 

For funding for Households and SEDs, three different call types could be established depending on 
the type of market failure. (1) Subsidy-only calls for white spots within areas which are otherwise 
well served (A areas) with grants of up to €10m; (2) Blending calls for areas in low market failure 
that  would  combine  Grants  potentially  up  to  €10m,  a  Thematic  Instrument  (layered  fund)  from 
InvestEU and potentially a Debt Guarantee (B areas);11 and (3) Subsidy-only calls of up to €5m to 
support the deployment of dark fibre connections for SEDs and 5G backhaul in very remote areas 
where mass-market fibre is not viable. (D Areas) We do not recommend targeting CEF2 funding at 
zones  exhibiting  significant  market  failure  (C  areas),  and  suggest  that  these  would  be  better 
addressed through structural funds.  

Under our recommended scenario, a total of €1.3bln would be allocated to SEDs and households, of 
which €470m would be devoted to addressing white spots within otherwise well served areas, €700m 
would be made available to areas with some market failure under a blending call, and €130m would 
be made available for SED and 5G backbone connectivity in remote areas where FTTH is not viable. 
This approach could deliver VHC coverage to nearly 5m households and 46,000SEDs in areas A and 

10   For example, we estimate that even if the most efficient technologies are chosen such as wireless in remote 
areas, subsidies of €9bln would be needed to address connectivity needs for households and socio-economic 
drivers alone. 

11   Interviews  with  investors  conducted  for  this  study  suggest  that  some  broadband  projects,  which  are  not 
commercially viable, could be made attractive for investors and banks, if sufficient public funding is made 
available. Project promotion such as marketing efforts to support take-up and underpinning of the investment 
via subsidies and key investors are important in achieving strong financial spill overs. 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Title: Supporting the implementation of CEF2 Digital - Executive summary - SMART 
2017/0018 

B and support 5G coverage to a further 1m  households in remote areas as well as fibering 7,000 
SEDs in those areas.  

We do not anticipate that the market for 5G cross-border corridors will reach maturity before 2025, 
but  ensuring  the  availability  of  appropriate  infrastructure  in  advance  to  ensure  that  this  market 
emerges. In this context, CEF could support road dark fibre backbone development on most of the 
CAM  road/highway  network  foreseen  (26,000  km)  in  order  to  facilitate  and  lower  costs  for  the 
development of cross-border 5G CAM. The targeting of additional subsidies and case for subsidising 
active  5G  CAM  equipment  could  be  reviewed  once  business  models  are  further  developed.  We 
propose  a  total  funding  volume  of  €1bln  to  address  public  needs  in  this  area.  This  budget  would 
enable 26,000km of connectivity across 20 countries. 

Wi-Fi vouchers (€15,000) could still be offered as in the current WIFI4EU programme. In addition, a 
similar 5G4EU programme could be set-up but with a 30% co-funding rate (up to a maximum budget 
of  €170,000)  especially  for  local  remote  communities  (municipalities)  to  establish  neutral  5G 
infrastructure in high-market failure zones. 

In addition, CEF could implement at district or regional level a backbone for WIFI combining backbone 
investment with WIFI equipment to provide smart services and touristic applications.  

To foster connectivity for High Performance Computing centres, CEF could support an increase in the 
network capacities of GEANT and the NRENs through an annual budgeting programme. Where remote 
areas  (islands and/or  overseas  territories) experience  a market failure associated with submarine 
cable connections, CEF could also finance the development of new capacities through grants. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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doi: 10.2759/933269