Natasa Gospic1, Milan Jankovic2, Dragan Bogojević3 Public Private Partnership: aspects of national model implementation Natasa Gospic1, Milan Jankovic2, Dragan Bogojević3 1Univesity of Belgrade, Traffic and Transport Engineering Faculty, Belgrade, 2Univesity of Belgrade, School of Electrical Engineering, Belgrade, 3ICT-INFO, Belgrade, Serbia Gospiic, Jankovic & Bogojevic, November 2012 1 | Industry Analyst Network | June 2009 1

Agenda Introduction: Public Private Partnership (PPP): Academia approach Gap model and role of the PPP (Author’s WB & ITU) Proposal for National model of the NGN and BB deployment and its decomposition Aspects of national model implementations National Broadband Network: Multi-layer open access model Serbian PPP Delphi Survey Proposals and Conclusions

REGULATOR’S METODOLOGY -PROPOSAL FOR US POLICY- CREATION OF US PROJECT Preparation of detailed overview of the situation of telecom infrastructure and telecom service provisioning within the whole territory of the country Proposal for scope and content of US Financial options Recommendations for US implementation Public discussion US implementation Project development is done by University Belgrade, TTEF

Gospiic, Jankovic & Bogojevic, November 2012 PROJECT Data base Development of Main Data Base (all settlements in country – 4.715 in Serbia) Locations (Settlements) without fixed telecom services (0% penetration) Locations with low penetration (less then 4% and less then 10%) Identification of areas lacking mobile signal DEVELOPMENT OF THE LIST OF CRITICAL SETTLEMENTS Elements for techno-economic analysis Criteria for definition of critical settlements for US Basic : + 20 households and/or + 50 inhabitants Additional: no mobile signal – critical inhabitant’s index (2002/1991) school, post office, ambulance, on the border to EU.... Structuring the settlements in the list of critical settlements for US Number of inhabitants Potential tourist locations Natural resources Requirements for NB and BB access Gospiic, Jankovic & Bogojevic, November 2012

Academia Proposal for NB US and BB US per region Scenario B BB US Zapadno-bački Sremski Podunavski Braničevski Srednje-banatski Severno-banatski Moravički Severno-bački Južno-banatski Južno-bački Kolubarski Borski Grad Beograd Pomoravski Zaječarski Mačvanski i Šumadijski Serbian regional organization 2008: 24 regions and city of Belgrade Scenario A NB US Pčinjski Jablanički Raški Pirotski Zlatiborski Nišavski Toplički Rasinski This proposal is not endorsed! Gospiic, Jankovic & Bogojevic, November 2012

Word Bank: Gap model, theoretical framework for UAS* Over last few years operators have bridged the market efficiency gap for voice The smart subsidy zone has narrowed The true access gap is typically last 5% of total population, but 20% in rural areas *Source: Telecom Regulation Handbook, Universal Service: Distinctions Within the Access Gap, WB 2011 Gospiic, Jankovic & Bogojevic, November 2012

Authors’ proposal for a national model of the NGN and BB deployment* P w S N *Sources: Gospic & Bogojevic, NGN Deployment in Developing Countries, ITU-D Forum for Arab Region, Dec. 2010 Bogojevic & Gospic, Modeling of NGN deployment, African Journal of Business Management, July, 2011 PWSN- People with special needs Gospiic, Jankovic & Bogojevic, November 2012

ANALYTICAL AND STRUCTURAL FRAMEWORK To transform the proposed framework into a model for the particular devC, it is necessary: To determine the existing level of access, To determine frontiers of market efficiency, To determine affordability frontiers in relation with household income To determine sustainability frontiers in relation to the potential investment cost Also in order to define structural components of the model it is necessary to determine the following: Detailed input data related to market-specific features; Costs for implementation of possible technologies Algorithms that represent the process of building the infrastructure, based on geography, population, and penetration; Revenue (per customer and total) and Calculation of the net profit and ROI Gospiic, Jankovic & Bogojevic, November 2012 8

Gospiic, Jankovic & Bogojevic, November 2012 Model decomposition* *Source: N. Gospic & D. Bogojevic, ITU Cross Regional Seminar, Chisinau Moldova, Sep. 2011 Gospiic, Jankovic & Bogojevic, November 2012

Application of the proposed Analytical Framework for Serbia The frontier for the existing level of acceptance is set to 600 € and the affordability frontier at 300 €. (The average monthly income of households in Serbia in September 2012 is amounted to around 500 €; for illustration, the average net salary amounted to 352€). Research into the Serbian territory covered by ADSL and 3G services indicated that market oriented methods lead to good coverage in urban areas and poor coverage in rural areas.

Frontiers for the Serbian national model (the end of 2010) Source: Bogojevic & Gospic, Modeling of NGN deployment, African Journal of Business Management, July, 2011 RECOMMENDATION: Develop the project to define frontiers and data Pilot project to test this framework Gospiic, Jankovic & Bogojevic, November 2012

Gospiic, Jankovic & Bogojevic, November 2012 GOVERNMENT’S ROLE The government responsibilities frontiers are indicated (100% of population) The Government financial resources have to be directed towards the development of services provided to citizens (e-Government, e-Health, e-Education, e-Procurement) in partnership with private sector. Development of National Broadband Network –NBN (Strategy for e-communication development in RS 2010-2020) National Commission for Broadband (high level officials) Gospiic, Jankovic & Bogojevic, November 2012

How to build the NATIONAL BROADBAND NETWORK (NBN)? Goals Technology Regulation Financing Coverage Bitrate Social and economic advantages FTTx, Wireless/satellite technology selection based on technical and economic analysis Transparent work Fair competition Guaranteed coverage Government budget Bank loans Supplier credit Public/private partnership NBN project Establish a new company to build NBN? First layer: open access passive network Second layer: open access passive network Interconnection points Level playing field Reasonable profit and return on investment (ROI) Affordable prices Efficient investments Open access Business plan Operation model Source: M. Jankovic ITU Regional Forum for Europe on Broadband, September 2012, Tirana, Republic of Albania

Innovations in NBN design Multi-layer open access model By applying this model, the NBN developers can further be divided as follows: Local governments offering a network will sell bandwidth to communication operators wholesale and service providers retail, instead of doing business with private persons. Infrastructure operators offering passive network (dark fiber) Operators offering active network (wholesale access) Service operators offering innovative services such as IPTV, with end-users Service Utility player Vertical service operator RSP RSP Bitrate RSP The main role of the state: Optical fiber Infrastructure operator (mainly local governments) Create Universal coverage Open access Fair competition Stimulate cooperation through partnerships (private/public sector...) Underground infrastructure Access right Source: M. Jankovic ITU Regional Forum for Europe on Broadband, September 2012, Tirana, Republic of Albania

Serbia BB4All situation Serbia adopted basic package of documents: Strategy of IS Development until 2020, Strategy of e-communication in Serbia from 2010 to 2020, Law on Electronic Communications and Strategy of broadband development up to 2012. Strategy of IS Development has set objective to provide all citizens of the Serbia with high speed Internet up to 100 Mbps. Strategy of e- communications, among others, has promoted model of national network based on passive optical infrastructure The appropriate action plans, resources and government activities in order to achieve objectives are still not officially prepared. Documents do not recognize PPP models and state subsidies. Examples and the proposed model indicate that development of PPP policy is important. Regulatory activities in this sense are very crucial. Gospiic, Jankovic & Bogojevic, November 2012

Application of the PPP – what are experts opinions? Gospiic, Jankovic & Bogojevic, November 2012

PPP Delphi Survey for application of the PPP and Analytical Framework Questionnaire on the position of public-private partnerships in the development of broadband Internet access and role of PPP in Serbia is in progress (I phase of Delphi method) Questionnaire sent to 30 Serbian experts (Academia, Regulator, Government, Private sector) first week of November 2012 For the moment answers received from 18 experts. Gospiic, Jankovic & Bogojevic, November 2012

ANSWERS ON QUESTIONNAIRE Consensus on questions “Who is the key player in the implementation of BB to all citizens of Serbia?”. “Both the government and the market should be included” “Private operators will not invest in between sustainability and government frontiers” All experts are agreed (Average 9.13, Median 10) “Political support is enough for implementation of Digital Agenda for Serbia Majority did not agreed (Average 3.00, Median 2) Is financing using PPP for BB applicable? All experts agreed (87%) Is it necessary to define methods of Government intervention? All experts agreed (87%). However, some comments refer that Government has no capacity for that, what could delay implementation Different expert’s opinions on questions Implementation of National Strategy for Information Society Realization of National Broadband Network Government investment for BB Additional comments Lack of e-services in local language will slow down BB Low level of ICT skills will slow down BB Domestic industry does not exist any more

Gospiic, Jankovic & Bogojevic, November 2012 Top ten proposals Definition and Scope of UAS have to be changed within time according to the country’s situation (Scope: US + UA => BB_UAS). Broadband UAS policies should to migrate to Broadband policies (rural) to ensure “Broadband for all”. Highlight of needs for innovation and creativity in identification of new services within UAS, like digital Broadcasting (BB_UAS + Digital Broadcasting => BB_UASB). Commence with promotion of new services from e-Government package and their impact (eGov + eEDU + eHelth => BB_UASBG). Identification of the broadband infrastructure serving for all purposes, including Critical Telecommunications Infrastructure (CTI). Gospiic, Jankovic & Bogojevic, November 2012

Gospiic, Jankovic & Bogojevic, November 2012 Top ten proposals Definition and implementation of National model for BB deployment, with identification of non-sustainable areas, which should be served with broadband Universal Service/Access, and be the scope of government support and/or PPP. Recognition that multi stakeholder approach is only financial solution, with clear role of government’s state intervention. Monitoring mechanism and benchmarking are critical factor. Starting as soon as possible with pilot projects based on the proposed analytical model for investigating the limits of market efficiency, availability and sustainability. Starting with activities on public-private partnerships (PPP) on local government level. Gospiic, Jankovic & Bogojevic, November 2012

THANK YOU FOR YOUR ATTENTION! n.gospic@sf.bg.ac.rs milan.jankovic@ratel.rs drbogy@gmail.com Gospiic, Jankovic & Bogojevic, November 2012