31 (126) 2017
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Houses of glass – when fiction becomes reality

By Stanisław Dąbek, consultant and member of the Intellectual Property, Technology and Communications practice team at Dentons
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Stefan Żeromski wrote a pivotal novel about ethnic Poles from Siberia returning to their ancestral homeland after the Russian Revolution, in the belief there were fantastical 'houses of glass' in Poland.1

The houses symbolised prosperity, development and technological progress. Alas, the main protagonist soon discovers to his chagrin that the houses of glass are just a chimera – a made-up story told him by his dying father. Today, in 2017, the glass metaphor is taking on a wildly more positive twist.

Two years ago saw the roll-out of a comprehensive programme of building next-generation networks to provide modern telecoms services for Polish flats or houses, based overwhelmingly on glass and plastic fibre optics. A good revolution!

This November will see the beginnings of a second roll-out. Telecoms operators are set to receive subsidies worth 1 billion zlotys2 (c. €235m) to develop the next generation network. Following the last two competitions, the telecoms are already committed to building networks covering well over two million households (about six million Poles). To give you some idea of the scale of the investment, that’s like hooking up the whole of Scotland to the internet and then some.

The major players on the Polish telecoms market, Orange, Netia, Vectra and Inea took part in the previous competitions. The new feature they brought to the local market was without doubt Nokia's successful debut in terms of its alliance with the Infracapital investment fund (obtaining funding of over 500m złotys).

The Polish government will have to nimbly side-step a number of legal barriers before launching the third competition, which seeks to make the fibre optic dream a reality for all Poles, everyday internet users, city dwellers and rural areas alike. Challenges are likely to come from two sources: on the one hand from EU regulations on state aid and, on the other, from local regulations concerning the investment process and the provision of telecom services.

The basic principle of granting state aid to develop broadband networks is to ensure effective wholesale access to networks created using EU funds. Overseeing the implementation of the rules in Poland is the regulator – the President of UKE (the office of electronic communication). He has decided to publish ‘reference offers’, an important guideline for specifying access conditions – in particular the price conditions. Consultations are already under way as regards the conditions for wholesale access applicable to networks rolled out under the second and third competition for the construction and expansion of the broadband networks. A key challenge for the regulator will be to gauge the level of charges correctly and to define appropriate wholesale access products for wireless networks (if they take part in subsequent competitions).

Of particular importance for the telecom firms are the eligibility rules for expenditure funded by Europe, as they determine which outlays may be supported by the state, and which may not. Just maybe, the Ministry of Economic Development will decide to extend the scope of eligible expenditure in the third competition to cover expenditure related to the entire investment process. At present, certain costs, such as the purchase of telecoms equipment for the end user and spending related to the preparation of technical documentation, cannot be co-financed from the funds of Measure 1.1. of the Digital Poland Operational Programme.

It will be extremely difficult for the telecoms firms themselves to overcome the legal barriers related to the investment process, although in recent years there have been positive changes in the regulations concerning wired broadband networks (though the opposite can be said for wireless networks). On the other hand, great uncertainty still surrounds the updating of the Urban and Construction Code. The Ministry of Infrastructure and Construction has decided to start work on legislation to overhaul the Urban and Construction Code, which will hopefully speed up the construction process for modern fibre optic networks.

The challenge for the Ministry of Digitisation will be to construct competition conditions in such a manner as to include the participation of telecoms operators, who have thus far not committed to applying for the competition – it seems there is still some untapped potential among mobile operators to deliver major investments. That said, this group of telecoms operators has been carrying out intensive work related to the implementation of investment commitments under the 800 and 2,600 Mhz bandwidth auctions completed in 2015.  All will become clearer soon, as the competition documentation should be done and dusted within the next month and it will then be possible to assess how the telecoms market will react to the new rules.

Houses of glass. Almost every household in Poland should soon be connected to the internet. The phantasmagoria of a century ago is nearly within the reach of all. Not through building new glass-and-concrete Class A office buildings in central Warsaw, but by providing ultra-fast broadband in the areas that have been bypassed until now by the telecoms market.

1. “First Spring”, 1925, Warsaw.
2. PLN 1 090 000 000

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