Public DBO

Public design build and operate – the public sector constructs the network itself, retaining full control and offering services on a retail or wholesale basis.

Stockab StockholmStokab, Sweden In Stockholm,  started in 1994, Stokab provided network infrastructure; the city installed dark fiber and several hundred service providers lit the fiber and now provide one service or another.

  • Västerås (Sweden) €40 million
  • North Karelia (Finland)
  • Bizznet (Austria)
  • MälarNetCity (Sweden)
  • Lyse Tele (Norway)
  • CityNetCologne (Germany)
  • Wilhelm.tel (Germany) Wilhelm, Germany

3 responses to “Public DBO

  1. The Swedish experience and claims to this being the model to adopt for public investment in high speed broadband is favoured by many. Please tell us why you believe this is the best and where it should be implimented.

  2. We are grateful to Jarmo Heiskanen for bringing us this update to developments in Karelia

    Just to clarify the present situation and background in North Karelia.

    Some of the experiences are based on the earlier broadband project “eRegio” which was the finalist in the RegioStars 2010 broadband competition and Bridging the broadband gap competition 2007. But most of the experiences below are from the new project.

    First of all the name of our on going “management” project: “Broadband for all in Eastern and Northern Finland”. It will be run during the period 1.1.2010-31.12.2012 and implemented in five regions.

    It is based on a national (Finnish) broadband strategy in Finland which is 100 MB for all till 2015. There are many elements in the strategy and one is that regional councils should take the responsibility on the activities and proposals in their own territory.

    Although we do already have a basic broadband (1 MB) connections almost everywhere available we are still seeking for high speed broadband connections.
    After 1.7.2010 USO (Universal service obligation) has been provided in Finland.
    It means that you should have basic broadband connection where ever your home is located.

    The aim of this project is to help municipalities in evaluating, planning, financing, preparing the tender processes for high speed broadband investments and giving them expert assistant and support.

    We (Regional Council of North Karelia) are leading and managing the project and we work together with four other eastern and northern regions. This project prepares the tenders for new broadband investments in each region and in each municipality. It means that we have an expert who has the knowledge of network infrastructure and how it should be developed in each municipality.

    The target in 2015 is that everyone should have the connection to high speed broadband. (fixed fibre). The plan is, according the national evaluation and estimation, that 95 % of population is living in the areas where high speed broadband should be covered by the markets and only the last 5 % of population is living in the areas that they are not covered by the markets and they need public support. This is a national decision or principle and used in every region in Finland. This means in North Karelia that we need to dig 4000 km new fibre and invest more than 50 million euros to cover 11 000 households in rural areas that are remaining outside broadband.

    We have an action plan for all 14 municipalities to build network (fibre) to rural areas where high speed broadband yet isn`t available. This programme is for years 2010-2015 and every municipality has been split in to smaller lots or areas and each of those smaller areas are supposed to put on a tender process during years ahead. So municipalities are not going to be finished in one year.

    There may even be 1-3 areas/lots in each municipality that are coming to be build in the next years. So far all the 14 municipalities are engaged to this project.

    This project started 2010 so we are going to start approx. 10 new areas per year till 2015.

    * Would it be possible to confirm the total investment amount for the project (both public and private) and the number of homes covered by the new broadband services?

    So far there are decisions from 13 areas/investments. One project is nearly finished and rest 12 projects are beginning this summer after the snow has smelt and the digging can start.

    Total investment costs for all these are 9,3 Me.
    State aid and EU support covers 4 Me.
    Municipalities are investing 2,2 Me.
    Operators investment 3,1 Me.
    Number of Households/private companies/public service estates in the areas is 3800.
    The length of new cable will be 776 km.

    Questions and answers from Jarm0 .


    * Do you feel the small lot size may have limited FTTH or helped it, and do you think this may have affected the national operators decision not to become involve?

    All the lots are being tendered one by one so there are small and bigger lots.
    I can`t say on behalf of national operators what is the reason they have`nt been interested in. But one reason might be that this activity is not according their strategy. Perhaps they feel that this market is not profitable enough – with low numbers of customers….

    * Also could you confirm if you said that the lots were all won by one local operator, or that there was only one operator per lot (but multiple operators)?

    So far we have had 13 separate areas under tendering process. In one case we got two bids from two operators (one national and one local) and in the rest 12 cases we got only one bid (local operator).

    * I noted that there were 1 to 3 lots per municipality and 14 municipalities under the Regional Council of North Karelia, yet in total North Karelia only 11 lots – does this mean that some municipalities did not take part?

    Look above. So we are still having a number of new tenders in a coming years in all municipalities. The key point is that without municipalities involvement this development is not possible. But they need assistant and expert help from regional council who has the resources.

    * Would it be possible to explain the reason for public funding being given to a specific telecom operator to build, own and operate the network within each lot, rather than different entities owning and operating the network?

    It is based on a public, open tender process, so all the operators had a chance to attend and give a bid but only this local operator was interested. This is a problem because there is no real competition.

    We do have some new ideas or pilot activities coming soon. We are seeking if so called co-operative solution would work out. In that model a group of village people could join together and give a tender and perhaps won the competition and after that they would build and own a very local part of the network. In our neighbour region there is some trial of such model and already some experiences of how it works. So far it has been successful. The co-operative owns this part of network and the services are provided by the operator.

    * Why are local telecom operators willing to wait longer for payback from projects?

    My assumption is that they are operating in their “own” major market areas from where they can get customers. They are only operating in certain limited areas, not nationally. Of course they must get the money back but I think their public “responsibility” or reputation is based on this activity. They are not so much stock market oriented.

    * With respect to the bottom up funding model that is used to connect households to the backbone, does the end user pay for the whole 2km connection, or just to some intermediate point (e.g end of the road)?

    Customer is paying the costs from home to the switch point or connector to the backbone for 2 km range or less if the house is closer to the backbone.
    Normally the network is planned so that houses are close (100-300 meters). Or at least this is the aim and normally houses are situated very close to the main road.

    * Following the fact that all of the lots were won by the single operator, is there now any broadband service competition or are all services provided by the one operator?

    According the state aid rules, there is a regulation that the owner of the network is obligated to hire the network for other service providers. Of course in the starting point the operator who is building the network is selling their own services at first, but later it is possible to supply services from other providers.

    * Please can I confirm that the EU approved the funding models on both projects?

    These are notified by the commission. The ministry of communication has applied this notification on behalf of all the Finnish projects.

    For the conclusion we are just now starting a new promotional/marketing project to inform/promote people living in rural areas/villages to take up this new high speed broadband.

    Our aim is to create demand and also give knowledge of what to do with high speed broadband

    Ystävällisin terveisin

    Jarmo Heiskanen
    tietopalvelupäällikkö / Manager of Information Services Pohjois-Karjalan maakuntaliitto / Regional Council of North Karelia Pielisjoen linna, Siltakatu 2
    FI-80100 JOENSUU
    GSM + 358 40 544 5671
    Puhelin / Phone +358 13 267 4700
    Faksi / Fax +358 13 267 4730
    jarmo.heiskanen @ pohjois-karjala.fi
    http://www.pohjois-karjala.fi/maakuntaliitto

  3. Thanks to Stefano Longano for posting this over on EBPII.

    It is certainly the best model, since we have to understand that the basic infrastructure (ducts and dark fiber) is a natural monopoly. It is economically inefficient to duplicate it.

    For electricity and gas it is well understood, politicians should understand that the same applies to the basic telecom infrastructure. You do not compete on the best fiber arriving at home, just on the best service running on that fiber.

    The only thing that is important, to foster competition on services, is that the infrastructure should be available to all operators at the same conditions. Public ownership ensures that there is no way for a vertically integrated operator to block competitors, as it is happening now with the copper network in the hands of the former monopolist.

    Another important thing is that basic network connection to each user should be available, as it is now with copper, available at the same cost regardless of geographic location.

    This is fundamental for basing the universal service on the new infrastructure. To this end the gains on rich areas should be used to cover the costs on other areas.

    This is now the big error that EU and national politics are making. The plan to leave to operators the coverage of rich areas, on the false assumption that in this way they are promoting competition. Then they will be forced to spend a lot of money to provide coverage in other areas, in particular rural ones.

    By having one public network allows to compensate revenues form profitable areas and non profitable areas. It is the only way to have a sustainable model that will not need public subsidy forever. There is always the problem, for a monopoly, on how to measure efficency. But it is no different than the problem of imposing tariffs on the tariffs on toll highways, or on the transport of gas and electricity.

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