1. Ma l opolska Broadband Network Broadband Network in Malopolska Kraków, 2 kwietnia 2004 r. Brussels, 5th of October 2010 1

2. Ma l opolska 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

3. Ma l opolska 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 3

4. Ma l opolska Broadband Network 4 Part I: Malopolska Broadband Network

5. 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

6. Ma l opolska 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

7. Ma l opolska Broadband Network General shape of MBN: Regional carrier-class network Backbone ready for: broadband services various technologies of access The network will complement existing networks Technology neutral Ready for easy further development 7

8. Ma l opolska 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

9. Ma l opolska Broadband Network Technology: Fiber optic cables seems to be an optimal solution Radio solutions can support fib e r optics and can be used in the access layer (not by SPV but local ISPs) 9

10. Ma l opolska Broadband Network Rules of network usage: Networks 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

11. Ma l opolska Broadband Network Cooperation with Malopolska counties and communes – Demand Aggregation Malopolska 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

12. Ma l opolska 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

13. Ma l opolska 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

14. Ma l opolska 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

15. Ma l opolska Broadband Network 15 Part II: Alternative business models of regional broadband projects in Poland – in search of the best business model for Malopolska

16. Ma l opolska 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 30 million EUR for the open call for proposals 16

17. Ma l opolska Broadband Network 17 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 consumers In 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

18. Ma l opolska 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

19. Ma l opolska 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 50% 100% building Malopolska Broadband Network without Public Procurement rules – SPV the owner of boradband 19

20. Ma l opolska Broadband Network Model 3a. Blended solution 20 SPV 1 investment SPV 1 investment PPP Agreement contract/concession for SPV2 Establishing of SPV2 PPP Agreement contract/concession for SPV2 Establishing of SPV2 Private partner SPV 2 Operation, maintanance, extension SPV 2 Operation, maintanance, extension 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 EUR Malopolska Region 50% 100% building Malopolska Broadband Network without Public Procurement rules; ownership 20

21. Ma l opolska Broadband Network Model 4. PPP/SPV: Public-Private Partnership plus establishing a Special Purpose Vehicle (SPV) 21 Malopolska Region PPP Agreement Contract/concession for SPV2 Establishing a SPV2 PPP Agreement Contract/concession for SPV2 Establishing a SPV2 Pivate partner SPV investment + operation and maintenance SPV investment + operation and maintenance 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

22. Ma l opolska Broadband Network 22 Model 5. Public-Public Partnership Malopolska Region Jagiellonian University 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

23. Ma l opolska Broadband Network Model 5 b. OPTION 2: Public-private Partnership with SPV 23 Malopolska Region PPP Agreement Contract/concession for SPV Establishing a SPV PPP Agreement Contract/concession for SPV Establishing a SPV Private Partner SPV investment + operation and maintenance SPV investment + operation and maintenance 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 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

24. Ma l opolska 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 d e sign-build-operate contract sustainability of the network 24

25. Ma l opolska Broadband Network Public-private partnership PPP: P h a ses 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 Refer e nce and specifications Selection of a Private partner Division of profits form PPP venture doent 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

26. Ma l opolska 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 Preparation of all documents for tender process Starting of the tender process /Obligatory notices Call for proposals to participate In the tender Assessment of proposals Invitation to participate in a competitive dialogue stage Copetitive dialogue, Creation of specifications and Terms of Refernece Call for proposals Assessment of applications/ offers 135 days Stage VIII 10 days Submitting applications under call for proposals Stage IX 14 days Stage X 1 day Stage XI 10 days Selection of the winning offer Signing the contract 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

27. Ma l opolska 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 Preparation of all documents for tender process Starting of the tender proecess/ Obligatory notices Call for proposals to participate in the tender Assessment of proposals Invitation to participate in a competitive dialogue stage Competitive dialogue/ Creation of Specifications and Terms of Rerence Call for proposals Assessment of applications/offers 189 days Stage VIII 20 days Submitting applications under call for proposals Stage IX 21 days Stage X 1 day Stage XI 10 days Selection of the winning offerSigning the contract 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

28. Ma l opolska 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

29. Ma l opolska Broadband Network Public-Private Partnership model for MBN: Leader: Malopolska Region (within Public-Private Partnership) Partnership, and their MBNs 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

30. Ma l opolska 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

31. Ma l opolska Broadband Network Thank you for your attention! Dariusz Kowalczyk Department of Economy and Information Society Marshals Office of the Malopolska Region Tel. +48 12 63-03-515 Fax. +48 12 63-03-503 Email: dkowa@malopolska.mw.gov.pl 31