The decision by European Union leaders last Friday to scrap plans for funding broadband to under-served parts of the EU has drawn wide criticism.
The Connecting Europe Facility (CEF) was to provide ¬9.2 billion (US$12.3 billion) for ICT projects, but was slashed by European member states in overnight budget negotiations last Friday, leaving a pot of just ¬1 billion.
Digital Agenda Commissioner Neelie Kroes said she was disappointed with the outcome and explained that with so little funding now available, there could be no support for broadband roll-out.
Industry representatives, ETNO (the European Telecommunications Network Operators' association) and FTTH Council Europe (the Fiber To The Home Council for Europe), were quick to condemn the cut in funding. However after a failure to reach agreement on the budget last November, big cuts to assuage net payers such as Germany and the UK were widely expected.
Luigi Gambardella, ETNO chairman and Telecom Italia vice president, called the decision short-sighted. "Investments in wireline networks in Europe in 2011 amounted to 24.8 billion Euro, with ETNO members accounting for 67 percent of this expenditure. Industry is finding it increasingly difficult to sustain this level of investment," he said in a statement.
"The decision shows that there still is a lack of understanding of European governments on the importance of future-proof broadband networks," added Karin Ahl, President of the FTTH Council Europe.
Kroes agreed that fast broadband targets for 2020 would now be harder to reach and called on member states to help build a better E.U.-wide telecom market. She said that she would continue to work closely with the European Investment Bank to encourage the bank's lending for broadband projects.
But there was some good news for the ICT sector from the budget deal: That remaining 1 billion Eurowill now fund "necessary digital service infrastructure" such as cross-border e-services including ehealth, esignatures, eprocurement, cybersecurity and Europeana (Europe's digital cultural archive).
Meanwhile 6.3 billion Euro has been allocated to Galileo, Europe's navigation satellite system -- a cut of only 10 percent on the Commission's proposal.
The E.U. leaders want the new budget be fully functioning by January 2014, but according to Fabian Zuleeg, chief economist at the independent think tank EPC, this is highly optimistic.
The European Parliament must also approve the budget in a secret ballot, shielding parliamentarians from direct pressure by governments. The major parties all indicated that the deal was not good enough, but Zuleeg said it was unlikely the Parliament would really risk paralysing the EU and that a final vote would likely pass.