MINISTRY OF COMMUNICATIONS AND INFORMATION SOCIETY
Intermediate Body for the Promotion of the Information Society
Concept Paper- State aid memorandum –
Priority Axis 3 (PA3) - ICT for Private and Public Sectors
Key Area of Intervention (KAI 1) - Supporting the ICT use
Support for setting up broadband networks in the underserved areas
July 2009
Page 24
MINISTRY OF COMMUNICATIONS AND INFORMATION SOCIETY
Intermediate Body for the Promotion of the Information Society
1 Introduction
This concept paper outlines the nature and rationale for public intervention envisaged to support the rollout of BB in the areas within the the Romanian territory which do not have broadband coverage .
The intervention will be carried out under Priority Axis 3, “ICT for Private and Public Sectors”, of the Sectoral Operational Programme (SOP) “Increase of Economic Competitiveness”.
The objective of PA3 is to “support economic competitiveness through increasing the interactions between the public sector and enterprises/citizens by fully exploiting the ICT potential”.
Achievement of this objective envisages three Key Areas (KA) of intervention as follows:
KA1 - Supporting the ICT use
KA2 - Developing and increasing the efficiency of electronic public services
KA3 - Sustaining the E-Economy
KA1, Supporting ICT Use, envisages supporting access to broadband connectivity in “white” areas where broadband is currently not available and where there are no plans for the near future. The support for broadband network deployment is in line with existing Community policies to promote regional cohesion and address market failures, and the primary objective is to ensure a higher level of broadband coverage and penetration, or in a more timely manner, than would occur without the aid.
Contents
1 Introduction 2
2 Analysis of the Current Situation 5
2.1 Eurostat 5
2.2 National Authority for Management and Regulation in Communications of Romania (ANCOM) 6
2.3 Main Findings and Conclusions 10
3 Aim and Objectives of the Intervention 12
4 Description of the Intervention 13
5 Main features of the intervention 18
5.1 State aid beneficiaries 18
5.2 Target Areas 19
5.3 Consultation with Broadband Providers 19
5.4 Call for Proposals 19
5.5 Responding to the Call 19
5.6 Tender Action 20
5.7 Feasibility and Business Case 22
5.8 Services Provided to the End Users 23
5.9 Monitoring and Clawback 23
5.10 Ownership and Management of the Infrastructure 24
Summary of Main Steps 25
Appendix 1 – Cities Greater Than 50,000 Persons 27
Appendix 2 –Broadband Analysis by County 28
List of Figures
Figure 1 - Romanian Counties and Lack of Broadband Access 10
Figure 2 – Operational Areas 16
Figure 3 - Proposed Broadband Infrastructure Model 17
List of Tables
Table 1 - Internet access and broadband connections 2008 (%) 5
Table 2 - Enterprises with a website with key facilities 2008 (%) 6
Table 3 – Underserved areas 9
Table 4 – Target Broadband Development Regions 16
2 Analysis of the Current Situation
Any planned intervention must be based on an analysis of the current status of deployment of broadband in Romania. Consequently, this section highlights relevant results from two studies carried out in 2008 - one carried out by Eurostat and the other by the National Authority for Management and Regulation in Communications of Romania (ANCOM).
2.1 Eurostat
According to the survey conducted by Eurostat in January 2008[1] (please see Table 1, below), Romania was ranked lowest among the EU27 Member States for broadband connections and second lowest for household access.
Table 1 - Internet access and broadband connections, 2008[2] (%)
Enterprises / HouseholdsInternet access / Broadband[3] connection / Internet access / Broadband connection
Iceland / 100 / 99 / - / -
Finland / 99 / 92 / 72 / 66
Spain / 95 / 92 / 51 / 45
Sweden / 96 / 89 / 84 / 71
UK / 93 / 87 / 71 / 62
EU27** / 93 / 81 / 60 / 48
Romania / 67 / 44 / 30 / 13
In addition, 64% of enterprises in the EU27 had a website, against a figure of 27% for Romania, which was ranked lowest (please see Table 2 below).
Table 2 - Enterprises with a website with key facilities, 2008[4] (%)
Having a website or home page / Of which, providing facilities for:Product catalogues or price lists / Online ordering, reservation or booking / Advertising jobs or online job applications / Online payment
Denmark / 87 / 58 / 26 / 40 / 12
Finland / 82 / 37 / 16 / 46 / 7
Spain / 54 / 57 / 23 / 18 / 5
Sweden / 86 / 45 / 20 / 35 / 7
UK / 76 / 43 / 25 / 27 / 19
EU27** / 64 / 57 / 26 / 26 / 10
Romania / 27 / 73 / 38 / 20 / 16
2.2 National Authority for Management and Regulation in Communications of Romania (ANCOM)
This section outlines the results of research into the broadband[5] market carried out by ANCOM during 2008 and analysed by the Romanian Ministry of Communications and the Information Society (MCIS) and by the contribution of the National Institute for Research and Development in Informatics (ICI).
The purpose of the research was to identify areas of the country which are underserved in terms of broadband supply.
The analysis provides a breakdown at national, urban/rural and county levels.
2.2.1 Coverage Analysis
Romania is divided into 41 counties for administrative purposes. Each county is further divided into administrative territorial units. This analysis is made at locality[6] level, which is a part of an administrative territorial unit. The locality, because of its small size, is the ideal unit for analyzing the supply of broadband to homes, businesses and public buildings within specific geographic areas. There are 13,749 localities in total, giving an average of 335 localities per county.
The aim was to map the supply of broadband in each of the 13,749 localities. This involved collection of data from some 540 Internet Service Providers (ISPs) to establish which localities each was supplying broadband to. Together, the ISPs analysed supply 95% of the total installed broadband connections in the country.
The situation of the broadband coverage, broken down by the number of ISPs, is presented below:
a. 55% of the population (12 mil.) is situated in “black areas”, where there are more then two ISPs, out of which:
i. 36% of the population (7.8 mil.) are in cities with more than 50.000 inhabitants – the list of localities is in Appendix 1
ii. 19% of the population (4.2 mil.) are in cities with less than 50.000 inhabitants
b. 16% of the population (3.5 mil.) is situated in “grey areas”, where there is only one ISP
c. 29% of the population (6.2 mil.) is situated in “white areas”, where there is no ISP.
Detailed information, at county level, is presented in Appendix 2.
2.2.2 Underserved Areas
Taking into account that Bucharest is covered by more than 2 operators and as territorial–administrative units is on the same level with a county, it was excluded from the analysis performed.
The result of the coverage analysis is highlighted in Table 3, which shows 80% of the localities, 31% of the population (total population without Bucharest), reprezents “white zones” (where there is no broadband provider). The same situation is geografically presented in Appendix 3 –˝white˝, ˝grey˝ and ˝black˝ zones, using geoSIRUTA application. Detailed mappings of the existent ˝white˝, ˝grey˝ and ˝black˝ zones in each county are attached at the end of this document.
Table 3 – White zones
Taking into account that all 11027 localities (with one exception) have a population under 10.000 inhabitabitants, we can consider the condition regarding “localities desadvantaged from the poit of view of access” form the National Broadband Strategy is fulfilled.
2.2.3 County level analysis
That percentage of the population with no broadband coverage was further analysed at county level to determine if there was a spatial or geographic pattern to the underserved areas.
The main findings are set out below:
- In 11 of the 41 counties, between 40% and 60% of the population live in localities with zero ISPs;
- This rate is between 30% to 40% in 11 counties;
- It is between 20% to 30% in 11 counties;
- And 10% to 20% in 8 counties.
The particular counties in each of the above percentiles are shown on the map in Figure 1 (see below), while a complete list is set out in Appendix 2 on page 29.
Figure 1 - Romanian Counties and Lack of Broadband Access
2.3 Main Findings and Conclusions
1. Romania has the lowest percentage of businesses with broadband connections in the European Union, i.e., with only 44% of enterprises having a broadband connection as opposed to an EU27 average of 81%.
2. The level among enterprises is mirrored in the household area, with only 13% of households (the second lowest level in the EU) having a broadband connection against an EU27 average of 48%.
3. It also has the lowest percentage of enterprises with a website, i.e., 27% against an EU27 average of 64%.
4. 29 % of of the population is located in white areas (11027 localities out of 13.749).These indicates that the a very significant area of the nationall territory has no broadband coverage.
5. 91% of population with no coverage live in rural areas.
6. A further 16% of the population, located in 1,987 localities (14% of the total), have access to one broadband provider only – “grey areas”.
7. Taken together with the 29% of the population with no coverage, it suggests that 45% of the population in 94% of the localities, do not have access to a proper functioning broadband market or live in underserved areas.
8. This is exacerbated by the fact that Romania has a very low level of fixed telephonery penetration rate, particularly in rural areas. This severly limits the ability to boost supply by upgrading traditional telephone exchanges, a strategy that has been widely used in other Member States to deliver broadband to a large proportion of the population in a cost effective[7] manner and in a relatively short period of time.
9. Given the relative high investment need in the underserved areas, there is strong rationale for public intervention to reduce the digital divide in broadband access, a critical factor in assisting local communities to attract businessess, enable telework, provide healthcare, improve educational opportunities and government services and a critical link to information.
3 Aim and Objectives of the Intervention
In the underserved (“white”) areas, defined in the last chapter, where the inherent profitability of investment in BB infrastructure is low. Neither ex ante regulation nor demand-side measures will be sufficient to enable the supply of broadband service. Granting of public support is therefore required to overcome the lack of broadband connectivity. Hence the aim of this intervention is to:
“Provide the enabling infrastructure necessary to stimulate the supply of a choice of broadband services in underserved areas”
Specific objectives are to:
1. Reduce the "digital divide" between the areas which have access to broadband services and those that have not;
2. Address the lack of broadband infrastructure in underserved areas of Romania.
3. Provide the broadband infrastructure necessary to promote economic growth and job creation.
4. Create the conditions necessary to stimulate a properly functioning market for broadband services based on provision of open access infrastructure.
These objectives will lead to the geographical broadening of the ability to provide and receive broadband services and contribute to regional development and social coherence.
The intervention is part of Romania’s goal to work towards creation of a proper functioning broadband market, and ensuring that the entire population of Romania has access to broadband.
The intervention will facilitate private sector investment in advanced broadband services in the localities. An important aspect of the intervention is to minimise project implementation costs and uncertainties and to maximize the number of residential/business beneficiaries.
4 Description of the Intervention
This section describes both the features of the intervention envisaged and its Romanian legal basis.
Under the SF terminology the MCIS will be the beneficiary whilst under State aid rules and terminology the MCIS will be the State aid provider and investors/operators will be the beneficiaries of the measure.
For the intervention under POS CCE, approximately 84 million € will be available from ERDF including the national budget of Romania. The individual amount of aid for each beneficiary will depend on the result of the tender precedure.
Apart from the funds available under ERDF, there will be also available another 60 million € from the Recovery Plan, as it was agreed with the Ministry of Agriculture.
The intervention will be made in two phases:
- In the first phase, there will be used funds from ERDF and the eligible localities are all 11027 localities with no broadband provider;
- In the second phase, there will be used fund from Recovery Plan, in the remaining rural localities, not covered in the first phase and where no privat investment was done
After the intervention under POS CCE, the remaining white areas in the rural zones will be mapped and put under public consultation as an essential tool in defining the existing white areas.
The measure will be based on:
a) State budget Law for 2009
b) Government Decision no. 12 of 16 January 2009 on the organization and functioning of the Ministry of Communications and Information Society
c) Rules on eligibility
- Government Decision no. 759 of 11 July 2007 (517 Of.Journal of 1 August 2007) on rules of eligibility of expenditure incurred in the operations financed by operational programs;
- Government Ordinance no. 64/2009 on financial management of structural instruments and their use for the convergence;
d) Normative acts of electronic communications:
- Decision no. 34/2002 on access to electronic communications networks and associated facilities, and their interconnection, approved with amendments by Law no. 527/2002, which implements the Directive 2002/19/EC of 24 April 2002.