National Operational Broadband Plan

NATIONAL OPERATIONAL BROADBAND PLAN

MINISTRY OF INFORMATION SOCIETY AND ADMINISTRATION

April 2019

DOCUMENT OBJECTIVE Republic of North Macedonia, being a candidate country for EU membership, is obliged to harmonise its national policies on electronic communications development with EU policies, in line with which an obligation was imposed to adopt a National Operational Broadband Plan (NOBP), which will be harmonised with the strategic objectives of the EU 2010 initiative on Digital Agenda for Europe1, as an umbrella strategy for information society development, and the EU 2016 strategy Towards a European Gigabit Society2 for 2025. Also, the development of the National Operational Broadband Plan took into consideration the EU recommendations and regulations on the development of the next generations of broadband networks, recommendations for using state aid in broadband development, EU 2018 strategy for enlargement with Western Balkan countries3, EU reports on the broadband market development, reports from international institutions on the electronic communications development in the region (World Bank etc.), reports and experiences of EU member states in using state aid for broadband development, etc. The National Operational Broadband Plan, succeeding the National Strategy for Development of the Next Generation of Broadband Internet, sets the national broadband4 targets that are to be achieved over the next period of time, and defines the measures and activities required for achieving those targets.

DEVELOPMENT, REVISION OF THE NATIONAL OPERATIONAL BROADBAND PLAN AND ACTION PLAN FOR ITS IMPLEMENTATION In order the prepare the National Operational Broadband Plan, in early January 2018 the Ministry of Information Society and Administration set up four working groups: - A working group for ensuring improved coordination in the process of mapping of the territory of the country with existing and planned future broadband networks by operators, - A working group for identifying the free capacities and their future use in existing electronic communication networks and facilities constructed with public funding, - A working group for defining the measures and activities required for introducing the 5G mobile technology, and - А working group for defining the draft measures for encouraging and increasing the interest among the citizens for using broadband. The working groups gathered representatives from state authorities and bodies, regulatory bodies, universities, municipalities, operators, economic chambers, public enterprises, private companies, etc. TAIEX technical assistance was also provided for the development of the National Operational Broadband Plan. A web page was launched (http://mioa.gov.mk/?q=mk/node/1313), where all suggestions and comments by all stakeholders, as well minutes from meetings, were posted. As part of the implementation of the NOBP, the Ministry of Information Society and Administration will conduct, every two years, revision of the implementation process, adjust the existing ones or introduce new measures based on the current situation in consultation with all stakeholders. After the adoption of the NOBP by the Government of Republic of North Macedonia, an Action Plan for implementation of the NOBP will be adopted.

1Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM(2010) 245 final, A Digital Agenda for Europe 2COM(2016) 587 3 https://ec.europa.eu/commission/sites/beta-political/files/communication-credible-enlargement-perspective-western-balkans_en.pdf 4http://mioa.gov.mk/sites/default/files/pbl_files/documents/strategies/Nacionalna_strategija_za_razvoj_na_sledna_generacija_shirok opojasen_internet_09.pdf 2

NATIONAL BROADBAND TARGETS Taking into consideration the broadband targets of EU5, the mapping that was carried out6 and the announced future investments by operators over the next three years, the national broadband targets of Republic of North Macedonia are as follows: - By the end of 2023, at least one larger city to be covered with 5G signal.

- By the end of 2025, the main corridors in accordance with the Treaty establishing the Transport Community on the basic and comprehensive road network in the country should be covered with an uninterrupted 5G signal.

- By the end of 2027, all towns in the country are covered with uninterrupted 5G signal.

- By the end of 2029, anyone can have the opportunity to access the internet through 5G with a minimum speed of internet access of at least 100 Mbps.

- By the end of 2029, at least 50% of the total number of household subscriber contracts across the country are for internet access of at least 100 Mbps.

- By the end of 2029, all households will have affordable opportunity to access a network that allows for a download speed of at least 100 Mbps, with a possibility for upgrade to Gigabit speed.

- By the end of 2029, all public institutions (schools, universities, research centres and other education institutions, healthcare facilities, ministries, courts, local self-governments and other state authorities and bodies) have symmetrical internet access with a speed of at last 1Gbps.

MEASURES AND ACTIVITIES FOR ACHIEVING THE NATIONAL BROADBAND TARGETS FOUR PILLARS: A. USE OF STATE AID B. ADDITIONAL MEASURES FOR ENCOURAGING THE USE OF ACCESS TO ULTRAFAST INTERNET C. IMPROVED LEGAL FRAMEWORK AND REGULATION D. 5G INTRODUCTION AND DEVELOPMENT PLAN

ANNEXES

- ANNEX 1: EU BROADBAND TARGETS - ANNEX 2: IMPLEMENTED MAPPING - ANNEX 3: SELECTION OF BROADBAND INFRASTRUCTURE - ANNEX 4: SELECTION OF AN INVESTMENT MODEL - ANNEX 5: SELECTION OF A BUSINESS MODEL - ANNEX 6: THE USE OF STATE AID FOR THE DEVELOPMENT OF BROADBAND NETWORKS

5 See Annex – EU Broadband Targets 6 See Annex – Implemented Mapping 3

A. USE OF STATE AID, INVESTMENT MODEL According to the European Commission (Digital Agenda for Europe), in order to achieve the broadband target of ensuring 30 Mbps speed of internet access, it has been estimated7 that EUR 60 billion of investments will be required, whereas for reaching the target of at least 50% of households having internet connections of above 100 Mbps up to EUR 270 billion will be necessary8.

Such investments are primarily made by the commercial investors. However, broadband targets defined with the Digital Agenda for Europe cannot be achieved without the support from public funding. Because of this, the European Commission called upon member states to use “public funding in accordance with the EU rules for competition and state aid”9, so as to achieve the broadband targets stipulated in the Digital Agenda for Europe.

In line with this, the purpose of using the state aid in the Republic of North Macedonia is to reach the national broadband targets i. . to achieve a higher level and a faster rate of coverage and use of broadband connections, compared to a situation without the state aid, thereby supporting greater access to services, higher quality of services and pro- competitive investments.

There are various ways for public bodies to be involved in supporting the development of broadband networks in the country. Depending on the broadband networks investment model, public bodies may have a different role in terms of implementation, operation, ownership, and broadband network management.

In general, the following investment models are most often represented: - Subsidizing an operator (granting non-refundable public funds) to upgrade its network. - Indirect investment: Privately managed municipal network (also known as concession model). - Direct investment: Publicly managed municipal network. In the Annex – Selection of an investment model, a brief overview of the specific investment models and their features is given (see Table 1).

The practice shows that if the implementation of a particular investment model has given positive effects in a particular country, this does not necessarily mean that the same effects will be achieved by implementing that same model in another country. Which investment model will be implemented in the country depends on the cultural and socio-economic situation, the medium and long-term development plans of the area in which the state aid should be used. Specifically for Republic of North Macedonia by applying the investment model - Direct investment: A publicly managed municipal network, in the long run, may be expected to achieve the national broadband targets set by this NOBP. This is so, particularly for the following reasons: - In the rural areas of Republic of North Macedonia, where most of the white zones are located, due to the process of population aging, immigration of the youth, lower education level, poor ICT skills of the population, larger percentage of small and medium enterprises, lower level of innovation, etc., broadband penetration may slow down, thus slowing down ICT penetration as well. Such circumstances could in most cases benefit the models with long-term investments (for instance, direct investment model, i. . public body managing the infrastructure), since they allow sufficient time to increase penetration, thus ensuring a gradual socio-economic impact.

7Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, European broadband: investing in digitally driven growth, COM(2010) 472 final. 8 Investment costs could be significantly lower depending of the reusability of the existing infrastructure and depending on the developments in the market, technology and regulation.. 9 See Annex – Using State Aid for Broadband Networks. 4

- Short-term investment models (such as a subsidy model for an operator, i. . granting non-refundable public funds to an operator to upgrade its network) are unlikely to achieve the medium-term rural development plans. Subsidising an operator may achieve short-term results and require lower amount of funding than, for instance, the direct investment model (public body managing the infrastructure), however, this model is less likely to be a driver for future stable investments, compared to the direct investment model, which ensures higher degree of earnings reinvestment, thus increasing the network coverage. Therefore, these short-term models may prove more expensive in the long run, especially when large areas need to be covered.

- According to the latest Report on Market Development of the Agency for Electronic Communications, the share of operators by number of active subscribers with fixed broadband access shows that of the total notified 92 entities, Makedonski Telekom has the largest share at 40,55%, followed by one. IP at 30,11%, Robi at 16,33%, Neotel at 1,46%, Inel International at 1,31%, Kabel Net at 1,31%, Multimedia Net at 1,16%, Cable Call at 0,95%, and others at 6,82%. Implementing the model of subsidising an operator envisages a number of obligations that the operator has to fulfil, and require serious financial and human resources. Taking into account the market situation, these resources may be provided by only few large operators in the country, which means that the implementation of this model puts the smaller operators in less favourable position, which is contrary to the general principle envisaging an investment model that will give equal opportunities to all operators in the country with regard to the use of state aid. Unlike this model, the implementation of the investment model direct investment: Publicly managed municipal network does not put certain operators in a more privileged position compared to the others, that is to say, it does not give advantages to certain operators.

- Taking into account the widespread availability on the territory of the whole country and the capacities of the existing fibre optic infrastructure built with public funds, it may be expected that its streamlining and consolidation by a single public body would ensure less public funds to be needed, and shorter deadlines to achieve the national targets set in this NOBP, compared to those that would be achieved by implementing another investment model.

- The public body that will build, manage and give for utilisation the constructed passive infrastructure (particularly the available fibre optic capacity) to operators for a certain fee, must operate following the non- profitability principle, which means that all fees received for provision of wholesale services for infrastructure access will be intended only to cover the network operating and maintenance costs. Eventually generate profit will be intended for development of existing or new capacities within the area.

- Operators that intend to use services of other data transmission operators must adapt to certain technologies and interfaces defined by the operator providing the services, unlike the case of leasing free fibre optics that guarantees the principle of technology neutrality, etc.

Taking into account the afore said, the public body that will be in charge of implementing the state aid, that is to say, that will build and manage the broadband infrastructure that will then be offered for utilisation to operators under non- discriminatory and transparent conditions, as per this NOBP, will be JP Makedonska Radiodifuzuja – Public Enterprise Macedonian Broadcasting (hereinafter: JP MRD), whose competences are defined in the Law on establishing the Public Enterprise Macedonian Broadcasting. The decision for selection of JP MRD is based on: - the necessary financial resources from the State Budget for expansion/transformation of the competencies of JP PE MRD are smaller in terms of establishing a completely new institution, - the previous experience of JP MRD in the field of telecommunications (especially wireless technology), in maintaining telecommunication facilities/infrastructure, knowledge of the country’s terrain, - the short deadlines set in national broadband targets, - the existing human, technical and spatial facilities, etc.

In order for JP MRD to be able to fulfil the obligations set forth in this National Operational Broadband Plan, it is necessary to expand its competencies and to increase the institutional capacities of JP MRD.

1. PREPARATORY PHASE

1.1. ESTABLISHING A NATIONAL BROADBAND COMPETENCE OFFICE - BCO

According to EU recommendations10, member-states should establish their national Broadband Competence Offices that will participate in the EU network of such bodies. The National Broadband Competence Office – BCO has to be an expert body supporting the investments in broadband infrastructure (especially in rural areas), by increasing their efficiency and efficacy. BCO is particularly important for the use of state aid for development of broadband networks, that is, for ensuring the optimal and most cost-efficient technical solution, which in the case of Republic of North Macedonia means state aid for covering the white zones with NGA infrastructure, development of national optical transport network with minimum public funding, maximum utilisation rate of the existing resources and existing infrastructure (both private and public), and ensuring their economic sustainability.

In line with this, and having in mind the EU recommendation and guidelines, BCO should in particular have the following competences: - monitor the implementation of the NOBP and other strategic documents and plans for broadband development in the country, as well as the fulfilment of the national broadband targets, - provide opinions and suggestions from a regulatory, legislative and organizational nature for the purpose of faster development of broadband, i. . of electronic communications in the country, - provide coordination, cooperation and institutional support to public institutions/enterprises, local self-government units in the development of plans/projects/studies on broadband development, as well as support in the implementation thereof, - provide opinions and advice in terms of technical solutions, selection of investment and business models for broadband infrastructure, - provide opinions and advice when preparing future strategies that are related to the broadband development in the country, - inform about the broadband development in the EU and in the Republic of North Macedonia, about the reduction of the broadband gap in comparison to EU, - cooperate and participate in the work of the BCO network of the European Union, etc.

Considering the aforementioned, and the role that BCO will have in the implementation of the NOBP, BCO members should be prominent experts with at least 10- year experience in areas relevant for the development of broadband networks.

The total number of BCO members should not be greater than nine. The BCO members shall be designated by the minister in charge of information society and administration. For its operation, BCO shall be responsible before the minister in charge of information society and administration. The Ministry of Information Society and Administration shall provide the administrative, technical, spatial and other necessary conditions for the operation of the BCO. The BCO should be set up through amendments and supplementations of the Law on Electronic Communications.

MEASURES: - Amendments and supplementations of the Law on Electronic Communications, so as to set up the BCO.

10 The EU Strategy for Enlargement with Western Balkan Countries recommends the BCO of the Republic of North Macedonian to take part in the EU network of such bodies.

1.2. MAPPING AND MONITORING THE IMPLEMENTATION OF THE ANNOUNCED PLANS/INVESTMENTS OF OPERATORS

The planned development of the NGA networks can be subject to changes, as the result of external factors (e. . change in market conditions, drop in the general purchase power of the population, etc.), but also as the result of internal factors – internal policies of operators, changes in development priorities, shift in the areas of interest for investing – giving up on investments in one area and redirecting the funds to another area that was initially not planned for development, etc.

For these reasons, in view of the successful implementation of the National Operational Broadband Plan, it is exceptionally important to ensure that a mechanism/tool is put in place for monitoring the realisation of the announced plans/investments of operators. At the moment, the tool that allows for sharing of information regarding the planned constructions is the Single Information Point implemented by AEC, but in practice it has been shown that this tool has not been sufficiently used and is frequently bypassed, and the operators submit their requests for constructing new networks directly via the website https://www.e-urbanizam.mk.

The image that has been created for the white, grey and black areas during the mapping process, based on data submitted by electronic communication networks operators, if not updated regularly, will soon become irrelevant and will no longer constitute a relevant information resource for designing projects for NGA network development. To avoid this, AEC rulebooks need to be amended, so as to oblige the operators to continuously report (quarterly) the changes in the existing, planned and constructed NGA infrastructure. Moreover, AEC should provide a tool, based on information available in the ETI base, that will automatically recalculate and publish the updated situation with white, grey and black areas.

The changes in the planned development of the NGA infrastructure in white zones will be taken into consideration up to the moment when the Terms of Reference will be defined for designing a project for covering a white zone with NGA infrastructure. The changes that would possible occur after the writing of the Terms of Reference will not be a reason to further change the Terms of Reference and/or the already designed project.

To this end, within 3 months upon adoption of the NOBP, and at the request by AEC, the operators will have to submit a specific plan for constructing of the announced NGA networks (announced during the mapping process), including the implementation stages, and specific evidence for the commencement of works.

In case the operators fail to submit the requested information within three months, the investment announced during the mapping process will not be taken into consideration and the zone’s initial colour will be changed. BCO should be informed about this.

If one year upon submission of the construction plan for the announced NGA networks and the specific evidence for commencement of works no progress has been made in the realisation of the announced NGA networks, the announced investment will not be taken into consideration and the zone’s initial colour will be changed.

MEASURES: - Amendment of AEC rulebooks regarding the operators' obligations to submit information. - AEC submits a request to the operators for their plans for construction of the announced NGA networks (announced during the mapping process), including the implementation stages, and specific evidence for the commencement of works. - AEC quarterly will update the white, grey and black areas in the country and publish them accordingly. - If necessary, by amending and supplementing the Law on Electronic Communications, competence of the Agency for collecting information from operators in order to update the white, grey and black areas in the country will be established.

1.3. DETERMINING THE ELIGIBLE GREY ZONES G1NGA (С1НГА) IN THE COUNTRY

A eligible [justified] grey zone G1NGA shall be deemed any grey zone G100/C100 in which there is one ultra fast NGA network of an operator, and there is no plan to develop another ultra-fast NGA infrastructure by another operator in the next three years, and fulfil the following additional conditions:

- There are no free optical fibres to the zone that can be used as an aggregation connection or such exist, but the price for their lease do not provide economically viable operation in the zone, and - In the next three years there are no plans to build an optical infrastructure up to the eligible grey zone G100 with the capacity and conditions mentioned before. In order to determine the existence of free optical fibres or plans for construction of optical infrastructure, the information from the Single Information Point of AEC (ETI) should be used. If no such information is available at the ETI, it will be deemed that there is no possibility of leasing free optical fibres, and there are no plans for building an optical infrastructure up to the justified Grey G1NGA zone.

Determining whether the existing prices for free optical fibres to the eligible grey zone G1NGA provide economically viable operation for an operator, will be done by consulting the operators.

If by April 2020, in a Grey zone G1NGA, as per the mapping carried out (see Annex: Conducted Mapping), the percentage of subscriber household contracts for ultra-fast internet accepted in that zone is less than 5% of the total number of subscriber contracts that contain an internet access service in the zone, said Grey zone G1NGA will be deemed as justified, if there is only one ultra-fast NGA network of an operator, and there are no plans to develop another ultra-fast NGA infrastructure by another operator in the next three years, that is, the additional conditions need not be fulfilled.

MEASURE: - JP MRD, in cooperation with BCO and AEC, will publish the White zones W100/W100 and the possible eligible grey zones G1NGA/G1NGA.

1.4. DETERMINING CENTRAL POINTS FOR WHITE ZONE W100 AND CENTRAL POINTS FOR ELIGIBLE GREY ZONES G1NGA

For any W100 White zone from a Target Area and a eligible grey zone G1NGA, a Central Point should be identified that will be optically linked to the data centres, that is, the NBON network nodes. The Central Point for the White zone W100 shall be connected to the fibre optic access infrastructure connecting the end users within the zone (households, public institutions, private legal entities, and free Wi-Fi points). The Central Point for a eligible grey zone G1NGA shall be connected to the fibre optic access infrastructure connecting: public institutions and free Wi-Fi points in the eligible grey zone G1NGA. The location of the Central Points should be where it will provide the most optimal and cheapest solution for implementation (for example, vacant premises of public institutions/enterprises, etc.). Central points will be defined by JP MRD in cooperation with BCO, AEC and the local self-governments.

MEASURE: - JP MRD, in cooperation with BCO, AEC and the local self-governments, upon adopting the NOBP, shall launch the process of defining the central points for each White zone W100, and the central points for each eligible grey zone G1NGA.

1.5. DEFINING TARGET AREAS WHERE STATE AID WILL BE USED FOR CONSTRUCTING ULTRA-FAST NGA INFRASTRUCTURE

In order to prepare the Study on the feasibility of NBON, it is necessary to determine the Target Areas. Target area shall comprise one or more neighbouring white zones W100 where state aid will be used for construction and development of ultra-fast NGA networks. The scope of an individual target area has to allow for operators in W100 white zones to have a profitable service provision for access to ultra-fast internet at expected retail prices for households. It is therefore of particular importance that operators should be involved in determining the target areas.

Target areas will be defined and all decision in relation to them will be made by JP MRD in cooperation with BCO and AEC.

The Council for Equal Regional Development of Republic of North Macedonia, the Council for Planning Region Development and ZELS (Association of Local Self-Government Units) should also be consulted when defining the target areas.

When defining the target areas, the following should be taken into account: - Demographic, social and economic situation in the W100 white zones; - Possible demand for services according to categories of users (households, private, public institutions), which can be supported with results from user surveys (if conducted); - Technological solution for covering a target area with NGA infrastructure, - Possible business model covering the target areas, - Expected retail monthly subscriptions for households in the target areas, expected monthly fees for the operators, in accordance with this NOBP; - Possible eligible grey zones G1NGA that are in or near the target area (whether conditions as eligible grey zones G1NGA) are met); - Locations of the NBON access points in the cities/towns/settlements for aggregation connection to the data centers in a target zone/white zone W100/eligible grey zone G1NGA;; - Central points for the white zones W100, central points for the eligible grey zones G1NGA;; - Existing broadband infrastructure and existing services; - Interrelation of regional and municipal strategic objectives, development documents with the benefit coming from construction of the ultra-fast NGA infrastructure; - Documents concerning the spatial planning at municipal level; - Planned and ongoing public investment projects; - Existing free fibre optic and other passive infrastructure that can be used to facilitate the setting up of a broadband network, including JP MŽ Infrastruktura, MEPSO, EVN Macedonia, etc; possible interested operators that would offer services in the white zones, etc.

JP MRD will publish the identified target areas on its website.

MEASURES: - JP MRD, in cooperation with BCO, AEC, and the operators shall launch the process of establishing the target areas in the country. - JP MRD will publish the established target areas on its website.

1.6. USING THE EXISTING FIBRE OPTIC INFRASTRUCTURE BUILT WITH PUBLIC FUNDS

The performed mapping of electronic communication networks built with public funds does not include a detailed analysis of the existing situation and the future plans concerning the optical infrastructure of MEPSO and JP MŽ Infrastruktura.

Optical infrastructure shall include: - Electronic communication conduits, which contain fibre optical cables and optical fibres; - Underground cable ducts; - Other infrastructure necessary for smooth functioning and use of fibre optic cables, optical fibres and underground cable ducts.

In order to ensure full implementation of the NOBP, a particularly to achieve the national broadband targets pertaining to public institutions, as well to implement other strategic documents of the Government pertaining to the development of the information society, it is necessary to give the free optical fibres of MEPSO, JP MŽ Infrastruktura, and other entities owning fibre optic infrastructure built with public funds to JP MRD for a period of not less than 30 years to develop the NBON, as per this NOBP.

To this end, JP MRD, in cooperation with BCO, MEPSO, JP MŽ Infrastruktura and other entities owning fibre optic infrastructure built with public funds, will make an Analysis of the existing situation of the fibre optic infrastructure in the country built with public funds, and the future plans to use it, particularly in relation to fibre optic cables and optical fibres, both from the aspect of available capacity and from the aspect of their quality (especially of the fibre optic cables and the optical fibres).

The analysis should determine which fibre optic infrastructure of MEPSO, JP MŽ Infrastruktura and other entities that own fibre optic infrastructure built with public funds can be given for use to JP MRD.

If necessary, the Government, upon request of JP MRD, will establish an inter-ministerial Working Group which will determine, within six months, the free capacities in the underground cable ducting of the enterprises where the state owns a share. ZELS will also participate in the working group.

JP MRD should use the optical fibres only for the purpose of developing the NBON, which is for the purpose of implementing the measures and activities in accordance with this NOBP.

The Analysis should be made within 6 months from the adoption of the NOBP, and submitted to the Government for approval.

JP MRD will annually inform the minister in charge of information society and administration about the situation and the utilisation rate of the fibre optic infrastructure of MEPSO, JP MŽ Infrastruktura and other entities owning fibre optic infrastructure built with public funds.

For that purpose, MEPSO, JP MŽ Infrastruktura and other entities owning fibre optic infrastructure built with public funds shall cooperate with JP MRD and upon request provide the requested data.

Figure: Existing optical networks constructed with public funding and white zones - W100 MEASURES: - Government of Republic of Nоrth Macedonia will set up an inter-sectoral working group with representatives from JP MRD, BCO, MEPSO, JP MŽ infrastruktura and other entities owning fibre optic infrastructure built with public funds for the purpose of preparing the Analysis of the existing situation with fibre optic infrastructure and future plans concerning the development and use thereof, and its possible use for constructing and developing the NBON. The analysis should be prepared within six months from the date of adoption of the NOBP. - JP MRD will annually inform the minister in charge of information society and administration about the situation and the utilisation rate of the fibre optic infrastructure of MEPSO, JP MŽ Infrastruktura and other entities owning fibre optic infrastructure built with public funds.

1.7. MAPPING THE AVAILABLE CAPACITIES IN THE UNDERGROUND CABLE DUCTING OWNED/MANAGED BY OPERATORS

The use of the available underground cable ducting owned or operated by the operators when constructing the NBON, as well as when constructing the ultra-fast NGA access infrastructure in the white zones, can significantly reduce the required public funds. Therefore, it is of particular importance that AEC regularly (and especially during the Preparatory Phase for Implementation of this NOBP) updates the data available via ETI, pertaining to the available capacities in the underground cable ducting owned or operated by operators. 11

1.8. LAYING THE CABLE INSTALLATIONS WHEN CONSTRUCTING NEW OR RECONSTRUCTING THE EXISTING ROADS

When constructing new or reconstructing the existing roads in the country, it is especially important to set up cable installations, i.e. underground ducts (pipes) and cable shafts, which will be used for installation and protection of the electronic communication cables (especially the fibre optic cables ). It is of particular importance to ensure the coordination of the construction works when deploying the cable installations, in accordance with the Law on Electronic Communications, so that the operators could plan their future investments in a timely manner. This will not only avoid duplication of networks, it will also ensure competition development, cost savings, better working conditions, which as a final result will provide better services to the citizens at affordable prices. This can be particularly important for the construction and development of NBON, but also for the development of new technologies, such as 5G. In that direction, the deployment of underground cable ducting along the road routes determined by the Treaty establishing the Transport Community can significantly help achieve the national broadband target:By the end of 2025, the main corridors in accordance with the Treaty establishing the Transport Community on the basic and comprehensive road network in the country are covered with an uninterrupted 5G signal. Laying the underground cable ducting should be done during construction of new or reconstruction of the existing roads that are under the jurisdiction of the local self-government. In order to ensure co-ordination, it is necessary to inform the AEC in a period that cannot be shorter than 60 days from the date of works commencement for the underground cable ducting, in order to place this information on AEC’s web site and update the ETI. For that purpose, amendments and supplementations to the laws and bylaws related to construction of public roads are necessary. MEASURES: - Ministry of Transport and Communications in cooperation with the Ministry of Information Society and Administration, AEC, the Public Enterprise for State Roads, and the othe competent public institutions, upon adopting the NOBP, will commence a procedure to amend the existing laws and bylaws in order to ensure the obligation to lay underground cable ducting when constructing new or reconstructing the existing roads. - When constructing new or reconstructing the existing basic and comprehensive roads in the country, as per the Treaty establishing the Transport Community, it is necessary lay cable installations, i. . underground ducts (pipes) and cable shafts, which will be used for installation and protection of the electronic communication cables (especially the fibre optic cables ). - When constructing new or reconstructing the existing roads in the country that are under the jurisdiction of the local self-government, cable installations, i. . underground ductls (pipes) and cable shafts have to be set up, which will be used for installation and protection of the electronic communication cables (especially the fibre optic cables ).

1.9. MAPPING PUBLIC INSTITUTIONS, LOCATIONS FOR FREE WI-FI INTERNET ACCESS

Before starting to draft the NBON Feasibility Study, JP MRD will provide a mapping platform for: a. List of public institutions (grouped by type and settlement), which will be connected to the NBON network nodes;

b. List of locations that will provide free wireless Wi-Fi Internet access in the municipalities (parks, etc.), which will be connected to the NBON network nodes. Public institutions, educational institutions (schools, universities, libraries, research centres, etc.), healthcare institutions, ministries, courts, financial institutions, local self-government units, and other state bodies and authorities. When compiling the list of public institutions, the existing and planned interconnection of the public institutions built with public funds has to be taken into account. The Government of Republic of North Macedonia, upon proposal by JP PE MRD, will approve the list of public institutions (grouped by type and settlement), which will not be connected to the NBON network nodes. In order to establish the micro-location of public institutions for which symmetrical Internet access at 1 Gbps needs to be provided, JP MRD should provide a GIS platform and a dedicated application that will enable the mapping of these institutions by the competent ministries, for example Ministry of Health, Ministry of Education, Ministry of Finance, Ministry of Justice, Ministry of Local Self-Government, etc., thus guaranteeing the best data accuracy.

Figure: Block diagram of the GIS platform of JP MRD with an IT system for mapping of public institutions The list of locations for providing free wireless Wi-Fi internet access in the municipalities that will be connected via fibre optic to the NBON network nodes shall be prepared by JP MRD in cooperation with BCO, and the local self- governments, the planning regions, and ZELS. MEASURES: - JP MRD should provide a platform for mapping public institutions.

a. JP MRD will provide a platform for mapping of: List of public institutions (grouped by type and settlement), which will be connected to the NBON network nodes; b. List of locations that will provide free wireless Wi-Fi Internet access in the municipalities (parks, etc.), which will be connected to the NBON network nodes. - JP MRD will submit to the Government of Republic of North Macedonia a draft list of public institutions (grouped by type and settlement), which will not be connected to the NBON network nodes.

1.10. MAPPING THE USE OF THE INTERNET ACCESS SERVICE, BY SETTLEMENT

In order to monitor the broadband use and development in the country, it is necessary for AEC to map the use of the internet access service (in the residential areas in the country), especially regarding: - the use via fixed and mobile access, - provided speed (download/upload), - technology used.

AEC should regularly update the previous data and publish them accordingly (as tables and graphs). Within three months from the date of the adoption of this NOBP, AEC should have mapped the use of the internet access service, by settlement.

MEASURE: - AEC will map, publish and update twice a year the use of the internet access service by settlement. - At the moment when an address registry is established at state level, the obligation of the operators to map the use of the internet access service by user micro-location shall be expanded.

1.11. ROLE OF LOCAL SELF-GOVERNMENTS IN BROADBAND DEVELOPMENT, THEIR INCLUSION IN THE EARLY STAGES The role of the local self-government in the country’s broadband development is crucial. Their role is particularly important because of: - Ensuring the rapid issuance of the necessary building permits, - The use of municipal property for implementation of state aid projects, - Ensuring the coordination of construction works (in accordance with Article 68 of the Law on Electronic Communications), - Laying the underground cable ducting when constructing new or reconstructing the existing roads under jurisdiction of the local self-government, which will be used for installation and protection of the electronic communication cables (especially the fibre optic cables ), - Efficient use and updating of the AEC's Single Information Point (ETI). It should be taken into account that the public institutions can be the "main users" of broadband services. In this regard, local self-governments should have the main role in encouraging the demand for new electronic services. Any planned construction of broadband infrastructure, 60 days before the commencement of construction, must be posted by JP MRD on its website, as well as reported to the local self-government, AEC and BCO. Activities to raise awareness of the broadband importance, as well as the importance of the local self-government for broadband development are necessary, especially about the use of ETI. In this context, at the beginning of the process, AEC will undertake promotion activities about: - the significance of broadband development for the whole society, - the importance of the local self-government for the broadband development.

MEASURES: - MISA in cooperation with the Ministry of Transport and Communications will continuously organise meetings with the mayors of the local self-governments on their importance for the broadband development, that is, for the information society, as well as their importance for the implementation of the NOBP, particularly with regard to issuing the necessary permits, approvals, etc. for construction of broadband networks, both by JP MRD and by the operators. - Upon the adoption of the NOBP, AEC should start holding meetings with the mayors of the local self- government officials, and training the employees in terms of using the ETI. - Upon the adoption of the NOBP, AEC will undertake promotion activities about: o the significance of broadband development for the whole society, o the importance of the local self-government for the broadband development. - AEC will, within 6 months from the date of adoption of the NOBP, in cooperation with BCO and JP MRD, and in consultation with the local self-government units, draft and publish a Plan for implementation of broadband promotion activities. The Plan will include, inter alia, the types of activities, target groups and specific time frames.

1.12. INVOLVING THE OPERATORS IN THE EARLY STAGE

It is essential to identify operators who would be interested in providing services in the target areas.

Close cooperation with the operators will help maximize the market benefits in the target areas.

In that context, prior to the preparation of the NBON Development Project, that is, the start of constructing the NGA infrastructure/networks in the target areas, it is necessary to have early consultations with the operators in relation thereto, so that they are timely informed and may prepare appropriate business solutions. MEASURE: - JP MRD in cooperation with BCO and AEC, even before the preparation of the NBON Feasibility Study and the construction of the NGA networks in the target areas, will start consultations with the operators. JP MRD shall notify the Minister competent for development of the information society and administration about the conducted consultations.

1.13. MONITORING THE ACHIEVEMENT OF THE NATIONAL BROADBAND TARGETS

BCO in cooperation with AEC and JP MRD will monitor the fulfilment of the national broadband targets and publish it on its website. On its website, BCO will shows the development of the broadband market in Republic of North Macedonia in relation to the EU broadband market, according to DESI (Digital Economy and Society Index)11.

MEASURE: BCO on its website will semi-annually present: - the achievement of the national broadband targets, - the development of the broadband market in Republic of North Macedonia in relation to the EU broadband market, according to DESI.

11 https://ec.europa.eu/digital-single-market/en/connectivity 15

2. STATE AID UTILISATION

2.1. CONSTRUCTION AND DEVELOPMENT OF A NATIONALBACKHAUL OPTICAL INFRASTRUCTURE / NETWORK (NBON)

2.1.1. DEFINING THE NATIONAL BACKHAUL OPTICAL INFRASTRUCTURE/NETWORK

In order to achieve the national broadband targets set, it is necessary to build and develop a National Backhaul Optical Infrastructure/Network (NBON), which will include: A. In order to deploy the passive optical infrastructure that will connect the NBON access points with the centres of the target areas/central points for white zones W100/central points for eligible grey zones G1NGA (hereinafter: backhaul connections), where the operators by leasing free optical fibres therefrom will provide backhaul connections for their backbone networks to the access networks in the areas, in order to provide ultra-fast internet access services for the end users, as per this NOBP.

B. Connecting public institutions and locations with free Wi-Fi internet access (free Wi-Fi points) to the NBON's network nodes. Deploying the optimum passive NBON infrastructure between the defined points that will serve as an backhaul connection for operators is a prerequisite, that is, a basic infrastructure resource needed to ensure the achievement of national broadband targets, or the implementation of this NOBP. It is important to emphasize that the operators will not be leased to other free optical fibres from the NBON, except the free optical fibres from the previously emphasized backhaul connection. Backhaul connections should be designed in such a way so as to ensure that a larger number of operators can access the target areas/white zones W100 /eligible grey zones G1NGA. Backhaul optical connection will not be deployed if, according to the ETI information and/or in consultation with the stakeholders, the following has been determined: - There are free optical fibres that can be used as a backhaul optical connection to the areas and the prices for leasing them in provide cost-effective option for the operator to provide ultra fast Internet access to the area’s end-user, or - Construction of optical infrastructure has begun up to the area with capacities and conditions that will meet the afore said. Bearing in mind that backhaul connections will be built with public funds, and then used by operators in order to provide access to ultra fast internet access in these areas via the NGA access networks, the construction and operation of these networks should be in accordance with the state aid rules. In order to guarantee the principle of technological neutrality when providing the backhaul connection, active network equipment will not be deployed at the termination points of the backhaul connection, i. . the provision of backhaul connection will be based on leasing the free dark optical fibres from JP MRD. Unlike constructing the NBON passive optical infrastructure that will be used by operators as backhaul connection, and which in formally legal sense will include the use of state aid, connecting the public institutions do not include state aid, taking into account that this connection will provide services for the own needs of the public institutions (does not include economic activities as per the state aid rules). If the needs of the public institutions (for which it is necessary to provide symmetrical internet access at 1 Gbps) are taken into account within the NOBP, another transport optic network for connecting public institutions will have to be

16 developed simultaneously with the development of backhaul connection network, since the required speed will have to be provided solely via fibre optic network. It is necessary to designate a body by the end of 2019 that will specifically coordinate the access to capacities at the national level, the future development of broadband connections to the NBON for the public institutions, etc. according to their needs and future plans. The investment model for backhaul connections: Direct investment - Publicly managed network12. Construction, development, maintenance and management of the NBON shall be the responsibility of JP MRD. Government of Republic of North Macedonia shall provide the necessary funds for constructing the NBON. MEASURE: - By the end of 2019, a national body will have to be designated that will specifically coordinate the access to capacities at the national level, the future development of broadband connections to the NBON for the public institutions, etc. according to their needs and future plans.

2.1.2. NBON FEASIBILITY STUDY Construction and development of NBON should be based on an approved NBON Feasibility Study, which in addition to establishing the technical recommendations and properties of the national backhaul optical network (topology, requisite fibre optic cables, optical fibres, properties, network nodes, other requisite physical infrastructure, site, etc.), and utilisation of the existing phycial fibre optic infrastructure, requisite funding, etc., it should also envisage connecting the NBON network nodes to the afore mentioned entities/areas (white zones W100, grey zones G1NGA, public institutions and sites for free Wi-Fi internet access). JP MRD, in cooperation with BCO, shall draft the NBON Feasibility Study. While drafting said Study, it is necessary to include AEC, state bodies and authorities, local self-governments, Council for Equal Regional Development of Republic of North Macedonia, Council for Planning Region Development, and ZELS, and can also use external expert assistance. The feasibility study shall be adopted by the Government within 30 days from the date of its receipt. For the purpose of developing the design projects necessary for construction and development of NBON, according to the Feasibility Study, JP MRD shall announce public calls for selecting a project designer for each region in the country. JP MRD should obtain all necessary permits, consents and approvals for construction of NBON, after which public calls for selection of companies to build the NBON will be published. JP MRD, in its regular Opeartion Reports submitted to the Government, shall present the degree of implementation of the NBON Feasibility Study. JP MRD will send the status of the NBON construction and development to BCO and AEC, and publish it on its website. The complete construction of the NBON and the envisaged interconnection of the NBON network nodes to the entities/areas has to be completed by JP MRD not later than 2029. MEASURES: - JP MRD will start the drafting of the NBON Feasibility Study in cooperation with BCO. - NBON Feasibility Study shall be adopted by the Government of Republic of North Macedonia. - JP MRD shall announce public calls for selecting a project designer to draft the necessary construction projects for each region in the country. - JP MRD shall obtain all necessary permits, consents and approvals for construction of the NBON.

13 They should be sufficiently big so that they can serve several cable networks point-to-several-point and point-to-point solutions.

- JP MRD shall announce the public calls for selection of companies to build the NBON. - JP MRD will publish the NBON construction and development status on its website.

2.1.3. ENSURING INTERNET ACCESS Operators should provide for the public institutions symmetric internet access service of at least 1Gbps. MARnet shall be the competent institution for providing symmetric internet access service of at least 1Gbps to the educational institutions. Free Wi-Fi internet access for the end-users shall be provided by the operators based on a signed contract. The free Wi- Fi internet access should be with a limited use duration for each end user. As a rule, the site for free Wi-Fi internet access in the white zones W100 should be at the facility where the area's central point is located.

2.1.4. MAIN PILLARS FOR DRAFTING THE NBON FEASIBILITY STUDY It is essential that the NBON Feasibility Study provide the optimal technical solution, which will be as cheap as possible and as simple as possible for implementation (will provide optimal use of the state aid), and will contribute to acceptable wholesale prices for the operators, which will in turn provide affordable retail prices for the end users. In order to achieve the above, it is necessary for the Feasibility Study to be based on: i. Maximum utilisation of the existing available fibre optic infrastructure of JP MŽ Infrastruktura, MEPSO, and other entities that own fibre optic infrastructure built with public funds; ii. Maximum utilisation of the existing passive physical infrastructure; iii. Intensifying the coordination processes for the construction works, in accordance with the Law on Electronic Communications; iv. Utilisation of the available vacant premises of public institutions, in accordance with this NOBP; v. Deployment of new optical fibre optic cables should be, as a rule, in underground cable ducts, and overhead lines in cases where it is the technically and economically more acceptable solution; vi. Wireless networking of the network nodes, the public institutions, and the free Wi-Fi access points, in cases where it is the only technically and economically most affordable solution; vii. Backhaul connection to the data centres of the target area or the central point of the eligible grey zone G1NGA should exist from at least two NBON access points from different cities/settlements; viii. Backhaul connection to the data centres of the target areas/central points of white zones W100/central points of eligible grey zones G1NGA should be designed so that at least three operators can lease in available optical fibres thereto. For the monthly fee that the operator will pay to the account of JP MRD, according to this NOBP, it will be able to use two optical fibres; ix. Provision of spare capacities in the cable ducting13; x. Provision of spare optical fibres; xi. Minimum disruption of private real estate. In order to ensure the lowest possible price when procuring fibre opric cables and other equipment, which may significantly impact the requisite public funding, the price for utilisation of specific capacities of the infrastructure built, and finally achieve the expected retail prices for the citizens, JP MRD must conduct as few public procurement procedures as possible. To that end, in an ideal case, JP MRD should announce a single public procurement for the entire quantity of cables and other necessary equipment (both for NBON and for the NGA access infrastructures in the target areas) with a delivery schedule of several years.

13 They should be sufficiently big so that they can serve several cable networks point-to-several-point and point-to-point solutions.

2.1.5. NBON NETWORK NODES The NBON Feasibility Study should define the NBON network nodes, which: - will represent NBON access points for the operators, - will link public institutions, free Wi-Fi internet access sites, target areas/white zones W100/eligible grey zones G1NGA, - other network nodes that do not belong to those mentioned previously. The NBON Feasibility should envisage at least one NBON access point in each city. The NBON network nodes shall be managed by JP MRD. The list of network nodes is managed and updated by JP MRD. JP MRD shall provide site information to the interested operators, as follows: - on the NBON access points where the operator will be able to lease in available optical fibres from NBON in order provide backhaul connection to the data centres of the target areas/central points of the white zones W100 /central points of the eligible grey zones G1NGA, - on the data centres of the target areas/central points of the white zones W100 /central points of the eligible grey zones G1NGA where operators will have the opportunity to install their active equipment, - on the data centres for NGA connections to the public institutions where operators can provide services thereto, - on the data centres for NGA connections to free Wi-Fi internet, from where operators can provide internet access services. NBON network nodes should be located in infrastructure equipped premises (co-location premises), where active network equipment (data centres) may be installed. The co-location premises, apart from the optical distribution frame (providing flexible access and cross-connecting the optical fibres), should be equipped with power supply and the necessary air conditioning for which JP MRD will be in charge. Within the co-location premises intended for connecting the public institutions, there should be option for them to set up their own active network equipment and to be able to maintain it. As a rule, NBON network nodes should be located at the available premises of public institutions/enterprises. To this end, JP MRD will consult and cooperate with the local self-governments units. MEASURES:

- JP MRD will compile a list of public institutions where NBON network nodes can be located, and it will submit it to the Government for adoption.

2.1.6. PRIORITY IN CONNECTING THE NBON NETWORK NODES Priority in the process of connecting the network nodes and the entities/areas should be put on the public institutions that manage critical information infrastructure, the connections of the universities and the white zones W100.

2.1.7. ENSURING WHOLESALE ACCESS TO THE NBON INFRASTRUCTURE JP MRD will provide the operators leased NBON available optical fibres services in order to ensure backhaul connections to their backbone networks from the NBON access point to the data centres of the target areas/central point of white zones W100/central points of eligible grey zones G1NGA, and to provide services to end users. JP MRD may not provide leased NBON available optical fibres, beyond the previously stated. Wholesale prices/fees for leased NBON available optical fibres are specified in Chapter 2.2.7 (see below: Expected retail and wholesale prices/fees).

Apart from wholesale leased available optical fibres services, JP MRD may also provide to the operators, in order for them to provide said backhaul connections, wholesale services for internet access and use of other available NBON passive physical infrastructure14, at prices determined by JP MRD in cooperation with AEC. These wholesale prices shall be established in accordance with the EU rules for broadband state aid15. The information on the available optical fibres and capacities that the operators may use according to the afore mentioned shall be published by JP MRD. In order to use the available optical fibres and/or wholesale access services and use of other passive physical infrastructure, the operators shall enter into a Contract with JP MRD for a period not exceeding 5 years. Contracts should contain the appropriate mechanisms to protect the rights of operators. It is particularly important that the contracts are based on the principle of transparency and non-discrimination, and in this context, JP MRD shall submit to AEC the signed contracts within seven days from the date of signing. Within 30 days from the date of signing the contract, AEC shall present the use of available optical fibres/other physical infrastructure on the ETI. Each operator shall be entitled to have access to any contract that has been previously signed. The pricelist shall be published by JP MRD on its website. MEASURE: - The services pricelist shall be published by JP MRD on its website.

2.1.8. CONDITIONS FOR LEASING the NBON AVAILABLE OPTICAL FIBRES FOR BACKHAUL CONNECTION Leasing the NBON available optical fibres by operators in order to ensure backhaul connections to their backbone networks from the NBON access point to the data centres of the target areas/central point of white zones W100/central points of eligible grey zones G1NGA, may be allowed only if the operator will use them for provision of ultra-fast internet access in said area. Additional condition for leasing NBON available optical fibres for backhaul connection of data centres of target areas or of central points of white zones W100 is for the operator to provide ultra-fast internet access to the households therein at the expected retail prices set in this NOBP (Chapter 2.2.7: Expected retail and wholesale prices/fees). It is not allowed to use leased optical fibres for further data transfer outside the area/zone. Overseeing the fulfilment of the afore said shall be performed by JP MRD. The operator, via the leased optical fibres, will be able to provide other public electronic communication services only in that area/zone.

2.2. COVERING THE WHITE ZONES W100 WITH ULTRA-FAST NGA INFRASTRUCTURE BY WAY OF STATE AID

2.2.1. INVESTMENT MODEL

14 For example, underground cable ducting. 15 See Annex – Using State Aid for Broadband Networks. 20

Investment model16 for covering the white Zones W100 with an accessible ultra fast first-mile NGA infrastructure: Direct investment - Publicly managed network. The construction, development, management and maintenance of the first- mile infrastructure in the white zones W100 shall be responsibility of JP MRD.

Covering all white zones W100 with first-mile NGA access infrastructure by JP MRD should be completed no later than 2029.

2.2.2. SELECTION OF INFRASTRUCTURE The first-mile access infrastructure17 in the white zones W100 should be based on optical fibre connectivity, in order to meet national broadband targets. The installation of fibre optic cables for the first-mile access infrastructure should, by rule, be in underground cable ducts, and overhead lines along the pillars for the power transmission lines, if possible, and when installation in underground cable ducts is not an option. Wireless connectivity should be used only in cases where it is the only technically and economically acceptable solution.

2.2.3. END USERS IN THE TARGET AREAS AND CONNECTION THEREOF

End users in a target area are as follows: - Households. First-mile infrastructure is provided by JP MRD upon request of a particular household and signing a contract with an operator for providing broadband access service. The internet access speed should provide download of at least 100 Mbps, with the option of upgrading to gigabit speed at the expected retail price. - Private legal entities. First-mile infrastructure is provided by JP MRD upon request thereof and signing a contract with an operator for providing broadband access service. - Educational institutions. First-mile infrastructure of educational institutions shall be provided by JP MRD in accordance with the NBON Feasibility Study, and according to the List of Public Institutions (grouped by type and settlement), which will be connected to the NBON network nodes. They should be provided symmetric internet access with speed of at least 1Gbps. MARnet shall be the competent institution for providing symmetric internet access. - Other public institutions. First-mile infrastructure for other public institutions shall be provided by JP MRD in accordance with the NBON Feasibility Study, and they should have symmetric internet access with speed of at least 1Gbps. The broadband access service of public institutions shall be provided by an operator by way of a signed contract. - Free Wi-Fi points. First-mile infrastructure shall be provided by JP MRD in accordance with the NBON Feasibility Study. Operators shall provide free Wi-Fi internet access for citizens by way of signed contract. First-mile infrastructure on behalf of JP MRD shall be deployed by a company selected through a public call, which must not have any connection with any telecommunication operator. 2.2.4. DRAFTING A FEASIBILITY STUDY ON COVERING A TARGET AREA WITH NGA ACCESS INFRASTRUCTURE JP MRD, in co-operator with BCO, shall draft a Feasibility Study on covering a target areas with NGA access infrastructure.In addition to setting the technical recommendations and properties of the access infrastructure (topology, technology, requisite optical fibres, optical fibres, properties, central points, other requisite physical infrastructure, sites, etc.), use of the existing physical fibre optic infrastructure, the requisite funding, etc, the Feasibility Study should envisage connections to the previously set end user.

16 See Annex – Selection of Investment Model. 17 See Annex – Selection of Infrastructure. 21

During the preparation of the Study, cooperation with AEC, state bodies and authorities, and local self-government units shall be necessary, and external expert assistance may also be used. It is essential that any feasibility study on covering a specific target area with NGA infrastructure provides the optimal solution for constructing and developing the NGA access infrastructure (may have a local backhaul fibre optic NGN infrastructure), in order to make its implementation as cheap and as simple as possible, which will ultimately ensure achieving the expected retail prices for end users. In this regard, the Feasibility Study should identify the optimal site for the central points and the network nodes of the local backhaul NGN infrastructure (if any) in the white zones W100. Accordingly, they should be located in public institutions' premises (if possible). The feasibility study shall be adopted by the Government within 30 days from the date of its receipt. For the purpose of developing the design projects necessary for construction of the access NGA infrastructure in the targer area, according to the Feasibility Study, JP MRD shall announce a public call for selecting a project designer. JP MRD should obtain all necessary permits, consents and approvals for construction of the access NGA infrastructure, after which public call for selection of companies to build it will be published. In its regular reports on its operation submitted by JP MRD to the Government, the former shall present the implementation degree of the access NGA infrastructure in the target area. JP MRD will send the development status of the access NGA infrastructure in the target area to BCO and AEC, and publish it on its website. MEASURES: - JP MRD, in co-operator with BCO, shall initiate the process for drafting the Feasibility Study on covering a target area with NGA infrastructure. - The feasibility study on covering a specific target area with NGA infrastructure shall be adopted by the Government of Republic of North Macedonia. - JP MRD shall announce a public call for selecting a project designer to develop the design projects necessary to build the access NGA infrastructure in the target area. - JP MRD shall obtain all necessary permits, consents and approvals for construction of the access NGA infrastructure in the target area. - JP MRD shall announce public calls for selecting companies to build the access NGA infrastructure in the target area. - JP MRD will publish on its website the development status of the access NGA infrastructure in the target area.

2.2.5. NEW INVESTMENTS OF OPERATORS IN WHITE ZONES W100 AND IN THE ELIGIBLE GREY ZONES G1NGA

Operators will be able to monitor the construction of NBON networks that will serve as backhaul connections for operators, thus being able to plan their future investments in a timely manner.

The construction of NBON networks that will serve as backhaul connections for operators may be an incentive for operators to decide and invest in access NGA infrastructure in the white zones W100 in a target area or in the eligible grey zones G1NGA.

For these reasons, prior to the preparation of a Feasibility Study on covering a specific target area with NGA infrastructure, the white zones W100 in the target area, i. . the eligible grey zones G1NGA should be verified.

2.2.6. PUBLIC DEBATE ON COVERING A TARGET AREA WITH ACCESS NGA INFRASTRUCTURE AND CONSULTATION WITH OPERATORS, SELECTION OF BUSINESS MODEL Prior to starting the preparation of a Feasibility Study on covering a specific target area with NGA infrastructure, JP MRD, in cooperation with the BCO, the local self-government and AEC, should hold a public debate and consultation with the operators. The purpose of the public debate is to inform the public about the project for covering the target area. The following issues shall be particularly addressed during the public debate: - Possibility for financial assistance in the form of subscription payment for the first year of a signed subscriber contract for access to ultra fast Internet for households in the white zones with total income lower than the monthly average salary paid at the state level, - Expected retail monthly subscription fee for households for providing access to ultra fast internet, - Relation between the municipal strategic objectives and the benefit arising from construction of the ultra-fast NGA infrastructure, - Development-related documents of the local self-government (including documents related to spatial planning), - Possibility to use the existing physical infrastructure of operators and other legal entities (private and public), - Timeframe for implementation of the project design, - Methods for service charging (JP MRD, operator or third party), - Timeframes for organized connection of end users, possible connection fees within and outside the period when organized connecting will be carried out, etc., - Submitting an intention to show interest for connection, method of delivering the intention, etc. Within 45 days of the start date of the public debate, households and private legal entities should submit an intention to connect to the access NGA infrastructure that will be set up by JP MRD. As per the submitted intention to connect, the interested households and private legal entities will confirm that they will sign a subscriber contract for a period of at least two years, which will include service providing ultra fast internet access and connection fees will be paid on JP MRD’s account, fees agreed upon during the public debate, which may not be higher than the price households will pay for two months of ultra fast internet in a white zone as per the NOBP (these funding paid will be deemed as paid portion of the monthly service fee for ultra fast internet). Within 5 days from the expiry of the period for submission of the intention to connect with the access NGA infrastructure, JP MRD will announce on its website the number of interested households and private legal entities in the target area. In order to ensure the consultations with the operators, AEC, after the public call, i.e. after the period for showing the intention to connect, should submit to the operators a questionnaire that specifically addresses the following issues:

- Colour verification in the white zones W10 0 in the target area and the eligible grey zones G1NGA; - ; - Interest in providing access to ultra fast internet in the eligible grey zonesG1NGA; - Existing broadband infrastructure and other available physical infrastructure; - Interest of the operator for using the backhaul NBON network for access to the target area/white zone W100/eligible grey zone G1NGA; - Selection of a technological solution, method of deploying the access infrastructure; - Proposal business model for covering the target area, maximum amount of fees for operators, depending on the business model; - If a business model proposing selection of one operator by public procurement, who should deploy the active network equipment in all data centres in the target area, the conditions for selection of an operator, the contracts that operators will enter into with JP MRD, depending on the Business model, and in relation to the use of the first mile access fibre optic infrastructure, use of optical fibres for backhaul connection or for access to the active network infrastructure deployed by JP MRD at the data centre of a single target area/white zone W100 /eligible grey zones G1NGA.;; - manner of collection of monthly fees, etc.

The consultation with operators may include meetings with them. Data obtained from consultations with operators shall not be publicly disclosed and should be used exclusively for the Feasibility Study. Regarding the verification of the area colour-designation, if an operator has already started an investments in the zone/area, within ten days from the start of the consultation process with the operators, said operator has to submit proof to the JP MRD on the started investment in the respective zone/area. JP MRD shall inform AEC and BCO thereof. The public hearing and consultation with the operators may determine the need to change the scope of the target area, and if it involves major changes, the procedure shall be repeated. Pursuant to the consultation with the operators, JP MRD, in cooperation with BCO and AEC, shall adopt a decision on selecting the Business Model for the specific target area18 and all of the elements of the financial relations between the operators and JP MRD, which may be:

a. PASSIVE-LAYER OPEN MODEL (PLOM) According to this model, the first-mile fibre optic access infrastructure to end users (or antennae sites for microwave wireless connection) shall be available to all operators under fair and non-discriminatory conditions (publicly announced by JP MRD). Operators will be able to set up active network equipment in the Data Centres in the target area, enter into an agreement with JP MRD on using the first-mile fibre optic access infrastructure and through the signed subscriber contracts provide to end-user services for ultra fast broadband access. Contracts should contain appropriate mechanisms to protect the rights of operators. Contracts shall be signed for periods that cannot exceed 5 years. The Contract shall be submitted to AEC and shall be publicly available. It should be kept in mind that this model is most widely used, and in relatively large densely populated areas, such as cities and larger populated areas/places (see Annex: Business Model Selection).

b. ACTIVE-LAYER OPEN MODEL (ALOM) In accordance with this model, JP MRD, besides deploying the first-mile fibre optic access infrastructure, shall deploy and maintain19 the active network equipment in all data centres in the target area. Any operator/service provider will be able, under fair and non-discriminatory prices and conditions (published by JP MRD), as per the signed contract with JP MRD, access the active network infrastructure/equipment of JP MRD in order to provide services for ultra fast broadband access in the target area (by signing subscriber contracts). Contracts with JP MRD should contain the appropriate mechanisms to protect the rights of operators. Contracts shall be entered into for periods that cannot exceed five years. The Contract shall be submitted to AEC and shall be publicly available. It should be taken into account that this model is mostly used in smaller populated areas/places (see Annex: Business Model Selection).

c. THREE-LAYER OPEN MODEL (3LOM) In accordance with this model, JP MRD, besides deploying the first-mile fibre optic access infrastructure, by way of public procurement shall select a single operator to deploy the active network equipment in all data centres in the target area, and also operate it. The conditions for public procurement shall be determined by JP MRD in consultation with BCO and AEC. When defining the conditions, the public debate and the consultations with the operators shall be taken into account. The operator selected by JP MRD shall lease in the entire first-mile fibre optic access infrastructure (or antennae sites for microwave wireless connection) under fair and non-discriminatory conditions. The Contract

18 See Annex – Selection of Business Model. 19 Deployment and maintenance of active network equipment on behalf of JP MRD is carried out by a company selected through a public tender. 24

that JP MRD signs with the selected operator shall be for a period that may not be shorter than three years, nor longer than five years. The Contract shall be submitted to AEC and shall be publicly available. The Contract should contain the appropriate mechanisms to protect the rights of operators. In order to ensure that all service providers are guaranteed fair and non-discriminatory conditions, the selected operator can be prohibited (this is defined in consultation with the operators during the target area coverage procedure) to provide a service for ultra fast broadband access to end users. Any service provider may, under fair and non-discriminatory conditions (publicly announced), access the active network equipment of the selected operator and provide services to end users (via entering into subscriber contracts). Just like the previous model, this model is mostly used and used in poorly populated areas (see Annex: Business Model Selection). JP MRD shall inform the Government about the business model selection, and about other issues related to covering the target area with NGA access infrastructure. MEASURES:

- Prior to starting the preparation of a Feasibility Study on covering a specific target area with NGA infrastructure, JP MRD, in cooperation with the BCO, the local self-government and AEC, will hold a public debate and consultation with the operators about the Project Design. - In order to provide consultation with the operators, AEC will submit a questionnaire to the operators regarding the coverage of the target area with NGA infrastructure. - JP MRD, in cooperation with BCO and AEC, shall adopt a decision on selecting the Business Model for the specific target area and all of the elements of the financial relations between the operators and JP MRD:

2.2.7. EXPECTED RETAIL AND WHOLESALE PRICES/FEES Taking into account that the ultimate purpose of the state aid is increasing the use of ultra fast internet access by the citizens, the retail prices for ultra fast internet access for the households should be affordable, that is, set them taking into account the average monthly income in the respective planning region. On the other hand, prices should ensure cost-effective operation of commercial operators, but also enable the operation of JP MRD in accordance with the principle of non-profit operation. It should be taken into account that most of the costs for deploying broadband infrastructure are spent on construction works (excavation, laying cables, etc.), and in case of fiber optics to end users, the construction costs can be up to 70-80 % of total investment costs. Taking into account the afore said, the expected retail prices for households for access to ultra-fast internet and the expected maximum monthly fees for operators shall be determined as follows: - Expected retail monthly fee (RMF) for households in a white zone (target area), for access to ultra fast internet (download higher than 100Mbps): up to 2% of the average salary in the respective planning region, according to the data from the SSO.

- Expected maximum monthly fee for operator to use the available optical fibres (two optical fibres per operator) for backhaul connection from the access point of the NBON to data centres in a target area/the central point of the white zone W100 /Central point of the eligible grey zone G1NGA: 0.03 x B x MMF, where B = total number of households in the target area, white zone W100 or the eligible grey zone G1NGA.

- Expected monthly fee for operator to use the first-mile connection deployed by JP MRD in the target area: up to 20% of the total monthly amount collected for the provision of the service ultra high-speed Internet access in the target area.

- Expected monthly fee for operator to access the active network infrastructure20/equipment deployed by JP MRD in data centres of a target area: up to 30% of the total monthly amount collected for provision of the service ultra high speed Internet access in the target area. The maximum value of the expected retail monthly fees for households in a target area, as well as the expected monthly fees for an operator, shall be determined by JP MRD in cooperation with BCO and AEC, taking into account the public debate and consultations with the operators. The Minister in charge of information society and administration shall be informed thereof. The monthly fee may include the power supply and air conditioning for the co-location of active equipment of the operators in the data centres of NBON (it shall be determined having in mind the public debate and consultations with the operators).

20 Central access enabled on fixed location for mass consumption products. 26

2.3. EXPANDING THE COMPETENCES AND STRENGTHENING THE INSTITUTIONAL CAPACITY OF JP MRD

STUDY ON EXPANDING THE COMPETENCIES OF JP MRD In order for JP MRD to be able to fulfil the obligations laid down in this National Operational Broadband Plan, it is necessary to have at its disposal highly qualified trained staff, adequate technical and administrative capacities, that is, it is necessary to strengthen the institutional capacity of JP MRD. To that end, JP MRD, in cooperation with BCO, will prepare and submit to the Government a Study on expanding the competencies and strengthening the institutional capacity of JP MRD. The Government shall approve the Study within 30 days from the date of receipt thereof. External expert assistance may be used to draft the Study. The Study should propose: - New organizational setup and new internal organisation of positions within JP Macedonian Broadcasting, - Need to employ new professional staff (number, profile, experience, etc.); - Need to establish a quality management system, a resource planning system, a geographic information system, a software for planning and designing the networks and the like, - Method of maintaining the infrastructure built, ie whether JP MRD should perform the maintenance or an external company should be selected, - Need to organize trainings for the employees who will need to use the afore mentioned systems, etc. If the Study on expanding the competences of JP MRD establishes that the current maintenance of NBON and of the NGA access networks built with state aid is cheaper if done by an external company and not JP MRD, in an ideal case JP MRD should, by way of public procurement, select company(ies), who already maintains a specific infrastructure on the territory of the country. In order to fulfill the above said, it will be necessary to amend the Law on Establishing the Public Enterprise Macedonian Broadcasting, as well as obtain external expert technical assistance to implement the afore said. MEASURES: - JP MRD, in cooperation with BCO, will prepare and submit for adoption to the Government of Republic of North Macedonia, a Study on expanding the competencies of JP MRD. - Amend the Law on Establishing the Public Enterprise Macedonian Broadcasting.

B. ADDITIONAL MEASURES FOR ENCOURAGING THE USE OF ACCESS TO ULTRAFAST INTERNET

MEASURES: - The Government of Republic of North Macedonia will adopt the amendments and supplementations to the Law on Value Added Tax by the end of August 2019, in order to reduce the VAT for the use of access to ultra-fast internet in the next 10 years, from 18% to 5%.

- The Government of Republic of North Macedonia, in 2021, by a new draft law shall ensure financial assistance in the form of subscription payment for the first year of a signed subscriber contract for access to ultra fast Internet for households in the white zones with total income lower than the monthly average salary paid at the state level.

C. IMPROVED LEGAL FRAMEWORK AND REGULATION

According to the mapping results: - 78% of the total number of households (445,233) have a possibility to access high-speed Internet, and - 43.8% of the total number of households (249,979) have possibility to access ultra-fast internet. Data shows that coverage with fast broadband networks (78%) is roughly the same as the average in the European Union (80%), which is very good. However, the existing coverage with ultra fast broadband networks (43.8%) is much lower than the EU average (58%). Comparing the previous results with the latest AEC data on the development of the electronic communications market in Republic of North Macedonia, the following may be derived: - Approximately 15% utilization of the existing fast broadband network in the country, - Approximately 1.2% utilization of the existing ultra fast broadband network in the country. Given the current coverage of broadband networks and the low utilization thereof (especially of ultra-fast broadband networks), the following question arises: What are the reasons for this? In the latest World Bank Report on Republic of North Macedonia, among other things, the following is stated:

- High telecom prices slow down the use of fast broadband access. Republic of North Macedonia has the highest price for fast broadband access (30 Mbps), and the second highest price for broadband access > 10 Mbps in the Western Balkans (in terms of average monthly income, see below charts). As a result, Republic of Northern Macedonia has one of the lowest penetration rates for fast broadband in the sub-region, and its average connection speed is slow even for the Western Balkans. - - The structure of the telecommunication markets both retail and wholesale is not competitive. For example, the market share of a retail operator is more than 40% in both fixed and mobile telecommunication markets. The wholesale broadband market is also highly concentrated with few providers, which prevents competition and investment in the sector (see figure below). The market concentration, measured according to the Herfindahl-Hirschman index, is high in all Western Balkan countries, but in Republic of North Macedonia it is second highest. In addition, high wholesale broadband prices prevent investments, especially among the smaller or regional operators. Better regulation, especially in calculating the costs or controlling the prices, and encouraging greater investments, can increase competition. Enhancing the competition among the operators can reduce prices and accelerate the use of broadband access.

Bearing in mind the afore said, it is necessary to provide external expert assistance for preparation of a detailed Analysis of the laws and bylaws in Republic of North Macedonia, incl. proposed measures for improvement thereof. In this regard, the technical assistance that can be provided by World Bank to Republic of North Macedonia, as well as the TAIEX instrument of the EU, should be used.

MEASURE: - Ensure external expert assistance (via the TAIEX Instrument of EU and/or World Bank) for preparation of a detailed Analysis of the laws and bylaws in Republic of North Macedonia, incl. proposed measures for improvement thereof.

D. 5G INTRODUCTION AND DEVELOPMENT PLAN

WORKING GROUP FOR DEFINING THE MEASURES AND ACTIVITIES REQUIRED FOR INTRODUCING 5G MOBILE TECHNOLOGY

Taking into account the EU broadband targets pertaining to 5G development, as well as the commitment of Republic of Nоrth Macedonia, as candidate country for EU membership, to adopt a comprehensive National Operational Broadband Plan of the country, the minister of information society and administration, at the beginning of 2018, established a working group to prepare the measures and activities necessary for introduction of 5G mobile technology in Republic of Nоrth Macedonia. Representatives of ministries, regulatory bodies, operators, universities, chambers of commerce, equipment manufacturers, ZELS, independent experts, civil society associations, private companies, etc. participated in the working group. A dedicated web site (http://mioa.gov.mk/?q=mk/node/1552) was created, where all relevant documents, as well as stakeholder proposals were uploaded. Relevant documents that the Working Group took into account were as follows: A Digital Agenda for Europe (2010); European Gigabit Society (2016); 5G for Europe (2016); ITU - standards, recommendations regarding 5G; Radio Spectrum Policy Group – recommendations regarding 5G; Proposal for a Directive establishing the European Electronic Communications Code, etc.

OBJECTIVES FOR 5G INTRODUCTION

One of the objectives of this document is to analyse the implementation requirements of 5G architecture, and to define the necessary changes and strategic fields for action in order to create favourable conditions for development and efficient use of 5G. Moreover, the main focus is maximizing the benefits of implementing 5G, including the development of the economic market through support and development of new services in various vertical market segments that may be offered to end users.

The implementation of 5G in Republic of North Macedonia should ensure building a national eco-system for wireless connectivity that will focus on significantly increasing the quality of user experience, not only within the context of increased speed, reliability, and reduced communication latency, but also in the context of significantly expanding the number of offered services and improving the overall quality of life.

This document should be treated as a dynamic document that should regularly be revised and updated with additional information, following the course of development of 5G architecture and the standardization process.

INTRODUCTION

The future economic and social development of EU member states, and of Republic of North Macedonia will largely depend on the development of new wireless technologies and on the digitalisation of all societal spheres.The development of the new 5G technology will overcome the capabilities of the existing wireless networks in order to develop communications services available from anywhere, at any time, and at significantly faster data rates. The 5G technology is expected to be globally widespread, and its development will be aligned with the new market needs. It is also necessary for Republic of North Macedonia to engage in the global activities in order to provide the necessary prerequisites for development of new technologies, and to support the operators of electronic communication networks/services (operators) and the vertically-positioned industry in the development and implementation of new innovative services.

The support provided to the operators by the relevant institutions shall be a significant for the investment dynamics in new generation networks, and their construction will depend on the fulfilment of the necessary prerequisites, such as changes in the relevant regulations to enable efficient and rapid construction of the new 5G networks.

It is expected that the investments in new generation electronic communication network will be significant, and one of the main conclusions and directions of the EU Action Plan is that the network operators will invest in new infrastructure, whereas the adequate changes in the regulations will enable return on the investments.At this point, it is still difficult to envisage the necessary investments for 5G implementation, and they will depend on the strategy of each operator to follow the scenarios and the initially defined services.

BENEFITS FROM 5G IMPLEMENTATION

The main benefits of 5G networks are usually expressed via the technical parameters, as follows: - Increased speed of up to 10 Gbps, - Latency lower than 1ms, - 1000 fold increased bandwidth, - 100 fold more connected devices, - 99.99% availability, - 100% coverage.

However, despite the significant improvements in speed and reliability of connections, the main benefits that go beyond the boundaries of traditional electronic communications lie in the evolution of the new business models and the different types of customers and partnerships.

With the implementation of 5G architecture, operators can directly support the vertically-positioned industries and contribute to their mobilization.

The partnerships that can be established are multi-layered, ranging from simple sharing of infrastructure, through opening of specific network features in the form of an accessible service, up to integration of partners into a system with a software-oriented architecture.The values that are created include transparent and comprehensive availability, delivering consistent quality of service, different types of interaction, personalization of services, and highly reliable communications.

The range of services that can be radically innovated and offered through this architecture is the main incentive for development of every industry sector. The mobile connected society and the complete digital infrastructure offered by 5G are a prerequisite for development of the modern industry, and thus the growth of the economy. Therefore, the implementation of this technology represents an investment in the potential for opening new markets, and the opportunities to foster development in a numerous various fields, ranging from smart agriculture to smart factories.

It is deemed that the implementation of 5G technology will be managed by the vertically-positioned industry, the ecosystem for technical and business integrated network solutions into a single programmable and unified infrastructure. 5G technology is expected to be applied in the automotive industry, public safety, healthcare, financial sector, utilities, high-tech manufacturing, Internet/digital homes, media/games, etc.

TECHNICAL OVERVIEW OF 5G TECHNOLOGY

Using the term 5G described the next generation of mobile communications, following 4G, which unlike the previous ones offers much more. Instead of the traditional approach of improving the utilisation of the radio frequency spectrum, 5G reflects the need for developing new radio interfaces that use higher frequencies, specific user applications, such as Internet of Things (IoT), or specific features (e. . low latency) that go much farther than what is currently supported by 4G and its improvements.

However, 5G does not only concern only the development of a new radio interface. The 5G ecosystem includes all aspects of the network and its design is aimed at converging today's access mechanisms and their advanced future versions, including cable connections, and all new access networks that are yet to be developed. This means that 5G will work in an extremely heterogeneous environment that is characterized by multiple types of access technologies, multi- layer networks, different types of devices, different types of user interaction, and the like, where the basic need to be satisfied is a transparent and permanent connection throughout time and space.

The goal of 5G networks is to meet the demands of a dynamic, mobile and fully connected society. It is expected that 5G would enable socio-economic changes in various ways, especially in the sphere of productivity, sustainability and quality of people’s life. Formally defined, 5G is an end-to-end ecosystem that provides a fully mobile and connected society. This system supports creation of new values for customers and service providers through existing and new examples of use, which are offered with consistent user experience, and are defined with the help of sustainable business models.Designed as a flexible complex system, 5G should provide much higher performance with optimized network usage, by using modular networking functions that can be applied and scaled as needed so that all different application types are supported in an agile and cost-effective manner.

STANDARDIZATION OF 5G

Currently, 5G technology is still in the process of standardization. As early as 2012, the International Telecommunication Union (ITU-R) launched a program for development of "International Mobile Telecommunications (IMT) for 2020 and beyond", which laid down the foundations for 5G research activities in the world. In September 2015, ITU-R finalized its Vision for a 5G connected mobile society. Through this vision, this body guides the further development of the IMT standards framework, which from the current IMT-2000 and IMT-Advanced that cover 3G and 4G technologies, will continue to evolve to 5G through IMT-2020. The ITU is the standardization body that will release the final standard for 5G, IMT-2020, which is expected to become commercially implemented by 2020.In the first phase of the IMT-2020 process, the ITU members together with the academic community and research institutions defined the key performance requirements for 5G technologies including the following: • Minimum requirements for maximum data transfer speed at download - 20 Gbit/s • Minimum requirements for maximum data transfer speed at upload - 10 Gbit/s • Target user data transfer speed at download -100 Mbit/ s • Target user data transfer speed at upload -100 Mbit/ s • Maximum spectral efficiency for download - 30 bps/Hz • Maximum spectral efficiency for upload - 15 bps/Hz • Minimum user plane latency requirements for enhanced Mobile BroadBand (eMBB) - 4 ms • Minimum user plane latency requirements for Ultra-Reliable and Low-Latency Communications (URLLC) - 1 ms • Minimum requirements for control plane latency - 20 ms • Minimum requirements for connection density - 1000000 devices per km2 • Requirements for minimum bandwidth - 100 MHz • Bandwidths of 1 GHz required for higher frequencies (above 6 GHz) • 4 classes of mobility: − Stationary: 0km/h − Pedestrian: 0km/h - 10km/h − Vehicle: 10km/h - 120km/h − High speed vehicle: 120km/h - 500km/h − The 3GPP standardization body of the mobile industry is actively working on the initial description of the 3GPP 5G solution based on the LTE development and the first specifications for the new 5G radios (5G NR) that were approved in December 2017 in the form of Release 15.According to the current 3GPP development map for 5G, in June 2019, the final versions of Release 15 and Release 16 are planned to be submitted to IMT-2020 initiative to be added to the standard.

Given that the standard is not yet precisely defined and in development, in this phase it is necessary to take into account that all capital investments made in the electronic communications sector in the country are in line with the confirmed requirements and implementations of new 5G systems. This involves primarily strategic investments in the development of network infrastructure (with fibre optic technology as carrier of the network core) and the implementation of the commonly accepted technologies on which the 5G architecture is based, such as network layers, software-defined networks-SDN, and network function virtualization - NFV.

DEFINED PILOT 5G USE EXAMPLES

One of the reasons why the definition of the 5G standard and the network architecture are still incomplete is because, unlike other advancements of the wireless side of networks, the architecture and manner of implementing 5G depend on how and for what the network will be used. For example, analyses show that video traffic is expected to grow significantly in the next period, which means that there will be a need to provide higher-speeds for applications, such as support for streaming video, video conferencing and high-resolution virtual reality. In order to achieve this level of performance, the network will need to be built from a large number of small cells that will achieve not only coverage, but also higher utilization of the available spectrum’s bandwidth. At the same time, a number of 5G pilot implementations are based on the use of the network as the basis for building IoT. In order to provide support for a myriad of devices, many of which require a longer battery life, the 5G network must work extremely efficiently within the low bandwidth, where speed is not important, but good coverage and reliability are.

According to the ITU’s IMT-2020, three main scenarios of using 5G technology have been identified, according to which the development of specific services with specific requirements depends on the industry (sector) where they will be identified. • mMTC–Massive Machine Type Communications. Larger number of connected devices with different service quality requirements. The goal is to provide a response with an exponential increase in the density of connected devices • eMBB-Enhanced Mobile Broadband connections for mobile broadband at ultra high speeds (indoor and outdoor) with uniform quality of service • URLLC-Ultra-reliable and Low Latency Communications. This scenario has special requirements, such as latency in order to ensure increased response speed.

Fig. 1-Scenarios for using 5G

Within the definitions of 5G networks, example groups of typical use of 5G have also been defined: • Broadband access in densely populated environments − Examples: Ubiquitous video, smart offices, cloud services, high-resolution video sharing • Broadband access everywhere − Examples: More than 50 Mbps anywhere, ultra cheap networks • High user mobility − Examples: High-speed trains, remote calculations, mobile hot spots, 3D drone links • Massive IoT − Examples: Smart carrying devices, sensor networks, mobile video surveillance • Extreme communications in real time

− Examples: Tactile Internet • Emergency communications − Examples: Natural disasters • Ultra-reliable communications − Examples: Automated traffic and driving control, collaborative robots, e-health, remote operations, drone control, public safety • Broadcasting services − Examples: News and information in real time, local cell-level services, regional services, national services

IMPACT OF 5G ON THE VERTICAL MARKET

The current considerations and test pilot examples do not give an answer to the question: Which vertical market will feel the greatest impact on the 5G implementation. It is expected that a large number of sectors, starting from everyday life, transport, finance, healthcare, creativity, manufacturing, public services, and others will be directly impacted by the new opportunities offered by this ecosystem.

In this transitional period, there are examples of 5G applications in almost every segment of vertical markets, such as autonomous vehicles, smart cities or governmental services. It should be taken into account that each of the current scenarios is a combination of introduction of new technologies and development of new services and use applications. In addition, these efforts include more involved parties in the process that have a different impact on the development and application of the test scenarios.

The successfully trial will include telecommunication operators, who invest in new network architectures and infrastructure, innovative service providers, whose objective is to define new services developed on top of the new infrastructure, and which will make the new investment cost-effective by adequate penetration and attraction of new users, who would use the services offered. This is why the usual practice is for the test scenarios to be implemented through a partner collaboration of telecom operators and software companies, who will develop a specific test service, and representatives from the vertical market, who are interested in using the service.

Of strategic importance for the 5G implementation in Republic of North Macedonia is also the governmental support for establishing consortia of various partners that will include the telecommunication operators, who will offer infrastructure, representatives of vertical markets, who will define the services and end users, companies, who will develop new innovative services, and the representatives of the academia, who will support research, testing, and analysis activities for the implementation success.

MEASURE:

The ICT Council of the Government of Republic of North Macedonia, in cooperation with the Ministry of Information Society and Administration, will start talking with the vertically-positioned sectors, the traditional, industry and the telecommunication operators to the following end: - Sign a Memorandum of Understanding for 5G development and digital transformation in all spheres of the society through the use of 5G technology. - Possible financing of pilot projects through which the potential 5G features will be demonstrated and tested, thus allowing development of new services. - Raising the level of the digital skills within the industry, as well as among the citizens.

5G FEATURES AND TECHNOLOGIES

Deploying the 5G network will not be an entirely new change in the architecture of existing mobile technologies, such as the case of previous mobile technologies, which meant introduction of new base stations and new network elements in

34 the core network, but will rather be upgrade of the existing architecture, including introduction of new functions, and of the requisite module that enable the 5G technology.

In the part of 3GPP's core network, several variants are being considered. It is anticipated that existing operators would use the variant that actually represents coexistence of 4G and 5G networks. The following figure presents several variants that are considered as possible solutions for implementation of the 5G architecture. At first, the control functions towards 5G users will be implemented via 4G base stations. The core network will be upgraded with limited software functions that support 5G technology, but will not be able to implement all envisaged 5G features, such as 5G network slicing.

Fig. 2 - Possible Implementation Solutions for 5G Architecture

This actually reflects the evolution of the mobile network architecture, where at the beginning of 4G and 5G networks will be enabled through the same network elements (base stations, packet core, etc.) by upgrading the existing network elements, whereas in the following period, the new 5G network nodes will be implemented. All of this is for the purpose of developing the required 5G standards that are still in the process of standardisation. Such development of the network architecture contributes also to the development of the requisite 5G devices, which at the beginning will have to be compatible with the possible implementation variants, which in turn will result in having several implementation variants of 5G network architecture coexist in the future, thus additionally complicating the 5G network. When implementing 5G, a completely new operator (non-existent on the market) could appear, which would directly implement its own only 5G network or would use it together with an already existing operator.

RADIO ACCESS

The defined requirements of 5G networks require significant changes in radio access technologies, with expectations that the end systems will be a combination and integration of new technologies. New frequency bands, such as micro and millimetre wavelengths, are expected to be used.

Accordingly, the current 4G small cells will become even smaller and more densely deployed, thus making the problem of their planning and deployment more severe.

Also, the application of massive MIMO (Multiple-Input and Multiple-Output) systems requires the use of more efficient interference management schemes.

Improved communication between devices and/or end-users is considered to be a particularly important service that should be supported by 5G networks. These scenarios require massive connectivity with high system bandwidth and improved spectral efficiency, and impose significant challenges on the design of 5G networks. This is why radio modules, which will enable Non-Orthogonal Multiple Access (NOMA), are being developed. In addition, in order to allow

35 for better spectral efficiency, so called active antennae are being introduces, which radio modules are integrated with the antennae, thus enabling beam forming towards the signal user. Such antennae use new massive MIMO technology, where due to the increased spectral efficiency and signal strength, and in order to utmost utilise 5G potential, there will be need to redesign the base station sites, mostly in the non-urban areas.The redesign of sites implies, above all, deployment of antennas in such an appropriate way that the level of non-ionizing radiation from the 5G antennae is within the permissible limits.

NETWORK SLICING

In order to support defining a flexible platform that will involve integration of different vertically-positioned industries, thus responding to the technological and business requirements of each industry, 5G must support the concept of network slicing.

Network slices representing the logical traffic division throughout the network for which specific rules and requirements may be defined, should be designed from an end-to-end perspective, and may potentially pass across several technology domains (e.g. core, backhaul, and access network), and administrative domains (e.g. various mobile network operators). Therefore, management and orchestration functions should be available at slice level through central configuration of all elements across which the slice extends.This way, using the same infrastructure for different services that have different requirements, i.e. convergence of applications offered through the 5G network, is provided. Example thereof may be the co-existence of user-oriented and machine-oriented applications that have completely different functional and performance requirements from the 5G network. The creation of network slices allows defining specialized telecommunication services for each of the vertical sectors by offering so-called client-oriented network slices/layers created according to the client's requirements. These requirements for establishing a new network slice should then be automatically translated into network resources orchestration for the purpose of providing the required features.

SOFTWARE-DEFINED NETWORKING

It is necessary to implement two fundamental technologies within the network in order to support this mode of operations, that is, network “softwarisation” and virtualization of network functions.

Software-defined networks and virtualization of networking functions will play a key role at the moment of migration of mobile operators from 4G to 5G networks, allowing for easy and fast scaling.

With the help of resource virtualization and implementation of a software-defined, programmable network, operators may offer a solution, where each client can own and manage its own network slice through a set of well-known APIs (Application Programming Interface). By using the defined API functions, each client may define the slice features (topology, quality of service, etc.) based on its own specific requirements. Therefore, in support of future development of 5G services, it is essential for operators to implement SDN and NFV technologies and to provide uniform, well-defined access to these capabilities in order to ensure transparent cooperation between the telecommunications provider and the end service provider.

NETWORK EDGE COMPUTING

In addition to these options, provision of reduced latency, but also reduced core traffic, and streamlining of the central infrastructure is possible only with implementation of Mobile Edge Computing (MEC) solutions that include providing computing resources at the network edge, next to the base stations. In this way, by moving the computing and storage capabilities close to the network edge, rather than the traditional approach of using a remote data centre, seamless implementation of certain major 5G pilot examples, such as autonomous driving and other data intensive examples, may be provided. To this end, operators need to develop a strategy on where to deploy these additional computing nodes by minimizing costs and raising the quality of the user experience. The size, location and configuration of this equipment depends on the use and demand.

5G IMPLEMENTATION IN THE WORLD

Commercially, the implementation of 5G technology is expected to begin in 2020. However, there are currently more examples of partial implementation of this technology in its non-standardized form, focusing on certain examples of interest. In South Korea, 5G technology was used during the 2018 Winter Olympics in Pyongyang to create innovative lighting effects, run a stand-alone vehicle, display 360-degree images of competitors in real time and the like. This country is also the first country that has already begun with 5G test scenarios, and application of a specialized program for research and implementation of 5G since 2012.

In Japan, since the summer of 2017, the top three mobile operators have begun with 5G test pilots, by implementing high-speed wireless connectivity in trains. The tests implemented include wireless streaming of 4K ultra-high-resolution images, automated truck convoy driving, and remote control of machine construction.

In the United States, AT&T has begun with test scenarios since mid-2016, focusing on achieving multi-gigabit speed and low latency, as well as using the centimetre and millimetre wavelength spectrum. This operator, in February 2018, selected the first 3 cities for 5G implementation. On the other hand, Verizon has set up a 5G test plan in 11 cities during 2018.

In China, the main efforts to develop 5G technologies are led by Huawei, starting at the end of 2013, while in 2015 this manufacturer participated in scenario testing in the Netherlands along with Ericsson. In September 2016, the Chinese government announced that the first phase to test the future 5G networks was completed with tests made in 100 cities in the country. The next phase of pilot test implementation is underway, and commercial use is scheduled for 2022.

In the United Kingdom, organized 5G testing efforts exist from 2012, when the first 5G Innovation Centre was set up. In July 2017, the first on-site testing in central London was performed at 1 Gbps.

The European Commission has invested in a number of research projects in order to achieve 5G commercialization in 2020. The various supported projects focus on various aspects of 5G architecture, such as spectral efficiency, combination of radio base stations with cloud management infrastructure, implementation of 5G in environments of very high density, network edge computing, and the like. In accordance with the Common Strategy for 5G development in Europe, it is expected that all EU member states will have 5G test implementation in at least one city before 2019, which will enable analysis of the needs and possibilities for commercial implementation to start in 2020.

CHALLENGES FOR 5G IMPLEMENTATION IN REPUBLIC OF NORTH MACEDONIA

In order to support the 5G implementation during the test phase, but also during the following commercial phase, the current situation in Republic of North Macedonia indicates a number of challenges that need to be addressed or regulated. Operators are expected to invest in two key areas:

1. Infrastructure investments. Mainly to build a denser fibre optic network infrastructure, thus ensuring 5G connectivity of base stations, and to fund their installation. The next generation of 5G wireless networks will support applications requiring high speeds. One of the solutions in this case is to allow higher density of base stations by deploying small cells.

2. Investments in service innovation. In order to stimulate the emergence of new 5G services. This includes financing of pilot projects through which the potential 5G features will be demonstrated and tested, thus allowing development of new services.

The implementation of 5G architecture mainly depends on the small cell deployment capabilities, and their interconnection to the core system using a high-bandwidth network infrastructure based on fibre optic technology.

This process is currently painstaking due to various complications arising in finding sites for new base stations, and obtaining a license for their deployment, as well as due to the procedures that have to be followed when installing the cable network infrastructure.

From this viewpoint, it is necessary to provide legal and economic facilitation for the mobile operators, as follows: • When sourcing sites for new base stations it is necessary to facilitate the conditions for deployment of the appropriate equipment − the need for sites should also be taken into account when planning the construction of new facilities, that is, to envisage the possibility of deploying base stations on top of constructed facilities • Reducing the costs of deploying network infrastructure − the obligation referred to in Article 63 and Article 69 of the LEC has to be observed, and new facilities have to be constructed with a mandatory installed fibre optic infrastructure

In order to utilise most of the options offered by 5G architecture, and to attract as many as possible end users, thus involving wide range of quality of service requirements, net neutrality implications have to be considered at network- layer, which will enable defining a set of layers with different quality of service intended for various applications. In addition, the defined net neutrality rules should be in accordance with the norms prescribed by the EU.

The use of 5G services largely depends on the end-users and the benefits received thereby. However, in order to ensure a truly connected society, which is the goal of 5G, it is necessary to work on raising the skills of citizens as end users, so that they can enjoy the benefits offered by this ecosystem. In other words, projects aimed at raising the level of digital skills of citizens are needed. Such an investment will also mean supporting the economic development, since a society with higher level of digital skills will create a new market through new requirements for providers' services.

For the development of 5G networks and services, support is needed from the institutions relevant for regulating the electronic communications and constructing electronic communication networks, as follows: - Develop general and administrative procedures that will enable quick and easy acquisition of approvals for construction of the new 5G network. - Many of the benefits of the 5G technology will be based on the base station density in the network itself, primarily because of the use of higher frequencies in the inhabited locations.Because of this, there will be a need to deploy base stations in places where the current legislation does not allow it (e.g. roads, installing equipment on existing lighting poles, bus stops, transmission line towers, etc.). Accordingly, it is necessary to adapt the relevant laws so as to enable the deployment of 5G equipment on top of such facilities, as well as deployment of fibre optics thereto. - Regulating the deployment of small-size and low output equipment for mobile network should be in accordance with the regulations for installation of urban equipment (without an approval/decision), and via very simple and quick procedure. - When building new 5G networks, the possibility of shared use and avoidance of building parallel networks by business users in the so-called. "Campus Networks" in large industrial compounds, hospitals and other institutions, should be taken into account, pursuant to Article 75 of the LEC. - Coordination of 5G radio frequencies.

FIBRE OPTIC INFRASTRUCTURE

As per the generic 5G concepts, it is clearly emphasized that in each scenario, 5G will require a significant backhauling capacity, which will result in a huge number of connections in the domain of fibre optic networks. Although, in many remote areas it may be possible to use fixed wireless links for backhauling, the need to transport data at higher speeds will require access to fibre optic networks as a vital element for 5G introduction, especially in scenarios and at sites where small cells with high capacity will be used. Despite the fact that most of the investment needed for introduction of new fibre optic network resources and 5G, it should be ensured that the private sector, the state sector, i.e. the Government, encourage a range of initiatives and activities to increase the accessibility to fibre optic infrastructures. An example of this is the determination of the so called white zones (zones without any commercial interest for construction of an electronic communications network), obtained through an appropriate mapping procedure.

SHARING INFRASTRUCTURE

Sharing the infrastructure, in accordance with concisely defined competition rules, may be an efficient and cost-effective way of introducing and implementing 5G telecommunications infrastructure, especially in areas where it is not cost- effective to introduce several competing network infrastructures. However, at the same time, the need for protection and guarantee of operators’ investment interests should be taken into account. In general, sharing of infrastructure can be divided into two categories, passive or active sharing.

Passive sharing is generally defined as sharing space or physical infrastructure that does not require active operational coordination between network operators. For example, sharing a location for a base station or an antenna tower represents a form of passive sharing.

Active sharing is an approach when operators share an active telecommunications infrastructure. For example, sharing an access network or national roaming are a specific implementations of active sharing.

The competent state authorities and bodies, in cooperation with the AEC, will identify the unnecessary obstacles for sharing the existing telecommunications infrastructure. In addition, this cooperation would result in development of a more stable and robust sharing framework, which would significantly accelerate and facilitate the implementation of 5G in Republic of North Macedonia.

REGULATION CHANGES

Below are presented the draft amendments and supplementations to the Construction Law and other related laws that are of interest to electronic communications operators, and pertain to issues with the long-term procedure for obtaining approvals/decisions necessary for construction of the telecommunications infrastructure: - Simplification of the procedure for obtaining approvals for building base stations at greenfield sites (towers on land), - More detailed clarification of the obligations in the procedure for obtaining a decisions for rooftop deployment of base stations (towers on buildings), - Amendments to the procedure for obtaining an approval/decision for deploying the line infrastructure (fibre optic cables, power lines), - Amendments to the conditions for registration of telecommunication infrastructure in the Agency for Real Estate Cadastre in accordance with the Law on Real Estate Cadastre, - Construction of infrastructure of public interest (telecommunications, electricity, gas, water supply, etc.) should be regulated in a separate Law on construction of infrastructure of public interest, or be placed in a separate section in the Construction Law, - Amendments to the Law on Public Roads that will enable construction of a telecommunications infrastructure along the roads and within a protected belt. - Harmonization of the draft amendments to the Construction Law with other laws that are affected and involved in the procedure for obtaining decisions/approvals for construction of a telecommunications infrastructure.

Specific amendments to the laws and by-laws were submitted by the interested parties to the working group.

MEASURES: - The Government of Republic of North Macedonia will establish an inter-ministerial working group(s) for mutual harmonization and amendment of the laws and bylaws related to construction and electronic communications, taking into account the proposals submitted by operators and the measures set forth in this document. Representatives from the energy sector should participate in the working group. - MISA, in cooperation with the Ministry of Transport and Communications, AEC, municipalities and the representatives from the energy sector, will initiate talks in order to ensure: • Joint use of the existing physical infrastructure, according to the LEC. • Intensifying the coordination of construction works according to the LEC.

• Use of free optical fibres from NOM for aggregation linking to the development of 5G.Procedures that will enable quick and simple acquisition of approvals for construction of electronic communication networks, and in particular for deploying fibre optic infrastructure and base stations for the new 5G network. • Deployment of 5G equipment on existing lighting poles, at bus stops, transmission line towers, etc. • Deployment of small-size and low output equipment for mobile networks should be in accordance with the regulations for installation of urban equipment (without an approval/decision), and via very simple and quick procedure.

COEXISTENCE AND RADIO ALLOCATION

Evolution from 2G to 4G introduced applications that were unthinkable just a decade ago. These innovations have led to a significant increase in the volume of data services, which will only continue to grow, thus increasing even greater requirements in terms of network capacity. However, the evolution towards 5G is unlikely to replicate the linear progression to mass availability and usability that was a trend in previous generations of mobile standards.On the contrary, the evolution towards 5G will likely require wireless networks to comply and coexist much more closely with existing wired networks. At the same time, the 5G networks will co-exist and will be upgraded based on existing 3G and 4G networks, which will form the basic 5G infrastructure. This infrastructure, although technologically does not belong to 5G, will still provide support for many scenarios and services that we currently identify as strictly native to 5G. Therefore, a number of measures need to be taken to ensure the further improvement of existing mobile infrastructures. These improvements will need to go one step further than the current prescribed legal obligations for delivering coverage and quality.

In addition to the development of 5G technology and services, it is important to emphasize that 4G will continue to be developed and upgraded. 5G technology has not started to develop as a technology that will replace 4G, but one that will improve it with complementary new service features. At this point, it is considered that the use of 4G will continue for many years, before it is completely replaced with 5G. Similarity can be found with the introduction of 4G technology while 3G is still being developed globally. The graph below shows the coexistence of existing technologies.

Fig. 3 Coexistence of 2G, 3G and 4G

Hence, 5G will be designed to coexist with 4G and is expected to support the operation of the existing technologies, with terminals (CPEs) that will have the ability to connect to the best available network (technology). Each radio access technology uses different radio frequency bands, and the terminals can dynamically select the best radio access depending on the requirements of the application.

4G will ensure continuity of services in parts of the infrastructure, in periods and at locations where 5G functionality is not fully available. This is supported by the fact that the network operators in Europe continue to invest in upgrading of 4G architecture.

ARRANGEMENT AND REGULATION OF NECESSARY RADIO FREQUENCY BANDS

By introducing 5G it will be possible to meet the growing demands regarding capacity, bandwidth, availability and latency of digital radio infrastructures. In order to meet these requirements and to ensure coverage in the rural areas, as well as to provide for high-capacity applications, a sufficient amount of appropriate radio frequencies will be required.

For example, in rural areas, favourable propagation conditions will require low frequencies (below 1 GHz). The frequencies in slightly higher bands (for example, in the 3.5 GHz band), in contrast to lower ones, offer a larger frequency range and provide capacity for higher data rates available on a large number of devices. The frequencies in very high bands (above 24 GHz) will also be needed in order to allow offering services with very large bandwidth and large capacity. However, unlike low frequencies, coverage with these frequencies is very limited, which makes these networks limited to local areas.

Today, operators that provide mobile electronic communications networks/services in Republic of North Macedonia can already use a radio frequency spectrum of around 1000 MHz. When 5G technology becomes available, this range can also be used for 5G services. However, the implementation of high-speed data services (up to 20 GBit/s) requires allocation of additional radio frequency bands for mobile communications that will allow the use of a radio communication channel band of several hundred MHz or even GHz. Radio frequencies above 24 GHz (millimetre range) are very suitable for this purpose. Republic of North Macedonia will monitor the identification of harmonized radio frequency bands at European level, and will support the compliance for radio frequency bands that were declared by the World Radio-communication Conference (WRC) 2015 as 5G candidates. They range between 24 GHz and 86 GHz, and their suitability for 5G will be analysed by the next WRC in 2019. Based on the results of the analysis, WRC 2019 will decide which radio frequencies have been identified for 5G use.

Fig. 4 Use of radio frequencies of different ranges for different applications

At the level of the European Conference on Posts and Telecommunications (CEPT), which includes administrations from 48 countries, including Republic of North Macedonia, it has already been decided that Europe should analyse the following radio frequency bands 24.25-27.5 GHz, 31.8-33.4 GHz and 40.5-43.5 GHz. The Radio Spectrum Policy Group (RSPG), advisory body of the European Union (EU) for radio frequency issues, and the EU Radio Spectrum Committee (RSC) aim to harmonize the 24.25-27.5 GHz (26 GHz) band in Europe, even during the course of 2018. The goal is to use this 5G pioneering band as early as possible. Therefore, compatibility checks and negotiations with existing users in this range, as well as with users in the adjacent bands that have to be protected, have already begun.

The radio frequency band 3.4-3.8 GHz will also play an important role concerning the introduction of 5G. In this radio frequency band, there is a good chance that operators providing mobile electronic communications networks/services will be able to use channels up to 100 MHz wide, so this range can generally be used for data-intensive applications in smaller cells, for example in urban areas.

In addition, due to favourable propagation conditions, the 700 MHz frequencies will provide the opportunity for network operators to develop comprehensive 5G coverage early, on the basis of their existing network infrastructure. A precondition for the promotion of 5G networks is providing a sufficient and adequate radio frequency spectrum as early as possible, in order to stimulate investments, innovation and competition in the development of 5G services.

In order to enable the earliest possible use of 5G technology in Republic of North Macedonia, it is important to provide test radio frequencies in a timely manner, as well as frequencies for commercial use.

5G RADIO FREQUENCY BANDS IN REPUBLIC OF NORTH MACEDONIA

The most attractive radio frequency bands for land mobile services in which operators can provide broadband access services are the following: - 700 MHz (694-790 MHz) - 800 MHz (791-821/832-862 MHz) - 900 MHz (880-915/925-960 MHz) - 1800 MHz (1710-1785/1805-1880 MHz) - 1900 MHz (1900-1920 MHz) - 2100 MHz (1920-1980/2110-2170 MHz) - 2600 MHz (2500-2690 MHz) - 3.5 GHz (3.4-3.8 GHz) - 26 GHz (24.25-27.5 GHz) Currently, there are only two network operators in Republic of North Macedonia (Makedonski Telekom and one.Vip), and one virtual operator (Layca Mobile), which provide services through a radio communication network in the following radio frequency bands: 800 MHz, 900 MHz, 1800 MHz and 2100 MHz. The arrangement of radio frequencies in these bands is shown in the following figure: Makedonski Makedonski one.Vip one.Vip one.Vip one.Vip Telekom Telekom Guard LTE LTE LTE LTE LTE LTE band 79 1 801 811 821 832 842 852 862 MHz

Makedonski Makedonski one.Vip one.Vip Telekom Telekom Guard FREE MFCN MFCN FREE MFCN MFCN band 880 890 902.5 915 925 935 947.5 960 MHz

Makedonski Makedonski one.Vip Telekom one.Vip one.Vip Telekom one.Vip

FREE MFCN MFCN MFCN Guard band FREE MFCN MFCN MFCN

171 182 186 1720 1730 1745 1755 1770 1785 1805 1815 1840 1850 1880MHz 0 5 5

Makedonski Makedonski

one.Vip Telekom one.Vip Telekom

FREE MFCN FREE MFCN FREE FREE MFCN FREE MFCN FREE

19 19 19 198 211 212 21 215 2170 1945 1950 2140 20 35 65 0 0 5 35 5 MHz Fig. 5 - Overview of assigned radio frequency bands

This figure points out to the conclusion that currently the radio frequency resources for land mobile services have been assigned only to Makedonski Telekom and to one.Vip as follows: in the 800 MHz band, one.VIP owns 2x20 MHz

42 channels in the 900 MHz, and band both operators own 2x12.5 MHz channels in the 1800 MHz band. Makedonski Telekom owns 2x25 MHz, and one.Vip owns 2x40 MHz channels, and in the 2100 MHz band Makedonski Telekom owns 2x15 MHz, and one.Vip owns 2x10 MHz.

In the last three listed radio frequency bands, the possibility of developing the competition is ensured, as stipulated in the LEC (Law on Electronic Communications), in a way that unassigned are the following channels: 2x10 MHz in the 900 MHz and 1800 MHz bands, and 2x35 MHz in the 2100 MHz band, which is more than enough for entering of a third network operator to provide public electronic communications networks/services.

It is important to note the fact that all these bands are technology-neutral. In these radio frequency bands, the operators in Republic of North Macedonia provide electronic communications networks/services from the following technology generations: 2G, 3G and 4G.

Of course, in the future, electronic communications networks/services from the fifth generation will be provided in these radio frequency bands.

Radio frequency bands which are intended or will be intended for land mobile service, and which will provide the fifth generation electronic communications networks/services are the radio frequency bands that are popularly referred to as: 700 MHz band, 3.6 GHz band and 26 GHz band.

700 MHz

Currently, the 694-790 MHz radio frequency band is assigned to operators for provision of digital television networks/services (DVB-T). The following table shows the current state of the assigned channels (the channels that are part of the 694-790 MHz radio frequency band are marked in red).

Digi Plus Multimedia JP MRD one.Vip

Allotment zone MUX 1 MUX 2 MUX 3 MUX 4 MUX5 MUX 6 MUX 7

D1 Crn Vrv/Skopje 33 45 26 28 30 23 52 D1 Crn Vrv/Veles 40 47

D2 Stracin 21 41 46 37 42 50 56

D3 Turtel 22 32 43 24 39 38 55

D4 Boskija 21 37 49 34 41 57 54

D5 Pelister 25 29 33 22 37 38 42

D6 Mali Vlaj 32 39 41 26 36 44 50

D7 Stogovo 51 57 59 28 43 35 31

D8 Popova Šapka 24 34 38 27 36 41 50

Validity of the general Valid until: 04/06/2019 Valid until: 06/03/2022 Valid until: 31/05/2023 approvals

Fig.6 - Assigned TV channels in the 470-790 MHz band

Over the past two years, more specifically in 2016 and 2017, AEC has actively participated in SEDDIF (South Europe Digital Dividend Implementation Forum). SEDDIF is a working group formed after the end of WRC 2015, in December 2015, under the umbrella of the ITU, which continuously followed the work of this working group. All national regulatory bodies, from all the countries in Southeast Europe, actively participated in SEDDIF: Austria, Hungary, Romania, Moldova, Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, Serbia, Republic of North Macedonia, Bulgaria, Greece and Turkey. Only Albania did not participate from the whole region.

The purpose of this working group is to carry out appropriate re-planning of the radio frequency band intended for broadcasting (DVB-T: 470-790 MHz), with the possibility of implementing the DVB-T2 standard, where the broadcasting service would use the 470-694 MHz radio frequency band.

In doing so, the 694-790 MHz radio frequency band will be freed up to be used for land mobile services and via the appropriate legal procedure, as stipulated in the LEC, it will be available to the operators providing electronic communication networks/services, and they will be able to offer their end users broadband internet access.

This radio frequency band is also popularly known as Digital Dividend 2, thus facilitating the process of optimizing the use of radiofrequency resources in the UHF band. The process of re-planning, coordination, bilateral and multilateral negotiations on the modification of the GE06D Plan was also facilitated and achieved in this way. After two years of activities, in Budapest in December 2017, a Framework Multilateral Agreement was signed by all members of SEDDIF (except Albania). AEC, on behalf of Republic of North Macedonia, additionally signed Bilateral Agreements with: Montenegro, Serbia, Bulgaria and Greece for the Frequency planning for future terrestrial digital television in the 470-694 MHz frequency band.

It is also necessary to sign an agreement with Albania in order to avoid unwanted harmful interference, as was the case with the LTE implementation. Namely, the Macedonian operators faced huge problems since the beginning of the LTE implementation in 2013, until 17/12/2017, when Albania officially informed AEC that the 790-862 MHz radio frequency band is free in the border region with Republic of North Macedonia.

Having all of this in mind and how things will be developing in the future, during the course of 2016, AEC, following the appropriate legal procedure, adopted a new Plan for allocation of radio frequency bands in the Republic of North Macedonia (the Plan). In the Plan, the aforementioned 470-790 MHz radio frequency band shall be divided into two bands, namely 470-694 MHz, which is primarily intended for the broadcasting service, 694-790 MHz, which is primarily intended for the broadcasting service and for land mobile service. In addition, the CERT decision on technology neutrality has been implemented, thus allowing operators that will provide electronic communications networks/services to be able to use any technology (2G, 3G, 4G, and in future 5G). With this regulatory approach, effective and efficient use of radio frequencies is provided for the ultimate goal of increasing competition, and ensuring better quality services for the end users of operators. Also, in addition to the changes that took place during WRC 2015, technology neutrality in all radio frequency bands for the land mobile service has been ensured. The Draft Plan was published for a public debate, after which a meeting was held with all interested parties, where they also had the opportunity to discuss it. All submitted comments were answered and publicly published on www.aec.mk, after which consent was requested and obtained from the Government of Republic of North Macedonia, as stipulated in the LEC. The Plan was published in the Official Gazette of Republic of North Macedonia no. 38/2016.

A graphic display of the 700 MHz band is shown in the following figure:

Fig. 7 Channel allocation of the 700 MHz band

As mentioned earlier, the 700 MHz radio frequency band has already been allocated to the broadcasting and land mobile service on a primary basis, the bandwidth has been divided into channels, and the CERT decision on technology neutrality ECC/DEC/(15) has been implemented. 01: Harmonized Frequency Arrangement for MFCN (FDD and option for SDL). Currently, for this radio frequency band, radio frequency authorisations have been granted for the broadcasting service, which are still valid, some expiring by 2019, and some later on, and in case of their extension, there is consent from the holders of those authorizations to move down to the lower 470-694 MHz radio frequency band.

Pursuant to Decision 2017/899 of 17/05/2017 of the European Parliament (Decision (EU) of the European Parliament on the Council on the use of the 470-790 MHz frequency band in the Union) and the signed bilateral co-ordination agreements with the neighbouring countries (with the exception of Albania), the release of the 694-790 MHz band should be completed no later than 30/06/2020.

Accordingly, during 2019, AEC will make changes, ex officio, to the channels that are used by the operators in this band for provision of digital television services (DVB-T).

The new channels will be as follows:

Digi Plus Multimedia, changed to JP MRD one.Vip one.VIP Allotment zone MUX 1 MUX 2 MUX 3 MUX 4 MUX 5 MUX 6 MUX 7 D1 Crn Vrv/Skopje 33 48 26 28 30 23 45 D1 Crn Vrv/Veles 40 47 D2 Stracin 21 32 46 24 42 37 41 D3 Turtel 22 32 38 24 39 43 44 D4 Boskija 21 37 38 34 39 41 44 D5 Pelister 25 29 33 22 37 38 42 D6 Mali Vlaj 32 39 31 26 36 44 41 D7 Stogovo 47 37 31 28 43 35 21 D8 Popova Šapka 24 34 38 27 36 41 22 Fig.8 - Assigned TV channels in the 470-790 MHz band

By the end of 2018, multiplex operators should notify AEC of their schedule (time frame, incl. the name of the arrangement zone, transmitting locations) for the transfer to the new channels. During the development of the schedule and the implementation of the changes in the arrangement zones of Stracin and Boskija, it is mandatory to have coordination among the holders of authorisations for use of radio frequencies in order to avoid any interruptions in the program.

After the release of the 694-790 MHz radio frequency band from the broadcasting service and its reallocation for the land mobile service, in order to increase the capacity of the broadcasting service that will remain to operate in the 470-694 MHz radio frequency band, a national strategy for possible transfer to DVB-T2 may be drafted.

To that end, in 2019, the Rulebook on DVB-T Receivers will be amended, in order to ensure that the imported TV receivers support DVB-T2 technology.

The radio 694-790 MHz radio frequency band, which will be released upon completing the legally prescribed procedure in the LEC, can be assigned to operators that will provide electronic communications networks/services.

Also in the radio frequency band 694-790 MHz, as well as in the 450 MHz band, frequencies for public safety and emergency services should be provided in accordance with the ECC decision (16)02 of 17 June 2016 on Harmonization of technical conditions and frequency bands for implementation of BB-PPDR systems (BroadBand Public Protection and Disaster Relief). According to this decision, the following frequencies shall be assigned to state institutions of public security: − − 733-736 MHz (uplink) / 788-791 MHz (downlink) − 450.5-456.0 MHz (uplink) / 460.5-466.0 MHz (downlink) − 452.0-457.5 MHz (uplink) / 462.0-467.5 MHz (downlink)

The tender procedure for granting authorisations for use of radio frequencies for the 694-790 MHz band has to be planned for announcement by the end of 2020.

Under the terms of the tender procedure, the extent of the scope to be offered (e.g. radio frequency blocks of 2x5 MHz or 2x10 MHz) has to be indicated. 45

In such tendering procedure, priority will always be given to the possible entry of a new network operator, bearing in mind the possibility of developing the competition.

The initial amount of the one-time fee for obtaining an authorisation for use of radio frequency for a new network operator, as well as for the existing ones, shall be determined by the Government of Republic of North Macedonia, as prescribed in the LEC.

3.6 GHz

The current arrangement of radio frequencies in this radio frequency band is shown in the following figure:

3.4 GHz 3.8 GHz

Неотел Free Free

Fig. 9 - Overview of the 3.6 GHz band

For the 3.6 GHz radio frequency band, the CERT decision on technology neutrality ECC/DEC/(11)06: Harmonized Frequency Arrangements for MFCN Operating in the Bands 3400-3600 MHz and 3600-3800 MHz has also been implemented. From the entire 400 MHz band, only 31.5 MHz in this radio frequency band have been assigned to the operator Neotel. This means that almost the entire frequency band of 368.5 MHz is free, and after implementing the legal procedure prescribed in the LEC, this radio frequency band can be assigned to operators that will provide electronic communications networks/services.

If necessary, a change to Neotel's authorisation will be made in order to enable the provision of continuous radio frequency blocks, for example, of 50 MHz or 100 MHz each.

The tender for granting of authorisation for use of radio frequencies for the 3.4-3.8 GHz band can be announced immediately upon submitted application by an interested party.

The terms of the tender procedure shall indicate the extent of the scope offered.

The initial amount of the one-time fee for obtaining an authorisation for use of radio frequency shall be determined by the Government of Republic of North Macedonia, as prescribed in the LEC.

26 GHz

The frequency band 24.25-27.5 GHz shall be divided into two parts as per the Plan: 24.25-26.5 GHz for civilian users, and 26.5-27.5 GHz for Government users. In order to be able to use the band for the mobile service, it is necessary to supplement the Plan for primary MOBILE allocation in the 24.5-25.25 GHz band (according to the results of WRC 2019). The following figure shows the current use of the 24.25-26.5 GHz band:

Fig. 10 – Overview of the 26 MHz band

For the 24.25-26.5 GHz radio frequency band, 110 authorisations for use of radio frequencies in the fixed service are currently granted. Of these, 109 are authorisations granted to one.Vip and one is authorisation granted to EVN Republic of North Macedonia. As seen in the figure, there are still free radio frequencies in this radio frequency band, but AEC has committed itself, in the upcoming period until 2020, to re-plan this radio frequency band and allocate it for land mobile services.

In the beginning, the following bands may be assigned: 24.25-25.16 GHz (910 MHz) and 25.45-26.175 GHz (725 MHz).

When interest in additional bands appears, the full range will be released. For the remained of this band, 26.5-27.5 GHz, which is now intended for Government users, the possibility of its conversion to civilian use will be examined.

Following the successful re-planning of this radio frequency band, upon the completion of WRC 2019, a procedure for implementing the decisions of WRC 2019 in the national regulations will be conducted, thus allowing this radio frequency band to be assigned to operators that provide electronic communications networks/services.

MEASURES: - MISA in cooperation with AEC will launch bilateral talks with representatives from Albania on the possible signing of a Memorandum of Understanding on the avoidance of unwanted harmful interference in the radio frequency bands when implementing mobile communications (especially 5G).

- AEC, in cooperation with MISA and the operators, will launch a public debate on the amount of the one- time fee for use of radio frequencies for introduction of 5G.

- AEC, in cooperation with the operators, will launch a public debate on the amount of the annual fee for use of radio frequencies, in accordance with the new proposed EU Directive on Electronic Communications.

- AEC, in cooperation with MISA and the operators, will launch a public hearing on the duration of the authorisation for use of radio frequencies, in accordance with the new proposed EU Directive on Electronic Communications, which will result in respective amendments of the LEC.

- AEC will actively participate in WRC 2019, where it will be decided on global and European level which radio frequency bands will be additionally allocated for land mobile services, where 5G services will be provided.

- AEC will conduct harmonization of the spectrum within CEPT, and will implement it in the national regulation during 2020. Prior to this, re-planning of certain bands and allocation thereof for the land mobile service has to be conducted.

- AEC will make changes, ex officio, in the channels of the 694-790 MHz band, used by operators to provide digital television services (DVB-T) for the purpose of freeing the 694-790 MHz radio frequency band.

- The tender procedure for granting authorisations for use of radio frequencies for the 694-790 MHz band has to be planned for announcement by the end of 2020.

- The tender procedure for granting authorisations for use of radio frequencies for the 3.4-3.8 GHz band has to be announced as soon an application is submitted by an interested party. If necessary, AEC has to amend the authorisation of Neotel in order to enable the provision of continuous radio frequency blocks, for example of 50 MHz or 100 MHz each.

- For the 24.25-26.5 GHz radio frequency band, if needed, AEC may conduct re-planning by 2023 and allocate it for land mobile services.

ANNEXES

ANNEX 1: EU BROADBAND TARGETS

A DIGITAL AGENDA FOR EUROPE (2010):

− Broadband access for all to much higher internet speeds (30 Mbps or above) by 2020, and 50% or more of European households subscribing to internet connections above 100 Mbps.“

EUROPEAN GIGABIT SOCIETY (2016 ):

− All European households, rural or urban, will have access to Internet connectivity offering a downlink of at least 100 Mbps, upgradable to Gigabit speed (objective for 2025) − Gigabit connectivity for all main socio-economic drivers such as schools, transport hubs and main providers of public services as well as digitally intensive enterprises (objective for 2025) − All urban areas and all major terrestrial transport paths to have uninterrupted 5G coverage (objective for 2025) − Intermediate objective for 2020: 5G connectivity to be available as a fully-fledged commercial service in at least one major city in each Member State, building on commercial introduction in 2018.

ANNEX 2: IMPLEMENTED MAPPING

DETAILED MAPPING OF EXISTING COMMUNICATIONS NETWORKS BUILT WITH PUBLIC FUNDS IN R. of MACEDONIA The working group tasked with determining free capacities and their future use in the existing electronic communication networks and assets built with public funds (representatives of AD MEPSO (Electricity Transmission System Operator), ELEM (Power Plants of Macedonia), JP MŽ Infrastruktura (Macedonian Railways-Infrastructure), ZELS (Association of Local Self-government Units), AEC, MISA (Ministry of Information Society and Administration), MARnet (.mk domain authority) and JP MRD (Public Broadcasting Company)), in the period between the start of 2018 until August 2018, completed the mapping of existing networks built with public funds. For the first time, a database of the complete communications infrastructure built with public funds has been established and it is available via the website of AEC's Single Point of Information (ETI): https://e-agencija.aek.mk/JavniEKM/. This ensures efficient use of the free communications capacities built with public funds, development of electronic communications in the country, etc.

Figure: Existing optical infrastructure built with public funds 50

DETAILED MAPPING OF EXISTING COVERAGE AND PLANS OF OPERATORS FOR FUTURE INVESTMENTS IN NGA NETWORKS In the course of 2018, AEC, in cooperation with the Working Group for providing better coordination of the mapping process for the existing and planned future broadband networks of the operators, completed the mapping of the existing and planned broadband coverage on the whole territory of Republic of North Macedonia. During the mapping process, all operators in Republic of North Macedonia took part, and the quality data on the number of households as per the census circles provided by the State Statistical Office were of great importance for the analysis. Detailed mapping was carried out for fast NGA networks (download speeds between 30 and 100 Mbps) and for ultra fast NGA networks (download speeds greater than 100 Mbps). On the basis of the EU recommendations, the colours of the areas in the country were determined as follows: - White zone area where: there is no NGA network, and such a network will not be built within 3 years, - Grey zone area where: there is an NGA network or in the next 3 years there will be only one NGA network30 and there are no plans from any operator to deploy a NGA network in the next 3 years, - Black Zone area where: there are at least two NGA networks of different operators, or such will be deployed within the next 3 years.

RESULTS FROM THE MAPPING OF FAST NGA NETWORKS (30-100 Mbps): Of the total number of households (570,784) in Republic of North Macedonia, 78% have access to fast NGA networks (download 30-100 Mbps) or 445,233 households.

a) Number of households in white zones (W30): 85,958 households, representing 15.06% of the total number of households. b) Number of households in grey zones (G30): 61,931 households, representing 10.85% of the total number of households. c) Number of households in black zones (B30): 422,895 households, representing 74.09% of the total number of households.

RESULTS FROM THE MAPPING OF ULTRA FAST NGA NETWORKS (download >100 Mbps): Of the total number of households in Republic of North Macedonia, 43.8% have access to ultra fast NGA networks (download >100 Mbps) or 249,979 households. d) a) Number of households in white zones (W100): 174,242 households, representing 30.53% of the total number of households. e) b) Number of households in grey zones (G100): 123.684 households, representing 21.67% of the total number of households. f) c) Number of households in black zones (B100): 272,858 households, representing 47.80% of the total number of households. The mapping can be found on the following link: http://aek.mk/NGAPokrivanje/

30 The same company can manage separate fixed and wireless NGA networks in the same area, but this will not change the "colour" marking of that area.

Figure: White zones – W100

Data shows that coverage with fast broadband networks (78%) is roughly the same as the average in the European Union (80%), which is very good. However, the existing coverage with ultra fast broadband networks (43.8%) is much lower than the EU average (58%). The analysis of the coverage of fast and ultra fast NGA networks of operators in all 34 cities and towns in Republic of North Macedonia produces the following table:

City/Town Population White zone Grey zone Black zone White zone Grey zone Black zone name 30-100Mbps 30-100Mbps 30-100Mbps >100Mbps >100Mbps >100Mbps

Skopje 467.257 Outskirts: part Otskirts: Almost full Outskirts: Čair, Šuto High coverage. of Saraj, Glumovo, coverage. Kondovo, Orizari, delovi Kondovo, Petrovec, Saraj, Ljubin, od Glumovo, Gorno Glumovo, Butel Šiševo, Orizari, Šiševo, Gjorče Petrov. Marino. Ražaničino, Gorno Nerezi, Outskirt zones: Taor, Orešani. Batinci, Saraj, Sopište, Studeničani, Jurumleri, Kadino, Ilinden.

Marino, Aračinovo, Stajkovci, Radišani, Mirkovci.

Bitola 74.550 Full coverage. Full coverage. Largest cities in the country

Kumanovo 70.842 Small outskirts Almost full Small outskirts Small outskirts Coverage of part. coverage. part.. part. most of the town. Prilep 66.123 Full coverage. Full coverage.

Tetovo 52.321 Full coverage. Full coverage.

Veles 43.716 Small outskirts Almost full Small outskirts Almost full part. coverage. part. coverage. Štip 43.652 Small outskirts Almost full Small outskirts Almost full No coverage. part. coverage. part. coverage in grey zone. Ohrid 42.033 Small outskirts Almost full Small outskirts Coverage of part. coverage. part. most of the town. Gostivar 35.847 Full coverage. Small outskirts Almost full part. coverage.

Strumica 35.311 Full coverage. Full coverage.

Kavadarci 29.188 Full coverage. Full coverage. sized towns sized -

Kočani 28.330 Full coverage. Almost full No coverage. Medium coverage in grey zone. Kičevo 27.067 Full coverage. Full coverage.

Struga 16.559 Full coverage. Outskirts part. Small outskirts Coverage of part. most of the town. Radoviš 16.223 Full coverage. Small outskirts Almost full No coverage. part. coverage in grey zone. Gevgelija 15.685 Small outskirts Almost full Small outskirts Almost full part. coverage. part. coverage.

Debar 14.561 Outskirts part. Outskirts part. Coverage of Outskirts part. Almost full No coverage. most of the coverage in town. grey zone. Kriva 14.558 Outskirts part. Coverage of Outskirts part. Coverage of No coverage. Palanka most of the most of the town. town in grey Sveti Nikole 13.746 Outskirts part. Outskirts part. Coverage of Outskirts part. Coverage of No coverage. most of the most of the town. town in grey Negotino 13.284 Full coverage. Full coverage.

Delčevo 11.500 Full coverage. Outskirts part. Coverage of No coverage. most of the town in grey Vinica 10.863 Full coverage. Outskirts part. Coverage of No coverage. most of the town in grey zone

Resen 8.748 Celosna Full coverage. pokrienost. Probištip 8.714 Full coverage. Outskirts part. Coverage of No coverage. most of the town in grey Berovo 7.002 Small outskirts Almost full Outskirts part. Coverage of No coverage. part. coverage. most of the town in grey Kratovo 6.924 Full coverage. Outskirts part. Coverage of No coverage. most of the town in grey Small towns Bogdanci 6.011 Full coverage. Full coverage.

Kruševo 5.330 Full coverage. Full coverage No coverage. in grey zone.

Makedonska 5.147 Full coverage. Outskirts part. Full coverage No coverage. Kamenica in grey zone.

Valandovo 4.402 Full coverage. Outskirts part. Full coverage No coverage. in grey zone.

Makedonski 3.740 Outskirts part Almost full No coverage. Outskirts part. Almost full No coverage. Brod coverage in coverage in grey zone. grey zone Demir Kapija 3.275 Outskirts part. Coverage of Outskirts part. Coverage of most of the most of the town. town. Pehčevo 3.237 Outskirts part. Almost full Outskirts part. Almost full No coverage. coverage. coverage in grey zone. Demir Hisar 2.593 Full coverage. Outskirts part. Almost full No coverage. coverage in grey zone.

The mapping data shows that the white zone W30 are mostly outside the cities/towns, whereas the white zones W100, except in the rural areas (white zones W100 include the white zones W30) appear in parts of the major cities/towns. This tendency is more pronounced for the grey areas G30 and G100. This is due to the fact that NGA network coverage in areas outside the cities/towns (rural/remote areas) is a challenge for the operators, both technically and economically: - Operator has to reach the rural area with a backhaul network (owned or leased in), - Operator has to cover the area with wired and/or wireless NGA access network (if it does not exist), and if the users are very far apart, it is an additional challenge, - Rural areas with low population density, lower average incomes, and less favourable age or education structure can additionally deter the Operator from future investment plans.

The aforementioned confirms the already announced planned investments of the operators for the next three years: - Number of households that in the next three years will have access to fast NGA networks: 484,826 households, representing 84.94% of the total number of households. Hence, it is expected in the next three years that the number of households that will be able to access fast NGA networks will increase by 6.94% (from 78% to 84.94%). - Number of households that in the next three years will have access to ultra fast NGA networks: 396,542 households, representing 69.47% of the total number of households. Hence, it is expected in the next three 54

years that the number of households that will be able to access ultra fast NGA networks will increase by 25.67% (from 43.8% to 69.47%).

It may be ascertained that the planned investments of the operators in Republic of North Macedonia are mostly for ultra fast NGA networks, with a particular focus in the cities/towns. In line with EU31 recommendations, backhaul networks are needed so that the retail operators may provide services to end users, and the state aid projects aimed at financing backhaul networks (with open access to all operators and technologies) show particularly competitive features.

31 Please see ANNEX - USE OF STATE AID FOR DEVELOPMENT OF BROADBAND NETWORKS

ANNEX 3: BROADBAND INFRASTRUCTURE SELECTION

Three-layer model Broadband networks are generally comprised of three layers: - Passive (physical) infrastructure (broadband network without active components) that normally consists of ducts, cables, towers, buildings/facilities, etc. - Active equipment, which usually consists of transponders, switches, routers, controlling/management servers, etc. - Services to end users.

e-health, care for the elderly, TV, internet, telephony, video conference, Services entertainment, remote work, e-government, e-education, e-commerce, IoT, cloud operations

switches/routers, microwave radio equipment for providing switches, DSLAMS, DOCSIS, Active equipment switches/routers, data centres point-to-point transmission radio base stations (p2p)

fibre optics, copper wires, Passive infrastructure fibre optics fibre optics, antenna sites antenna sites

Table 1: Three-layered broadband network

Similar to other types of infrastructure (such as roads, transmission lines, water supply pipelines, etc.) the passive broadband infrastructure is usually characterised with high capital expenditures (CAPEX), low operating expenditures (OPEX), low economy of scale and stable low income for a long time period, locally limited, difficult to duplicate, and naturally subject to regulation (may be defined as a natural monopoly). On the other hand, the active equipment is characterized by high OPEX, economy of scale and is subject to limited regulation. Physical infrastructure is a permanent asset (once the cables are deployed, they have an economic lifespan that can be measured in decades), whereas the active equipment, due to the rapid technological development, is subject to rapidly becoming obsolete and deterioration of the electronics, usually lasting less than 10 years.

HORIZONTAL DIMENSION OF THE BROADBAND NETWORKS Usually, an electronic communications network providing broadband access consists of three different parts: A. Backbone network, B. Local backhaul/aggregation networks, and C. Access or "first mile" connection segment.

Backbone network Internet Local network national or

international networks

end user connections

Figure: Structure of the Broadband Network Source: EC The backbone network usually consists of a fibre optics ring that connects different areas of the municipality or the region. Here, the entire traffic from all users in the region/municipality is aggregated. Local backhaul/aggregation networks connect several access nodes (ANs), thus local traffic is transmitted to a higher layer in the network. This is most commonly done through ring-shaped optical connectivity, although tree topologies can be used as well (they are usually cheaper, but less redundant). If a relatively small number of end-users need to be connected in the area, and if the resources are limited, microwave radio links for the local backhaul networks can be used as a short- term/medium-term solution. The "First-mile" connectivity are links from the end users (houses, apartment buildings, enterprises, hospitals, schools, local public administration, etc.) to the access nodes, where the initial traffic aggregation takes place. In fact, this access segment connects the local backhaul network to the end users. “First-mile "networks can be: - Core networks (ADSL, ADSL2+, DOCSIS 2.0, third-generation mobile networks and satellite systems) - NGA networks (access networks based on fibre optics FTTx32, advanced upgraded cable networks33, certain advanced wireless access networks capable of providing high bandwidth per subscriber).

It is important to emphasize that in the longer term NGA networks are expected to replace the existing core networks, not just to upgrade them. Common topologies for backbone and local backhaul networks are as follows: tree topology, ring topology and mesh topology. For "first-mile" connectivity, there are two basic point-to-multipoint topologies (p2mp) and point-2-point (p2p). Taking into account today's technological developments, the backbone network and local backhaul networks are commonly referred to as NGN networks.

32 The term FTTx refers to FFTC, FTTN, FTTP, FTTH and FTTB.

33 Using the Cable Modem Standard "DOCSIS 3.0".

Infrastructure Existing technology Basic properties of the physical medium Latest Data transfer Joint use of Available Basic transfer wired technology speed (down/up) “first mile” bandwidth reach Fibre optics transport GbE (Gigabit 1/1 Gbps No 50 000 GHz 80 km p2p Ethernet) Fibre optics transport GPON up to 2.5/1.5 Gbps Yes 50 000 GHz 20-45 km p2mp (PON) 0.5-3.0 km Coaxial cable DOCSIS 3 up to 300/50 Mbps Yes 1 GHz (high-low speed) 0.2-1.0 km Twisted pair VDSL 2 up to 60/10 Mbps No 0,05 GHz (high-low speed) wireless Terrestrial wireless LTE up to 60/10 Mbps Yes 0,1 GHz several km Ka-band Satellite up to 20/8 Mbps Yes 10 Ghz -- systems Source: Acreo Swedish ICT Table 2: topology, technologies and infrastructure features

Table 3 shows the basic characteristics of different types of "First-mile" infrastructure. First-mile infrastructure Advantages Disadvantages Adaptability to future needs, very high level of FTTH34 / FTТB35 High investment in passive infrastructure services, symmetrical Download speed depends on the length of the copper line, number of users, type of applications, volume of data traffic and technology used. The new copper-based technology (for example, G.Fast vectoring) can deliver high speeds, but have the same limitations. The xDSL technology is very asymmetric, the upload Relatively small investment required for speed is generally much lower than the download Telephone copper line passive infrastructure. speed, which may hinder new services (cloud computing, video-conferencing, remote operation, remote presence, etc.). It is necessary to invest more in active equipment (with a working lifespan of 5-10 years). A temporary solution - investing in fibre optics infrastructure will most likely only be delayed for 10 to 15 years

The bandwidth is shared between multiple users. The peak traffic period reduces the bandwidth available for each user. Relatively small investment required for The inability for unbundling actually does not allow for Coaxial copper line passive infrastructure. competition. A temporary solution - investing in fibre optics infrastructure will most likely only be delayed for 10 to 15 years.

34 Fibre-to-the-home network, so far to the premises of the end-user, using fibre optics, i.e. access network consisting of fibre optics, both in the feeder and the drop segments of the access network (incl. the internal wiring). It is considered a first-mile infrastructure.

35 Fibre-to-the-building, reaches the end-user's premises with fibre optics, or fibre optics placed next to the building, but the building interior is cables with copper, coaxial cable or LAN. It is considered a first-mile infrastructure. 58

The bandwidth is shared between multiple users. The peak traffic period reduces the bandwidth available for each user. The strength of the signal quickly decreases with No first mile wire connections are required. distance and is affected by weather conditions. Bad Antennae - wireless access The infrastructure can also be used for weather conditions and lack of line of sight can reduce commercial mobile services the quality of the signal. A temporary solution - investing in fibre optics infrastructure will most likely only be delayed for 10 to 15 years.

A limited number of users can be covered in one region. Backbone and local backhaul networks High latency of the signal that hinders the use of are not needed: Relatively small investment certain applications. required for passive infrastructure. Satellite antennae Relatively high costs for end-user active equipment. Easily connection of users who are in a Bad weather conditions and lack of line of sight can relatively large area (at regional or even reduce the quality of the signal. national level) Usual limit (in commercial offers) for the volume of traffic that can be used by the user. Source: EC Table 3: Advantages and disadvantages of different infrastructure

ANNEX 4: INVESTMENT SELECTION MODEL

Role of public bodies In general, public bodies may have different roles in the investment models for broadband networks: • Direct investment: Publicly managed municipal network. • Indirect investment: Privately managed municipal network (also known as public outsourcing/concession model) • Supporting community-led initiatives: Community broadband • Subsidising an operator. The choice of the model is a political decision based on the cultural and socio-economic situation, the mid-term and long- term development plans of the area where the state aid will be used.

Publicly managed municipal network (Direct Investment) In this model, a public body builds the broadband network in a particular municipality, district, or region. Therefore, this model is also called a public design, build and operate model, although this can be done in cooperation using a public- private partnership (PPP). The public body manages the network deployment and directly controls it. Within this model, it is necessary to establish a company or a dedicated department within an existing enterprise. This entity deploys the network either through a standard public procurement (construction companies, but not telecommunications operators). The public body retains the ownership of the network and manages the operation and maintenance thereof (usually the passive layer, but sometimes the active layer as well). The network is generally made available to all market participants, under fair and non-discriminatory conditions (in the passive or active part, depending on the selected business model, see Annex - Business model selection). When using a PPP (which is recommended in case a private entity that owns infrastructure is ready to make it available for the Project), a new company is usually established as a public-private joint venture. This new company will need to integrate the existing public and private infrastructure, and will operate in a similar manner as previously described. The publicly-managed municipal network model is very common in the Nordic countries (from Stockholm to Suupohja in rural Finland), and has led to many successful cases regarding coverage, service availability, access to end-users, competitiveness and financial sustainability. The Swedish region Skånet uses the PPP option, encouraging the presence of private entities with an already established fibre optics network, and willingness to cooperate.

Privately managed municipal network (Indirect investment) In this model, the public body, via a public procurement procedure, chooses a private entity, which will ensure the construction and operation of the broadband network in the municipality or the region. This is sometimes called public outsourcing or a concession model.

In this model, the public body does not have to establish a dedicated company, and the necessary competencies and financial risks are quite limited for the public body. The contracted private company generally builds an open, operator- neutral network through which competing service providers can deliver their services to all end-users. The public body retains ownership of the passive infrastructure, but the operation contract for the external private entity is usually in the form of a right to use the network for a certain period, e.g. for 20 years. In order to guarantee fair and non-discriminatory conditions (operator neutrality) to all service providers, the private entity that builds and operates the network should ideally be prohibited to offer its own services, even though this is not always so, mainly because lack of providers of operator-neutral network services and service providers (please seen Annex - Business model selection), and due to the low awareness for this option. The private entity invests (often complemented by significant public funds) and takes over all incomes, but also the business risks during the contract period. With the expiration of the agreement, the network infrastructure remains in the possession of the public body, which can then decide to extend the existing agreement with the same private entity, to sign an agreement with another company, or even completely change its involvement (to adopt a model of publicly managed municipal networks). This model is found in continental Europe (e.g. in the rural area of Nièvre in France or in the Italian region of Piedmont).

Supporting community-led Initiatives: Community Broadband In this model, the broadband investment is implemented as an initiative of the local residents, the so-called “bottom-up” approach. Experience shows that the project utilising this model have been generally successful in increasing the broadband penetration. Ensuring competition varies from project to project: most use an open network business model with a good level of competition; others prefer acting as a vertically integrated operator (please see Annex - Selecting a business model), etc. The role of the public body in this case is to provide support, if and when needed. This can be in the form of co-financing, but also in an advisory form, ensuring the right of way, regulation and coordination with the setting up of another infrastructure, access to public infrastructure and points of presence (such as date centres) for backhaul connectivity, etc. The public body can also play an important role as a fair mediator that will contribute to the establishment of fair conditions for all operators seeking access to the infrastructure.

Subsidising an operator In this model, a public body is not directly involved in deploying broadband networks in the area, but rather subsidises one market entity (usually a large telecommunications operator) in order to modernise/upgrade its broadband infrastructure. The public body funds the gap between what is commercially viable and the coverage that is desired to be achieved, hence this model is also known as a model for funding the gap, or the private design, build and operate model. In this model, non-refundable funds - grants are offered for achieving the required results. It does not mean that the recipient of the subsidy must automatically be an existing operator. However, given that the traditional incumbents are usually the only provider of existing passive infrastructure in the region, they will have a significant competitive advantage in the public call for subsidies compared to the others.

Existing incumbents and large alternative service providers often have passive infrastructure and active equipment, so they provide end-users with services in the "vertically integrated" model (see Annex - Business model selection). One of the advantages of this model is relatively simple contractual arrangement, thus the ability for quick and easy introduction. Another potential advantage is transferring the risk to the recipient of the non-refundable funds, since the public sector is not directly involved in deploying the network and attracting a sufficient number of users. However, the disadvantage is that the public sector does not receive a financial return from the Project (which could be reinvested in deployment of any future network). Instead, at each stage of the new network introduction, new financial resources will be required, leading to higher public investments than initially planned. Some of the problems in this subsidy model are the definition of the public call scope (in order to ensure competitiveness and to prove that the really the subsidized funds have achieved the goal). In this model, activities to reduce the demand risks may also be useful, for example, the public sector's obligation to use the new infrastructure or guarantee that third-party service providers will have easy access to the new infrastructure at low transaction costs.

MODEL SELECTION Which of the four models should be selected is based on the available budget, as well as on the socio-economic context of the target area, the level of ambition, as well as the goals set for development of a particular region. For example, the inability to use ICT (due to aging, low level of education, poor ICT skills of the population in a particular area, presence of a large number of small and medium enterprises/micro enterprises, low level of innovation) can slow down the broadband penetration, thus the penetration of ICT. Such circumstances could in most cases benefit the models with long-term investments that allow sufficient time to increase penetration, thus ensuring a gradual socio-economic impact. Also, given that society and the entire economy accumulate benefits from NGN infrastructures, short-term investment models are not likely to reach the mid-term development plans for the regions and rural areas. The selected investment model for the Project may also have a significant impact on further investments. For example, a model that involves granting non-refundable funds to an operator (in order to reduce the gap) can lead to short-term results and require less funds than the direct investment model (Publicly managed municipal network). However, this model is less likely to be the driver of future stable investments, compared to a model that involves reinvesting the profits in order to increase network coverage. Therefore, these short-term models may prove more expensive in the long run, especially when large areas (even with lower population density) remain uncovered.

Level of neutrality Generating Transfer of Availability of between income for Control over the financial risk to community wholesalers and expanding the Project market entities infrastructure retailers network Publicly managed High Low Potentially high High High municipal network

Privately managed Medium Low Medium Medium Medium municipal network Community broadband access Medium Low Medium Low Medium network Subsidies for an Low High Low Low Low operator Source: EC Table 1

ANNEX 5: BUSINESS MODEL SELECTION As pointed out in Annex - Broadband infrastructure selection, broadband networks are composed of three layers: passive physical infrastructure, active equipment and services. Based on this, three major business roles can be identified: 1. Physical Infrastructure Provider (PIP) is an entity that owns and is responsible for maintaining with passive infrastructure. It can be: a) Backbone Physical Infrastructure Provider (Backbone PIP) is an entity that owns and manages the passive backbone infrastructure and to some extent the passive infrastructure in the local network. Backbone PIP can be a public or private entity with long-term investment plans or in some cases a local community. b) Access Area Physical Infrastructure Provider (Access Area PIP) is an entity that owns and manages the first-mile connectivity and to some extent the local passive infrastructure. Access area PIP can be a telecommunications operator, housing association, local community, municipality, owners of individual houses. 2. Network Services Provider/Network Operator - NP (Network Provider) is an entity that manages active equipment and is usually the owner of it. NP leases in "dark fibre" without active equipment from a PIP in order to provide connectivity to end users for the service providers (SP). In the PLOM model (see below), certain NPs can also offer their services (in addition to the services offered by other SPs), in which case they are called integrated NP+SPs or operators without infrastructure. An incumbent, an alternative operator, etc. may be a NP.

3. Service Provider - SP (Service Provider) is an entity that delivers digital services (e.g. e-health, television, internet, telephony, video-conferencing, entertainment, remote work, smart monitoring, etc.) to end users. SP can be a small or large company that provides end-user services at local or national level through a connectivity network provided by a NP. SP only has to put equipment at a particular location (data centre) and interface to the NP equipment. Different business models exist depending on the role assumed by the market participant (PIP, NP, SP). If one entity has taken on all three business roles, then it is deemed to be vertically integrated, and the business model is called a "vertically integrated model". Large telecom operators are usually vertically integrated. In certain cases, especially if a vertically integrated operator has significant market power (SMP), the regulatory body may, under certain conditions, impose obligations for the former to open its access network for competition at the passive or active layer. In this case, the network owner should design it in such a way so as to provide its own services and allow access to its competitors. Although this model is sometimes referred to by the incumbents as an “open access model”, it is in fact a "vertically integrated unbundling model" (at the physical layer, i.e. the unbundled local loop LLU36, or at active layer, i.e. bitstream37 access). On the other hand, if the roles are separated (see Figure 1), in this case it is a "open network model". In the open network model, the infrastructure is available to all market entities under equal conditions. Three open network business models can be identified: A. PLOM (Passive-layer open model); B. ALOM (Active-layer open model), and C. 3LOM (Three-layer open model). 64

Source: EC Figure 1: Open access models The following figure shows the generic value chain for the open network model.

Source: EC Figure 2: Value chain of an open network model

36 The physical unbundling grants access to the end-user's access line and allows the competitors' transmission systems to transmit directly through it. In certain circumstances, virtual unbundling can be deemed equivalent to physical unbundling.

37 Bitstream access: The wholesale access provider installs a high-speed access connection to the client's premises and makes this access connection available to third parties.

End users can be citizens, small or large companies, hospitals, schools, public administration, etc. Users at the wholesale level are entities that, for their communications needs, lease in dark fibre from the Backbone PIP or NP's networking services. They can be mobile operators, cable operators, banks, large companies, the public sector, etc. 65

PASSIVE-LAYER OPEN MODEL (PLOM) In this model, a single entity (public body) builds and manages the passive infrastructure, which is after available to all market entities under fair and non-discriminatory conditions. This entity deploys the passive infrastructure or it is done by a company selected via public procurement procedure (construction firm, but not a telecommunications operator). The entity (PIP) reserves the right to ownership of the passive infrastructure and is responsible for its operation and maintenance. In this model, the broadband network is open at the passive layer, where the competitors (integrated NP+SPs or NPs with open access providing connectivity for the SPs) gain access to end users. In can be noted in Figure 2 that the Backbone PIP generates revenue from operators, who lease in the dark fibre in order to provide services to their users. These operators lease in the passive connectivity, i.e. first mile connectivity (fibre, copper, etc.) from the PIP access area in order to provide services to end users in the local area. As in all other open network models, end users select services from their chosen operator and pay a fee for it. The Access Area PIP can generate revenue from end users in the form of a connection fee (one-time) and/or monthly network fee. The advantage of PLOM is that it gives the operators maximum freedom and control over the design of their networks. Disadvantage is that each competitive operator has to deploy active equipment at the access node in each area it wants to cover (except if it enters into a joint use contract), and if the population density is to low, each access node will aggregate small number of users, thus making it economically unsustainable for more than one operator per area. This reduces competition, while operational and capital expenditures (OPEX and CAPEX) are high. Therefore, the PLOM model is best used in relatively large areas with dense population, such as larger cities. The PLOM model is commonly used in a public managed municipal network in large cities, where a public body takes on the role of a Backbone PIP (a good example is the fibre optics network in the City of Stockholm). In sparsely populated areas, many public bodies in EU member states have selected the ALOM or the 3LOM model, where the competition among the service providers is achieved by providing an active-layer open network, so that the network costs (network design, procurement/deployment of active equipment, operation and management) are sufficiently low in order to incentivise market entry.

ACTIVE-LAYER OPEN MODEL (ALOM) In this model, one entity deploys and manages both the passive and the active layers (acting as an integrated PIP+NP). This entity deploys active equipment at all access nodes and builds an open, operator-neutral network, through which all SPs have wholesale access and can provide services to their end users. As shown in Figure 1, in the ALOM model, the roles of the backbone PIP and the NP are merged. The Backbone PIP + NP receives revenue from the SPs, allowing them to provide their services through the backbone network and through the first mile connectivity (which is leased in from the Access Area PIP). End users select services from their chosen operator and pay a fee for it.

THREE-LAYER OPEN MODEL (3LOM) In the three-layer open model, the roles of PIP, NP and SP are explicitly separated. In this case, the public body has the same role as in the PLOM model, but in the active layer the role of NP is awarded to a single company via public procurement procedure. The NP deploys active equipment at all access nodes and builds an open, operator-neutral network, through which all SPs have wholesale access and can provide services to their end users. In order for all SPs to be guaranteed fair and non- discriminatory conditions (operator neutrality), the NP is usually prohibited to provide its own services. Taking into account Figure 2, the Backbone PIP receives revenues from the NP for leasing out the dark fibre. The NP leases in the passive connectivity from the Access Area PIP. Again, end users select the services from their chosen service provider and pay a fee for the service.

VERTICALLY INTEGRATED MODEL Incumbents, and to some extent major alternative operators, usually have passive and active infrastructure and offer services to end users via the so-called "vertically integrated model". There are variations where an operator offers access to competing service providers at wholesale level. There are many cases in the EU, where public bodies have built broadband networks using the vertically integrated model, which was common for the initially built municipal networks (for example in Scandinavia). However, this model is increasingly being abandoned in favour of 3LOM or publicly managed ALOM. This is mainly due to the acceptance of the fact that the market takes on some roles more efficiently. If the vertically integrated operator has significant market power (as is usually the case with the incumbents), or if it has received public subsidies, the provision of network access for its competitors is usually mandatory at the physical layer (LLU) or at the active-layer (bitstream). In the first case, competing operators deploy their equipment at the access nodes in the areas they want to cover. In the second case, competing operators deploy their network equipment in a data centre, where they connect it to the network owner.

Source: EC Figure 3: Vertically integrated model

The new solutions for modernising the copper lines (FTTC38 + VDSL39) may be incompatible with the local loop unbundling, in case there is not sufficient room for the equipment of the competing operator in the street cabinets or when so called vectoring40 is used. Nevertheless, virtual unbundling may be provided via increasing number of technologies, provided certain conditions are observed.

BUSINESS MODEL SELECTION Table 1 shows how different business models can be applied to each investment model (see Annex - Investment model selection). Depending on the level of its involvement, the public body can decide to define the business model to a greater or lesser extent. Demographic, commercial and cultural conditions play an important role in the model selection. In general, selecting a business model that will provide a win-win situation for all stakeholders (including the end users, local businesses, service providers, and incumbents) will increase the chances for success of the Project.

BUSINESS MODEL PLOM ALOM 3LOM Vertically integrated Ownership: public bodies

al Ownership: public bodies Ownership: public bodies PIP: public body PIP: public body PIP: public body NP: public procurement NP: open market NP: public body Publicly network (3-5 years) managed municip SP: open market SP: open market SP: open market

Ownership: public body

Ownership: public body PIP: public procurement PIP: public procurement (right of use 20y) (right of use 20y) NP: public procurement

NP: public procurement (right of use 20y) (right of use 20y) SP: public procurement

rivately managed rivately SP: open market (right of use 20y) and municipal network municipal P LLU/bitstream obligations

Ownership: operator Ownership: operator PIP: owner PIP: owner INVESTMENT MODEL NP: owner NP: owner

operator SP: owner + LLU/bitstream

Subsidised Subsidised SP: owner + open market obligations Ownership: Ownership: community/investors community/investors Ownership: PIP: owner/public PIP: owner/public community/investors procurement procurement PIP: owner NP: owner/public

ommunity ommunity NP: owner/public NP: public procurement Broadband C procurement procurement SP: open market SP: owner/public SP: open market procurement Source: EC Figure 4: Selection of business/investment model

38 Fibre-to-the-Cabinet

39 Very-high bit-rate Digital Subscriber Line 40 Handbook for decision makers: the state aid rules explained

ANNEX 6: USE OF STATE AID FOR DEVELOPMENT OF BROADBAND NETWORKS

1. GENERAL The purpose of state aid for broadband networks is to ensure that a higher level or faster coverage rate, and use of broadband connectivity are achieved than would otherwise be the case without state aid, thereby supporting higher quality, more affordable services and pro-competition investments. If the state aid for development of broadband networks is used in areas where market operators themselves would normally choose to invest or have already invested, this could significantly undermine the incentives of commercial investors to invest in broadband Internet. In such cases, state aid for broadband networks may become counter-productive to its objective. For these reasons, detailed mapping and analysis of the broadband network coverage and future investment needs has to be done. For NGA networks, the following may be defined: - "White NGA" area is considered an area where NGA networks do not currently exist and where they are unlikely to be deployed within 3 years by private investors. Such an area is eligible for state aid for NGA, in accordance with the rules on state aid. - "Grey NGA" area should be considered an area where there is only one deployed NGA network42 or one will be deployed in the next 3 years, and where there are no plans from any operator to deploy a NGA network during the next 3 years. More detailed analysis is required in this area in order to confirm whether state action is needed, as state action in these areas poses a high risk of pushing out existing investors and distorting competition. - “Black NGA” area should be considered an area where at least two NGA networks of different operators exist, or such networks will be deployed within the next 3 years. State support for an additional publicly funded equivalent NGA network in such areas is likely to seriously distort the competition43. State aid may also be used to finance backhaul44 NGN networks45 that are not reaching the end users. Backhaul networks are an indispensable way of entry for retail telecommunication operators for providing access services to the end users. State aid projects aimed at financing backhaul networks46, which are limited to construction works and open for access to all operators and technologies, show particularly pro-competitive features. When identifying the target areas, whenever the public action is limited to the backhaul segment of the network, the state aid assessment shall take into account the situation both on the markets of backhaul networks and access networks47.

41 Text is in accordance with the "EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks (2013/C 25/01) 42 The same company can manage separate fixed and wireless NGA networks in the same area, but this will not change the "colour" marking of that area. 43 The exception to this is set out below in the text in point 4 (Aid for High Speed Broadband Networks) 44 Backhaul network: The part of the broadband network, which is the intermediate connection between the backbone network and the access network, and carries data to and from the global network. 45 Commission Decision for Case N 407/09 - Spain - Optical fibre Catalonia (Xarxa Oberta) 46 Actions that go beyond the operator's facility (central office level) shall already be considered NGA, and not NGN networks. See Commission Decision for Case SA.34031 - Next generation broadband in Valle d'Aosta. 47 Commission Decision for Cases N 407/09 — Spain — Optical fibre Catalonia (Xarxa Oberta) and SA.33438 — Poland, Broadband network for Eastern Poland.

The subsidised broadband network has to be able to provide step-by-step change regarding the availability of broadband internet. A step-by-step change may be demonstrated if as a result of the public action (i) the selected bidder made significant new investment in a broadband network48, and (ii) the subsidised infrastructure has brought significant new market opportunities concerning the availability of broadband services and capacity49, speed and competition50. The step- by-step change is compared with the existing, and the specifically planned network deployments. The role of public bodies in state aid projects for development of broadband networks is various. Taking into account that every plan for NGA network coverage via use of state aid must select the broadband infrastructure, the investment model and the business model, the public sector has to answer questions of various nature. In that context: - When selecting the broadband infrastructure (please see Annex – Broadband infrastructure selection), the key question to be answered is the following: Whether the state aid is going to be used for deploying broadband infrastructure adapted to the future needs or it is sufficient to modernise the existing infrastructure, taking into account the advantages and disadvantages of both options? - When selecting an investment model (see Annex – Investment model selection), the key question is: What role should the public body play in the deployment, operation, ownership and management of the infrastructure? - When selecting a business model (see Annex – Business model selection), the key questions to be answered are as follows: . Should a vertically integrated model or open network access model be selected? . Which business model will maximize the financial sustainability of the Project? . How to finance the further expansion of the broadband coverage? . How to incentivise competitiveness, that is to say, as most important, how to incentivise the social and economic development of the community?

Overall, in EU member states, there is a growing tendency for the public sector to invest in passive infrastructure51, to deploy operator-neutral networks52 through which private entities can provide services.

48 For example, marginal investments related only to upgrading the active components of the network should not qualify for state aid. Similarly, while certain copper-enhancing technologies (such as vectoring) may increase the capabilities of the existing networks, they may not require substantial investment in new infrastructure, so they should not qualify for state aid.

49 For example, an upgrade from core to NGA broadband network. Also, certain upgrades of the NGA network (such as extending the fibre optic connectivity closer to the end user) can be a step-by-step change. In areas where broadband networks are already present, the application of the step- by-step change should ensure that the use of state aid does not lead to duplication of the existing infrastructure. Similarly, a small, gradual upgrade of the existing infrastructures, for example from 12 Mbps to 24 Mbps, is unlikely to bring additional services (and probably would disproportionately benefit of the existing operator).

50 The subsidized network has to be more competitive, i.e. provide effective access to various layers of the infrastructure

51 The most common examples may be found in the Scandinavian countries, and in countries where state-owned utility companies provide other types of services (for example: Denmark, the Netherlands, the United States, etc.)

52 Networks that can support any type of network topology. In the case of FTTH networks, the infrastructure will be able to support point-to-point and point-to-multipoint topologies.

2. STEPS AND BASIC PRECONDITIONS FOR ANY STATE AID MEASURE FOR BRODBAND NETWORKS

The following steps and basic prerequisites need to be met for each state aid measure for deploying broadband networks:

DETAILED MAPPING AND ANALYSIS OF COVERAGE - It should be clearly identified which geographical target areas will be covered by the support measure in question. - A central database of available infrastructure at national level has to be created (thus increasing transparency and reducing the costs of implementing smaller, local projects). - Consideration should be given to the economic conditions when defining the relevant target areas before commencing the public tenders procedures53.

PUBLIC DEBATE - The measure, the list of targeted areas, the relevant project information and an open invitation for comments from all stakeholders has to be published at the national web-site. - Confirming the mapping results through a public debate will minimize any distortions of the competition among the existing service providers, and those who already have investment plans for the near future, thus allowing these investors to plan their activities54.

COMPETITIVE PROCESS OF SELECTION - Whenever the public body granting assistance selects a third party - an operator to deploy and manage the subsidised infrastructure55, the selection process has to be carried out in accordance with the public procurement regulation. This will ensure transparency for all investors wishing to compete for the implementation and/or management of the subsidised project. - Equal and non-discriminatory treatment of all bidders and objective assessment criteria have to be ensured. - A national web-site should be used to publish all current state aid tendering procedures.

53 For example, targeted areas that are too small may not provide enough economic incentive for market participants to apply for assistance, while remaining areas may reduce the competitive outcome of the selection process. Several selection procedures will also allow various potential enterprise to benefit from the state aid, thus avoiding a market share of a single (already dominant) operator to become stronger with the state aid measures, and avoiding bias towards the large market participants, or discouraging technologies that would be competitive in the smaller target areas.

54 Where it can be shown that the existing operators have not provided any meaningful information to the body for the purposes of the necessary mapping, it shall rely only on the information available to the latter.

55 The situation is different when the state body decides to deploy and operate the network directly (or through full ownership), as is the case with Commission Decision N 330/10 - France National Très Haut Débit and SA.33807 (11/N) - Italy, National Broadband Plan. In such cases, in order to protect the competitiveness results achieved with liberalisation of the electronic communications sector in the Union, and particularly the competition existing on the current retail broadband market, in case of publicly subsidised networks: (i) the publicly owned network operations will limit their activity on the previously defined targe areas, and will not expand to other commercially attractive regions; (ii) the public body shall limit its activity on maintaining the passive infrastructure and allowing access thereto, but will not compete with the retail commercial operators; and (iii) will keep separate accounting for the assets used for operation of the networks, and other assets at disposal to the public body.

ECONOMICALLY MOST FAVOURABLE BID - In the context of the tender procedure, the public body grating the state aid will need to establish qualitative criteria for evaluating the submitted bids. Criteria may include, for example, geographical coverage achieved, sustainability of the technological approach, or impact of the proposed solution on the competition56. - In order to reduce the amount of state aid to be granted, in similar, if not identical quality conditions, the bidder with the lowest amount of requested state aid should in principle receive more priority points within the overall bid evaluation. TECHNOLOGY NEUTRALITY - Since there are different technological solutions for providing broadband services, the tender should not be for or exclude any particular technology or network platform. Bidders should be entitled to propose the provision of the necessary broadband services by using or combining any technology they deem most appropriate. Based on the public procurement criteria, the public body that provides the subsidies has the right to choose the most appropriate technological solution or a mix of technological solutions. In general, universal coverage of larger target areas can be achieved by a combination of technologies.

USE OF EXISTING INFRASTRUCTURE . Since re-usability of the existing infrastructure is one of the main determinants of the broadband internet development, bidders should be encouraged to use the existing infrastructure in order to avoid unnecessary and expensive duplication of resources, thus reducing the amount of public funding. . Any operator who owns or controls the infrastructure (irrespective whether it is actually used) in the target area, and who wants to participate in the tender procedure, should meet the following conditions: o Notify the public body granting the state aid and the regulator of that infrastructure during the public debate; o Provide all relevant information to other bidders within a defined period of time, which will enable others to include said infrastructure in their bid. . A national database57 for the availability of existing infrastructures that could be re-used for broadband internet has to be established.

WHOLESALE APPROACH . An effective wholesale access for third parties to the subsidised broadband infrastructure is a necessary component of any national measure for broadband internet support. The wholesale approach allows third parties - operators to compete with the selected bidder, thus strengthening the choice and competition in the areas to which the measure applies, while at the same time avoiding the creation of regional monopolies concerning the provision of services. . The type of wholesale access obligations imposed on the subsidised network has to be aligned with the portfolio of access obligations set forth in the electronic communications regulation of the regulator.

56 For example, network topologies that allow full and effective unbundling could gain more points. It should be noted that at this stage of market development, point-to-point topology is more favourable to long-term competition compared to point-to-multipoint topology, while the installation costs are comparable, especially in the urban areas. Networks with point-to-multipoint topology can provide complete and effective unbundling only after standardising the access to the multiplex passive optical wavelength division network (WDM-PON), and this will be required according to the applicable regulatory frameworks.

57 Or to upgrade the existing Single Information Point of AEC

- The subsidised companies have to provide a wide range of products for wholesale access of those envisaged by the regulator (AEC) with the existing regulations for the operators with significant market power, since the user aid beneficiary uses not only its own resources, but also the assets of the taxpayers to deploy its own infrastructure58. Such wholesale approach should be granted as early as possible before the network operation starts59. - Effective wholesale access to the subsidised infrastructure should be offered at least for a period of 7 years. - If, at the end of the 7-year period, the operator of the infrastructure in question is designated by the regulator as a SMP operator in the particular market, obligations for access in accordance with the regulation on electronic communications should be imposed. - In order to provide an effective approach, the same access conditions should apply to the entire subsidised network, including the network segments where existing infrastructures are used60. - The access obligations shall apply regardless of any changes in the ownership, management or operation of the subsidised infrastructure. WHOLESALE ACCESS PRICING - Benchmarking is an important tool to ensure that the aid granted will serve to replicate market conditions, such as those prevailing in other competitive broadband markets. - The wholesale access pricing should be based on the pricing principles set by the regulator (AEC) and the benchmarking, and should take into account the aid received by the network operator61. - The average published wholesale prices that prevail in other comparable, more competitive areas in the state, region or EU are taken as benchmarks, or, in the absence of such published prices, the prices already determined or approved by the regulatory bodies of the affected markets and services. If there are no published or regulated prices available, in order to compare certain wholesale access products, prices should follow the cost based principles in accordance with the methodology established in accordance with the existing regulatory framework for electronic communications. - The public body granting the aid should seek advice from the regulator when defining the wholesale access prices and conditions. CLAWBACK MONITORING - The public body granting assistance has to monitor the implementation of the Project for the entire duration thereof. - When the operator is selected on the basis of a competitive procurement procedure, there is usually less need to monitor the subsequent development of the Project profitability. In many circumstances, it may be appropriate to fix the amount of state aid on an ex ante basis in order to cover the expected shortfall of funds over a certain period, rather than determine the amount of aid solely on the basis of the costs and revenues that will arise. - When future costs and revenues are surrounded by a high degree of uncertainty, and there is a strong asymmetry of information, the public body can adopt financial models that are not entirely ex ante, but a combination of ex ante and ex post (e.g. using a clawback will allow balanced sharing of any unforeseen gains).

58 If state aid is provided for financing the construction of ducts, they should be large enough to serve several cable networks and to host point-to-point and point-to-point solutions. 59 When the network operator also provides retail services in accordance with the EU NGA recommendation, this usually involves approving access at least 6 months prior to the commencement of such retail services. 60 For example, the use of wholesale access by third parties cannot be limited to retail broadband services only. 61 To what extent the aid amount is taken into account may vary depending on the competitiveness of the selection process and the target area. Accordingly, the benchmark will be the upper limit of the wholesale price. 73

- In order not to place a disproportionately high burden on small, local projects, the minimum threshold can be justified for the clawback. In that regard, a clawback mechanism has to be set up, if the amount of the project aid exceeds EUR 10 million62. - The public aid body may envisage that any additional profits returned by the selected bidder could be spent on further expansion of the broadband network. - The obligation for separate accounting for the most favourable bidder in relation to the subsidy received will facilitate the project monitoring by the public body granting the aid, as well as any further generated gains63.

TRANSPARENCY . It is necessary to publish at least the following information on the web-site for the state aid measures: o Full text of the approved scheme/aid plan and the implementing provisions, o Name of the aid beneficiary, o Aid amount, o Technology used. . This information shall be published upon adopting the award decision, and should be kept for at least 10 years and made available to the general public without any restrictions. . The aid beneficiary shall have to allow third parties to have comprehensive and non-discriminatory access to the information pertaining to its infrastructure (including, inter alia, ducts, street cabinets and fibre optics) deployed as per the state aid measure64. This will allow other operators to easily determine the possibility of accessing such infrastructure and to provide all relevant information on the broadband network to the Central Broadband Infrastructure Registry (ETI).

REPORTING . Starting from the date of commissioning the network, the public body granting the state aid should submit reports every 2 years with the key information on the supported Project to the Government of Republic of North Macedonia or to the European Commission (if EU funds have been used)65.

62 The clawback is not necessary only in case of publicly owned wholesale infrastructures, managed by a public body with the sole purpose of ensuring fair and non-discriminatory access to all operators if the conditions set out in footnote 10 are met.

63 Best practice examples suggest monitoring and clawback for at least 7 years, as well as of any additional profits (i.e. profits higher than those stated in the original business plan or the industry average) that will be shared between the beneficiary and the public body according to the intensity of the aid measure.

64 This information should be regularly updated (e.g. every 6 months) and be available in unprotected format

65 Such information should include at least: in addition to the information already published in the previous item on

Transparency, the date of commissioning the network, the wholesale access products, the number of access applicants and service providers in the network, the number of homes reached by the network, and the penetration rates.

3. SUPPORT FOR RAPID DEPLOYMENT OF NGA NETWORKS Any measure to support deployment of NGA networks, in addition to the above steps and basic prerequisites, must fulfil the obligation for: WHOLESALE APPROACH

- It is of the utmost importance to provide effective wholesale access for third parties - operators. Particularly in areas where operators of basic broadband networks already compete66, the competitive market situation that existed prior to the action should be maintained. - The subsidised network must offer access under fair and non-discriminatory conditions to all operators who will require said access and give them the possibility of effective and full unbundling67. - Third parties - operators must have access to the passive, not just to the active68 network infrastructure69. - Apart from the bitstream access and the unbundled local loop and sub-loop access, the access obligation should also include the right to use the ducts and towers, dark fibre optics or street cabinets70. - An effective wholesale approach should be approved for at least 7 years, and the right to access the ducts and towers should not be time-limited. - In areas with low population density, where there are limited broadband services or small local companies, the imposition of all types of access products can disproportionately increase investment costs71 without giving significant benefits in terms of increasing competition72. - In such a situation, access products that require expensive actions for subsidised infrastructure that is not otherwise envisaged (e.g. collocation at distribution points) can be offered only in case of reasonable demand from a third party (operator). Demand will be considered reasonable if: . The one requesting access has provided a coherent business plan that justifies the development of the product on the subsidised network; and . A comparable access product in the same geographical area is not available from another operator at equivalent prices to those in the more densely populated areas73. - The aforementioned cannot be used in densely populated areas where infrastructure development can be expected. Therefore, in such areas, the subsidised network should satisfy all types of network access products that operators may request74.

66 Including the LLU operators. 67 At this stage of market development, point-to-point topology can be effectively unbundled. If the selected bidder deploys network with point-to- multipoint topology, it must have a clear obligation to provide efficient unbundling via wavelength division multiplex (WDM), as soon as the approach is standardised and commercially available. Until the WDM unbundling does not take effect, the selected bidder shall be required to provide the seeking entities access via virtual unbundling, as close as possible to the physical unbundling. 68 In the case of indirect users, when they receive wholesale access, third-party operators may need to provide a bitstream access themselves. Despite the fact that the aid was granted only for the passive infrastructure, active access was also requested, for example as per Commission Decision for Case N 330/10 - France, the National Très Haut Débit Program. 69 Such as customer premise equipment (CPE) or other equipment required for network operation. If it is proved necessary to upgrade certain parts of the network in order to provide effective access, it will be provided for in the plans of the bodies granting aid, for example: envisaging properly dimensioned ducts, increasing the size of the street cabinets in order to provide effective unbundling. 70 The strong commitment to access is even more important for resolving the temporary substitution between the services offered by existing ADSL operators and those offered by future NGA network operators. The access obligation will ensure that competitive ADSL operators can migrate their customers to the NGA network as soon as the subsidised network is deployed, thus being able to plan their future investments without a competitive disadvantage. See for example, N 461/09 - United Kingdom, Cornwall and Isles of Scilly Next Generation Broadband. 71 Disproportionate cost increases must be demonstrated by detailed and objective cost calculations. 72 Commission Decision for Case N 330/10 — France, Programme national Très Haut Débit and in Case SA.33671 — United Kingdom, Broadband Delivery UK. 73 Other conditions may be accepted as part of the proportionality analysis in relation to the specificities of the subject matter and the overall balancing. For instance, please Commission Decision for Case N 330/10 — France, Programme national Très Haut Débit and in Case SA.33671 — United Kingdom, Broadband Delivery UK. If the conditions are met, access should be approved in a period that is customary for the particular market. In the event of a conflict (of interest), the state aid body should seek advice from the AEC. 74 For example, in case of passive fixed networks, to be able to support point-to-point and point-to-multipoint topologies, depending on the selection of operators. Especially in the densely populated areas, if they need to be eligible for state aid, it will not be deemed of public interest providing investment aid for simple upgrades to existing networks, which do not constitute a step-by-step change, also in terms of competitiveness.

FAIR AND NON-DISCRIMINATORY TREATMENT - Subsidised infrastructure must enable the provision of competitive and affordable services to end users. - When the operator is vertically integrated, appropriate safeguards must be established in order to prevent conflicts of interest, unnecessary discrimination in relation to ones requesting access or content providers, and any other hidden indirect advantages. - The criteria for granting aid should include a provision that bidders offering only a wholesale model, only a passive model or both, will receive additional points. State aid projects aimed at financing backhaul networks75 that are limited to construction works and are open for access to all operators and technologies, show particularly pro-competitive features. This feature should be taken into account in the assessment of such projects.

4. AID FOR ULTRA FAST BROADBAND NETWORKS Having in mind the objectives of the Digital Agenda, and the fact that there might be demand, particularly in the urban areas, for high performance services, compared to what commercial investors are ready to offer in near future, public action may be permitted for NGA networks that may provide ultra high speed, well above 100Mbps. In "Black NGA" areas, such action may be permitted if a "step-by-step" change is demonstrated, based on the following criteria: - The market situation in the near future and the investment plans of commercial operators are not developing towards achieving competitive provision of ultra fast broadband services over 100 Mbps; - The existing or planned NGA networks with fibre optics networks do not reach the premises of the end users; - The demand for such qualitative improvements is expected76. Also, it is required:

• That the subsidised network demonstrates significant enhanced technological features and performance compared to the features and performance of existing or planned networks; • That the subsidised network is based on an open architecture that is managed only as a wholesale access network; • The assistance does not lead to excessive distortion of the competition with other NGA technologies that have recently been subject to significant new infrastructure investments of the operators.

75 Actions that go beyond the operator's facility (central office level) shall already be considered NGA, and not NGN networks. Please see Commission Decision for Case SA.34031 - Next generation broadband in Valle d'Aosta. 76 In its Decision N 131/05 - United Kingdom, FibreSpeed Broadband Project Wales, the Commission was supposed to assess whether the financial aid provided by the Welsh bodies for construction of open fibre optics networks that would connect 14 business parks may still be pronounces compatible, even though the target locations have already been served by the current networks operator, who has provided leased lines with regulated prices. The Commission found that the leased lines offer by the current operator is very expensive, almost unavailable for the SMEs. Also, please see Commission Decision N 890/06 - France, Aide du Sicoval pour un réseau de très haut débit and Commission Decision N 284/05 - Ireland, Regional Broadband Program: Metropolitan Area Networks (MANs), phases II and III. Also, state bodies granting aid could take into account indicators such as: penetration rate of high performance services, excessive prices for high performance services (including leased lines for end users, as explained in the previous footnote), which have a discouraging effect for the use and innovations, e-government services in development requiring performance outside the one offered via the existing network. Where in the target area a significant part of the citizens and business users have already been appropriately served, it should be ensured that the public action does not lead to unnecessary upgrades of the existing infrastructure. In that case, the public action may be limited to measures to overcoming the gap.