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Malopolska Broadband Network
Broadband Network in Malopolska
Kraków, 2 kwietnia 2004 r.Brussels, 5th of October 20101
Malopolska Broadband Network
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
2
Malopolska Broadband Network
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
3
Malopolska Broadband Network4
Part I: Malopolska Broadband Network
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.
5
Malopolska Broadband Network
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
6
Malopolska Broadband Network
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
7
Malopolska Broadband Network
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
8
Malopolska Broadband Network
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)
9
Malopolska Broadband Network
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.
10
Malopolska Broadband Network
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
11
Malopolska Broadband Network
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
12
Malopolska Broadband Network
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
13
Malopolska Broadband Network
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
14
Malopolska Broadband Network15
Part II:Alternative business models of regional broadband projects
in Poland – in search of the best business
model for Malopolska
Malopolska Broadband Network
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
16
Malopolska Broadband Network17
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
MRPO (ERDF) – Malopolska Regional Operational Programme
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
Malopolska Broadband 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
18
Malopolska Broadband Network
Model 3. Establishing company dependant from Malopolska Region (SPV)
19
SPV investment
SPV investment
dividend/pay
Internet Service
Providers (ISPs)
- providing services to
final consumers
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the project: „big project” –
min. 50 million EUR
MRPO (ERDF) – Malopolska Regional Operational Programme
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
19
Malopolska Broadband Network
Model 3a. Blended solution
20
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)
- providing services to
final consumers
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EUR
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EURMalopolska
RegionMalopolska
Region
50%
100%
building Malopolska Broadband Network without Public Procurement rules; ownership
20
Malopolska Broadband Network
Model 4. PPP/SPV: Public-Private Partnership plusestablishing a Special Purpose Vehicle (SPV)
21
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)
- providing services to
final consumers
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EUR
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EUR
21
Malopolska Broadband Network22
Model 5. Public-Public Partnership
Malopolska Region
Malopolska Region
Jagiellonian University in
Krakow
Jagiellonian University in
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
Malopolska Broadband Network
Model 5 b. OPTION 2: Public-private Partnership with SPV
23
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)
- providing services to
final custemers
Jagiellonian University in
Krakow
Jagiellonian University in
Krakow
AGH University of Science and Technology
AGH University of Science and Technology
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EUR
MRPO (ERDF) – Malopolska Regional Operational Programme
Decision of the European Commision about size of the
project: „big project” – min. 50 million EUR
23
Malopolska Broadband Network
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
24
Malopolska Broadband Network
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
25
Malopolska Broadband Network
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
Pre
pa
rati
on
of
all
do
cu
me
nts
fo
r te
nd
er
pro
ce
ss
Sta
rtin
g o
f th
e t
en
de
r p
roc
es
s /
Ob
lig
ato
ry
no
tic
es
Ca
ll f
or
pro
po
sa
ls t
o p
art
icip
ate
In
th
e t
en
de
r
As
se
ss
me
nt
of
pro
po
sa
ls
Inv
ita
tio
n t
o p
art
icip
ate
in
a
co
mp
eti
tiv
e d
ialo
gu
e s
tag
e
Co
pe
titi
ve
dia
log
ue
,C
rea
tio
n o
f s
pe
cif
ica
tio
ns
an
d T
erm
s o
f R
efe
rne
ce
Ca
ll f
or
pro
po
sa
ls
As
se
ss
me
nt
of
ap
pli
ca
tio
ns
/o
ffe
rs
135 days
Stage VIII
10 days
Su
bm
itti
ng
ap
pli
ca
tio
ns
un
de
r c
all
fo
r p
rop
os
als
Stage IX
14 days
Stage X
1 day
Stage XI
10 days
Se
lec
tio
n o
f th
e w
inn
ing
off
er
Sig
nin
g t
he
co
ntr
ac
t
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
26
Malopolska Broadband Network
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
on
of
all
do
cu
me
nts
fo
r te
nd
er
pro
ce
ss
Sta
rtin
g o
f th
e t
en
de
r p
roe
ce
ss
/ O
bli
ga
tory
n
oti
ce
s
Ca
ll f
or
pro
po
sa
ls t
o p
art
icip
ate
in
th
e t
en
de
r
As
se
ss
me
nt
of
pro
po
sa
ls
Inv
ita
tio
n t
o p
art
icip
ate
in
a
co
mp
eti
tiv
e d
ialo
gu
e s
tag
e
Co
mp
eti
tiv
e d
ialo
gu
e/
Cre
ati
on
of
Sp
ec
ific
ati
on
s a
nd
Te
rms
of
Re
ren
ce
Ca
ll f
or
pro
po
sa
ls
As
se
ss
me
nt
of
ap
pli
ca
tio
ns
/off
ers
189 days
Stage VIII
20 days
Su
bm
itti
ng
ap
pli
ca
tio
ns
un
de
r c
all
fo
r p
rop
os
als
Stage IX
21 days
Stage X
1 day
Stage XI
10 days
Se
lec
tio
n o
f th
e w
inn
ing
off
er
Sig
nin
g
the
co
ntr
ac
t
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
27
Malopolska Broadband Network
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
28
Malopolska Broadband Network
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
29
Malopolska Broadband Network
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
30
Malopolska Broadband Network
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]
31