Liikanen: No blank cheques for rural broadband projects

By Peter Chapman

Date: 29/01/04

ERKKI Liikanen, the commissioner for enterprise and the information society, has brushed off claims that the EU has handed a blank cheque to big telecom operators to extend their grip on the internet from towns and cities to rural areas.

The Paris-based Organization for Economic Cooperation and Development (OECD) wrote a harsh report warning member governments that they might be wasting money by pumping huge amounts of cash into linking remote areas - currently overlooked by telecom firms - to fast broadband services.

The OECD report, seen by this newspaper, says extremely cheap new wireless technology could soon deliver the internet to small hamlets and villages.

Privately, OECD experts also warn that former monopoly firms, such as France Télécom, which already control swathes of their national internet markets, could use cash grants to quickly dominate internet access in most remote areas. This view apparently conflicts with EU plans to pump funds from its growth initiative and structural funds into broadband projects.

The European Commission decreed that broadband projects should be at the head of the queue for a special €10 billion war-chest devoted to IT projects in the structural funds budget for 2000-2006.

French President Jacques Chirac led the chorus of EU leaders calling for the move last year, as the Union's telecoms market was struggling to lift itself out of a cash crisis.

However, Liikanen told European Voice that the EU must encourage companies to invest in uneconomic projects. But he insisted it would never waste money on hi-tech projects which do not offer value for money.

"This is just a misunderstanding. There is no reason to put in massive amounts of money. But if we want to cover everyone, then markets will not do it alone.

"If you have a distant village why should we say that you can build a road but that the markets need to deliver broadband if you are to be connected?"

He said member states would have to prove that the projects that they earmark for cash are necessary, while companies handed contracts must show they offer the best value for money.

"We should not put in much public funds whenever markets deliver. But our guidelines are very carefully written," said Liikanen, even for projects in the most far-flung areas.

The cost of connecting regional areas to the internet has, up until now, been far greater than linking up residents of towns and cities.

That is because there are far fewer citizens to absorb the huge costs of laying fibre optic wires, or even investing in technology that beefs-up the existing copper telephone wires so that they can carry fast data connections.

But companies are starting to reap the benefits of investment in alternative, and far-cheaper, wireless technology.

For example, US chip giant Intel is backing a new wireless standard known as WiMax, to bring high-speed internet access to the remotest of homes for a fraction of the cost of using fibre optic cables.

In an interview with European Voice Erkki Liikanen, European Commissioner for Enterprise and the Information Society, says that the European Union must encourage companies to invest in projects linking rural areas to the internet but insisted the EU would not waste money on projects which do not offer value for money.