Net City project up in the air as City Hall and cable firms do battle in court

While the president of the Cable Communications Association (ACC), Radu Petric, dismisses Net City as a “non-viable” project that “raises his blood pressure,” being in fact only a subject passed around in the media while the contract itself has not been signed, Radu Alexandru, the director of the infrastructure coordination department within the Bucharest City Hall, says cable companies are not happy with the Net City arrangement since they “sit like crows on a fence” and “expect not to pay anything.”
To start from the beginning, the city council gave its approval in March for the concession of Net City public works (the metropolitan fiber optic backbone) to UTI Systems. The project should be developed in public-private partnership, the City Hall offering the public domain with UTI Systems in charge of the works and investments. The project will be worth EUR 202 million to carry out, a sum which should be integrally supported by the company that won the tender, UTI Systems.
In fact, UTI Systems was the only company that took part in the tender organized by the City Hall in August 2007, out of the 24 companies that purchased the task book. UTI Systems, with subcontractors Ericsson Romania, Alcatel Lucent and Neotel, was selected the winner of the bidding at the end of August.
Only companies with an average turnover of EUR 45 million for the last three years and at least three years' experience in construction works were allowed to take part in the tender.
The winner, UTI Systems, is contractually bound to place underground telecommunication networks on 1,350 streets within two years of the signing of the contract. By 2012, UTI Systems should complete the project on all the 5,000 streets of the capital.
However, last week the Bucharest Court of Appeal ruled against a decision by the Bucharest General Council (CGMB), which obliged cable companies to take all their television cables underground. Thus, the companies are now released from their obligation to bury their cables.
In more precise terms, the Cable Communications Association (ACC) demanded in court the annulment of the CGMB Decision Nr. 105 from May 4, 2006, that stipulated that cable operators were obliged to shift their cables underground within two years. “The decision was meant to help cable companies solve a problem and become fully legal. Since they considered this a danger, they have severed their last chance through which we could protect them,” says Alexandru.
The Court of Appeal decided in favor of the ACC. However, although the court decision is irrevocable, the City Hall appealed against it “on an exceptional basis,” and a decision in this matter should be made on June 2. “Under normal circumstances, we should win,” says Alexandru.
Meanwhile, Net City is up in the air since the contract with UTI Systems has not been signed due to some procedural problems. “We hope that under normal circumstances, the contract will be signed at the end of this month.” The City Hall official says the revocation of CGMB Decision Nr. 105 will not affect the Net City contract or the project itself. As far as cable operators are concerned, even though they are no longer compelled to bury their cables, not much will change, since there are another two previous decisions that forbid them to place their cables in the air. Therefore, the Net City project is still on.
“We will go ahead with signing the contract. This decision posed some difficulties for us since Decision Nr. 105 was mentioned in the contract and now we will have to change it so that the terms of the contract with UTI Systems are accurate,” says Alexandru. “No matter what, the City Hall will continue with this project,” he said, adding that “if the contract is not signed, I have another strategy to carry on with the Net City project, but for the moment there is nothing more I can say about this.”
If the City Hall loses its appeal on an exceptional basis, Alexandru says cable companies will still be obliged to enter into legality. “They will have to submit a request for construction authorization, but they are reluctant to do that because they have to pay,” says Alexandru.
The official says City Hall plans to introduce a tax for the occupation of the public domain which will apply to everybody equally since “it is not normal for some to pay and others not.” (He gives as an example the operators who pay for the Romtelecom canalization and those who use the cables in the subway stations.) “Everybody will pay according to some well established criteria. In fact, what will be done is a uniformization of the taxes that are being paid right now.”
Alexandru says that if operators choose not to enter into Net City, they might have more to lose since the tax for the public domain might turn out to be more expensive than the rent that they would have to pay for the backbone in Net City.
“It depends on the costs. If renting the Net City infrastructure will lead us to bankruptcy, of course we will not participate,” says Petric. “One of the key issues for operators in this business is to have ownership of their network. The Net City project is a robbery, an attempt to exercise control over the infrastructure, an economic blackmail,” he adds.
Petric complained about the lack of involvement of the Ministry of Communications and the National Regulatory Authority for Communications and Information Technology (ANRCTI), which are the only institutions allowed to take action.
“As long as politicians deal with telecommunications, nothing good will happen,” he says. He labels the project “a political declaration” adding that “telecommunications is not done through democracy, but through a sound knowledge of the domain” and in the City Hall “there are no competences whatsoever regarding telecommunications.”
On the other hand Alexandru says he has never seen a contract “that has so many enemies,” which is especially puzzling since “it is the only contract in the country that does not use public money but the money of a private partner.” He says the ACC in fact represents the interests of two major operators, RCS & RDS and UPC. “The others are companies that get the crumbs of these two operators that have divided Bucharest up between them.”

By Otilia Haraga