Ma l opolska Broadband Network Broadband Network in Malopolska Kraków, 2 kwietnia 2004 r. Brussels,...

Malopolska Broadband Network

Broadband Network in Malopolska

Kraków, 2 kwietnia 2004 r.Brussels, 5th of October 20101


Agenda

1. Short facts about Malopolska

2. Part I: Malopolska Broadband Network – description of the project

3. Part II: Alternative business models of regional broadband projects in Poland – in search of best business model for Malopolska

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Short facts about Malopolska

Malopolska Region is one of 16 Polish regions. Malopolska is a regional self-government.

• Area: 15 190 km2• Population: 3.2 million

(urban population: 50 %)• Counties: 22 • Communes: 182• Capital City: Kraków

Malopolska

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Malopolska Broadband Network4

Part I: Malopolska Broadband Network


Goal of Malopolska Bradband Network (MBN) project:

To create a regional carrier-class backbone broadband and distribution network

As a result at least 90.5% of households and 100% of private companies and public institutions will be covered by broadband by the end of 2013.

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What is going to be built:

3365 km: Total length of a planned optical fibre network

Nodes to be built: 19 backbone nodes 161 distribution nodes 276 access nodes

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General shape of MBN:

Regional carrier-class network

Backbone ready for:broadband servicesvarious technologies of

access The network will

complement existing networks

Technology neutral Ready for easy further

development

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Where will it be built:

The MBN will be built in digitally excluded areas, where market forces do not and will not provide broadband infrastructure due to a lack of profitability.

Nodes of MBN (planned)

Existing nodes of incumbant

Existing nodes of other operators

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Technology:

Fiber optic cables seems to be an optimal solution

Radio solutions can support fiber optics and can be used in the access layer (not by SPV but local ISP’s)

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Rules of network usage:

Network’s owner – SPV (Malopolska shares – 51%)

SPV is operator of the infrastructure

SPV provides network access on transparent and fair principles

The network will be open to all telecommunication operators providing broadband services to end-users

ISP can get access to the MBN in all nodes

Backbone nodes could also be used as access nodes

SPV does not provide end-user (retail) services.

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Cooperation with Malopolska counties and communes

– Demand AggregationMalopolska Region involves local governments at all levels (counties, and communes) into the process of consultation and cooperation with MBN project, e.g.:

• each county and commune will appoint a local MBN coordinator

• cooperation at all stages of investment (from planning to implementation and operation)

• support of local bureaucracy• demand aggregation

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Cooperation with Internet Service Providers (ISPs)

Agreements with 39 Internet Service Providers

Consultation on MBN project and feasibility study

Rules of making accessible information about existing network infrastructure

Rules of cooperation on building own infrastructure

Rules of making accessible ISPs’ network infrastructure

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Cooperation with other Polish Regions

Regional cooperation of all Polish Regions for:• smarter interconnections of broadband networks

built by Polish Regions,• better preparation for any breakdowns or

failures• common procurements and lower prices• common peering agreements with national and

international operators

The cooperation has been formalized within chiefs’ of the regions assembly – Marshals‘ Assembly /Convention

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European cooperation to support MBN:B3 Regions project (INTERREG IVC)

B3 Regions: Regions for Better Broadband Connection (INTERREG IVC)

B3 Regions idea is to exchange knowledge and know-how from other regions on building and developing broadband connections and overtaking digital divide.

B3 Regions project supports building of Małopolska Broadband Network – exchanging the knowlege helps to prevent mistakes.

Partners 15 partners from 8 UE countries (Italy, Spain, United Kingdom,

Greece, Bulgaria, Cyprus, Poland) Closer partnership of Małopolska region

with Catalonia (Spain) and North Yorkshire (UK)Budget Total budget: 3,5 million EUR Malopolska budget: 153 333 EUR (85% i.e. 130 333 EUR co-funded

from EU (ERDF)The B3 Regions project has been awarded a Fast Track label

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Part II:Alternative business models of regional broadband projects

in Poland – in search of the best business

model for Malopolska


Model 1. Open Call for Proposals

Operators build

broadband networks, manage

them, and provide

services to final

customers

In Model 1 Malopolska Region:• chooses area of intervention• Broadband network belongs to private entity• No influence of the Region on quality of services and prices

Board of the Malopolska

Region

Board of the Malopolska

Region

30 million EUR

for the open call for

proposals

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Model 2. Concession for services (in accordance with Polish Concession act and Polish PPP act): the model suggested in the Malopolska Broadband Network feasibility study

Internet Service

Providers (ISP)

- providing services to

final consumersIn Model 2 Malopolska Region:

• chooses area of intervention (white areas, grey areas)• carries out the procedure of individual notification of state aid to the EC (DG Comp)• submits application form under MRPO (Malopolska Regional Operational Programme) to get EU financial support• designs and builds all broadband infrastructure through companies choosen in accordance with Public Procurement ruels• covers 100% of the investment from public source of funding• chooses Infrastructure Operator of the broadband network (concession procedure)• accepts and controls prices and has influence on quality of service of the Infrastructure

In Model 2 Infrastructure Operator:• manages the Malopolska Broadband Network, offers services for ISPs and earns money for it• covers operating loss pokrywa stratę, or covers expenditures to develop Malopolska Broadband Network

Region

Investment

Region

Investment

MRPO (ERDF) – Malopolska Regional Operational Programme

Decision of the European Commision about size of the project: „big project” – min. 50 million EUR


Decision of the European Commision about size of the project: „big project” – min. 50 million EUR

building the network, ownership of infrastructure, Public Procurement rules

choosing Onfrastructure Operator to manage the network (concession)

Infrastracture Operator (IO) – operating the

network

Infrastracture Operator (IO) – operating the

network


(2) Disadventage of Model 2 (Concession for services): Schedule endangered due to state aid notification procedure

Positive decision of the EC on state aid

notification

- DG Comp: the problem of determining areas of

intervention

- notification procedure can take a dozen or so

months

Positive decision of the EC on state aid

notification

- DG Comp: the problem of determining areas of

intervention

- notification procedure can take a dozen or so

months

designing/ building

no confirmation if areas of intervention

are ok – risk

designing/ building

no confirmation if areas of intervention

are ok – risk

Agreement with IO

no support possible

Agreement with IO

no support possible

Approval for a big project

may be dependant on the result of

notification procedure

Approval for a big project

may be dependant on the result of

notification procedure

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Model 3. Establishing company dependant from Malopolska Region (SPV)

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SPV investment

SPV investment

dividend/pay

Internet Service

Providers (ISPs)


final consumers


Decision of the European Commision about size of the project: „big project” –

min. 50 million EUR


Decision of the European Commision about size of the project: „big project” –

min. 50 million EUR

Malopolska Region

Malopolska Region

50%

100%building Malopolska Broadband Network without Public Procurement rules – SPV the owner of boradband

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Model 3a. Blended solution

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SPV 1investment

SPV 1investment

PPP Agreement

contract/concession for SPV2

Establishing of SPV2

PPP Agreement

contract/concession for SPV2

Establishing of SPV2

Private partnerPrivate partner

SPV 2Operation,

maintanance, extension

SPV 2Operation,

maintanance, extension

input into SPV

input into SPV

dividend/pay

Internet Service

Providers (ISPs)


final consumers


Decision of the European Commision about size of the

project: „big project” – min. 50 million EUR



project: „big project” – min. 50 million EURMalopolska

RegionMalopolska

Region

50%

100%

building Malopolska Broadband Network without Public Procurement rules; ownership

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Model 4. PPP/SPV: Public-Private Partnership plusestablishing a Special Purpose Vehicle (SPV)

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Malopolska Region

Malopolska Region

PPP Agreement

Contract/concession for SPV2

Establishing a SPV2

PPP Agreement

Contract/concession for SPV2

Establishing a SPV2

Pivate partner Pivate partner

SPV investment + operation and maintenance

SPV investment + operation and maintenance

input into SPV

input into SPV

dividend

dividend/pay

designing, building, ownership, operation and maintanence

Internet Service

Providers (ISPs)


final consumers







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Model 5. Public-Public Partnership

Malopolska Region

Malopolska Region

Jagiellonian University in

Krakow


Krakow

AGH University of Science and

Technology in Krakow

AGH University of Science and

Technology in Krakow

Public -Public

Partnership

Public -Public

Partnership

Partnership agreement

OPTION 1:

Concession for services business

model

OPTION 2:

Public-Private Partnership

business model


Model 5 b. OPTION 2: Public-private Partnership with SPV

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Malopolska Region

Malopolska Region

PPP Agreement

Contract/concession for SPV

Establishing a SPV

PPP Agreement

Contract/concession for SPV

Establishing a SPV

Private PartnerPrivate Partner

SPVinvestment + operation and maintenance

SPVinvestment + operation and maintenance

input into SPV

input into SPV

dividend

dividend/pay

designing, building, ownership, operation and maintenance

Internet Service

Providers (ISPs)


final custemers


Krakow


Krakow

AGH University of Science and Technology

AGH University of Science and Technology







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Why PPP model?

bigger budget of the MBN thanks to the private funds

participation of a professional private partner from the very beginning of MBN's implementation

shorter public procurement procedures thanks to a possible one big procurement for design-build-operate contract

sustainability of the network

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Public-private partnership PPP: Phases

Preparation of plan/guidelines

Selection of Private partner

PPP undertaking Building, operating and maintenance of the infrastructure

Outlay

Payback period

Expectation of subsidies from public partner

Timeline of the investment

Defining the selection cryteria of Private partner

Call for applicants to become a Private partner

Competitive dialogue

ToR: Terms of Reference and specifications

Selection of a Private partner

Division of profits form PPP venture doen’t have to correspond to the number of shares. Moreover, companies can compete with this element in their proposals to become a Private Partner of PPP venture.

Private Partner of the PPP could only draw benefits from offering wholesale services over the infrastructure of the PPP

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Stage I

14 days

Stage II

1 day

Stage III

30 days

StageIV

14 days

Stage V

10 days

Stage VI

30 days

Stage VII

1 day

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135 days

Stage VIII

10 days

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Stage IX

14 days

Stage X

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10 days

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Schedule of the procedure for the Private Partner selection – optimistic scenario

NOTICE: If during the tender process any protests/appeals occur, the timeline must be extended accordingly

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Stage I

14 days

Stage II

1 day

Stage III

30 days

Stage IV

21 days

Stage V

10 days

Stage VI

60 days

Stage VII

1 day

Pre

pa

rati

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of

all

do

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me

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189 days

Stage VIII

20 days

Su

bm

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fo

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Stage IX

21 days

Stage X

1 day

Stage XI

10 days

Se

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f th

e w

inn

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off

er

Sig

nin

g

the

co

ntr

ac

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Schedule of the procedure for the Private Partner selection – pesimistic scenario

NOTICE: If during the tender process any protests/appeals occur, the timeline must be extended accordingly

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Starting form Public-Public towards Public-Private Partnership

Letter of intent (LOI) for cooperation in MBN implementation signed in April 2010 between: Malopolska Region, the Jagiellonian University in Krakow, the AGH University of Science and Technology in Krakow.

The Partners declared:• to combine their potential and experience for

efficient and effective MBN's implementation

• their precise financial involvement • Public-Private Partnership as an optimal

solution for the MBN project

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Public-Private Partnership model for MBN:

Leader: Malopolska Region (within Public-Private Partnership)

Partnership, and their MBN’s budget contribution:

Malopolska Region – 35 mln zł (approx. 8 mln EUR) Jagiellonian University – 5 mln zł (approx. 1.2 mln EUR) AGH University of Science and Technology – 5 mln zł

(approx. 1.2 mln. EUR) Private Partner – ok. 100 mln zł (approx. 24 mln EUR) Malopolska Regional Operational Programme – 124 mln zł

(approx. 29 mln EUR) Timeplan: until 30.12.2013

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PPP for MBN

Competitive dialogue procedure to choose a Private Partner

Establishing SPV (Special Purpose Vehicle) to carry out the MBN project.

The owner of the Malopolska Broadband Network: SPV (Malopolska Region to hold 51% of SPV shares)

SPV will be responsible for designing building and operating of the Malopolska Broadband Network – SPV is going to be a telecommunication operator

At the moment precise models of cooperation between partners in PPP model are being considered

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Thank you for your attention!

Dariusz Kowalczyk

Department of Economy and Information Society

Marshal’s Office of the Malopolska Region

Tel. +48 12 63-03-515

Fax. +48 12 63-03-503

Email: [email protected]

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Ma l opolska Broadband Network Broadband Network in Malopolska Kraków, 2 kwietnia 2004 r. Brussels,...

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