Commission staff working paper - Annex to the Communication from the Commission to the Council and the European Parliament - European Initiative for Growth EU loan guarantee instrument for TEN-Transport projects {COM(2005)75 final} {COM(2005)76 final}
Date: 2005-03-07
Institutions: European Commission
Subjects: EU financial instrument, EU growth strategy, structural policy, trans-European network, transport network













EUR-Lex - 52005SC0323 - EN






Important legal notice




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52005SC0323

Commission staff working paper - Annex to the Communication from the Commission to the Council and the European Parliament - European Initiative for Growth EU loan guarantee instrument for TEN-Transport projects {COM(2005)75 final} {COM(2005)76 final}  /* SEC/2005/323 */  








[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 7.3.2005SEC(2005) 323COMMISSION STAFF WORKING PAPERAnnex to the : Communication from the Commission to the Council and the European Parliament European Initiative for Growth EU loan guarantee instrument for TEN-Transport projects {COM(2005)75 final} {COM(2005)76 final}Table of contents1. Introduction 32. Public financing of transport infrastructure projects 33. Risks inherent in transport infrastructure projects 64. Stand-by credit lines 75. Indicative main features of the guarantee instrument 76. Provisioning 97. Tasks of the managing agent 9Annex 1 Aide-mémoire 11Annex 2 Indicative annual budget allocations 13Annex 3 Technical paper 14INTRODUCTIONThe aim of this working paper is to provide further information on the technical details of the EU guarantee instrument for TEN-T projects.Following the introduction, section 2 provides an overview of existing public financing programmes, which support transport infrastructure investments. Section 3 describes the main risks inherent to transport infrastructure projects and section 4 provides background information on stand-by credit lines in order to better understand the functioning of the EU loan guarantee instrument. Section 5 and 6 describe the indicative main features of the proposed guarantee instrument as well as the provisioning model which was developed internally by the Commission services in collaboration with the EIB. Section 7 outlines the main tasks of the managing agent.Annex 1 shows the aide-mémoire used during the market testing exercise as a discussion paper. Annex 2 provides an indicative breakdown of potential budgetary needs for the period 2007-2013 and Annex 3 is the technical paper on the provisioning and pricing.This working paper should be read in conjunction with the Communications from the Commission COM(2005)75 final and COM(2005)76 final of 7.3.2005.PUBLIC FINANCING OF TRANSPORT INFRASTRUCTURE PROJECTSThe principal source of financing of most transport infrastructure projects remains national budgets. In the less developed regions the European Regional Development Fund and the Cohesion Fund are the additional suppliers of resources. The PHARE programme has supported investments in transport infrastructure in the CEEC. The ISPA (instrument for structural policies for pre-accession) was designed to assist the accession countries to meet the EU requirements in the fields of environment and transport.An estimate, published in the report of the Van Miert High Level Group, shows the following figures:€ Billion | 1993-1999 | 2000-2006 EU 15 | 2000-2006 EU 25 |TEN Budget | 2.2 | 4.2 | 4.4 |Cohesion Funds | 7.6 | 9 | 12.8 |ERDF | 5 | 6 | 6 |ISPA | -- | 2.1 | na |Total | 14.8 | 21.3 | 23.2 |On the whole, Community participation in the current European Union (all instruments combined but not including loans from the European Investment Bank) reaches approximately € 20 billion for the period 2000-2006. In principle, this aid is supposed to induce a 'leverage effect' reaching up € 100 billion over the period. It is a principle of Community policy that its contribution covers only a limited part of the financial needs.The coexistence of various financial instruments, each with their own logic, causes asymmetry of the support available between those countries and regions eligible for the structural instruments and those eligible only for the budget of the Trans-European network. Consequently, work on the corridors connecting the peripheral countries to transit countries encounters an excessive delay on the territory of the latter, being little encouraged to invest in infrastructure benefiting in the first instance their neighbours.1.  Trans European Networks (TENs)The new guidelines for the Trans-European Transport Network were adopted on the 21 April by the European Parliament, one week after the adoption by the Council of Ministers. The guidelines include a list of 30 priority projects which are declared to be of European interest and have a strong focus on the enlargement of the Union. The new Guidelines follow up the report by the high-Level Group on the TEN-T chaired by Mr Karel Van Miert in 2003. The extension of major European axes to the future Member States should help to make enlargement a success and provide the Union with a new opportunity to reduce congestion, improve accessibility and encourage intermodality. The list of projects also aims at ensuring modal shift and more sustainable mobility patterns by focussing investments in rail and waterborne transport. Strong focus is put on cross-border projects as these are typically the most difficult ones to implement.The estimated cost of carrying out these 30 projects will be around € 235 billion by 2020. The total cost of completion of the trans-European transport network, including the projects of common interest not identified as priority projects, will be € 600 billion.On the basis of experience and forecasts made in national plans, the Group has considered “that, at best, between 10% and 30% of the overall amount of the priority project costs could be ensured by the private sector in the field of land transport. Of course, the share varies considerably from one project to another. It is advisable to adopt an approach on a case by case basis to accurately measure the potential contribution of private investors”.2.  European Investment FundThe EIF was established in 1994 with the primary objective of facilitating investment in TENs through the provision of guarantees. Between 1994 and 2000 it issued guarantees of over € 2 billion to some 40 TEN projects. From mid-2000, following its reform, EIF concentrated its guarantee activity entirely on the provision of guarantees on portfolios of SME loans and management of the EIF portfolio was subsequently transferred to the EIB.The EIF’s guarantees covered loans (from EIB and commercial institutions) as well as bond instruments against all risks of default. EIF guarantees were issued without obligatory risk sharing arrangements with the Member States although the Member States or their agencies were involved in other ways in the projects financed. The EIF’s pricing of guarantees was intended to reflect the risk of default on individual projects as well as covering costs and providing an appropriate rate of return as required by its Statutes.The EIF only guaranteed investment grade projects operating in the energy, telecommunications or transport sector. However it did provide some higher-risk guarantees on subordinated debt instruments in a few projects, alongside and with the comfort of a much bigger and growing portfolio of lower-risk guarantees on senior debt financings that provided acceptable portfolio risk management. Its prudential rules limited its exposure to individual projects to EUR 170 million and required 50% of the risk on any financing to be taken by another institution.3.  Existing national schemesMany of the Member States have provided guarantees for certain individual projects. One noteworthy example is the Øresund project which was financed by raising loans on capital markets in both domestic and foreign currency. All loans and other financial instrument are subject to joint and several guarantees from the Swedish and Danish governments. The two States divide the liability on 50/50 basis. Due to these guarantees, the underlying loans achieved the highest possible rating from Standard & Poor’s which is a higher rating than given to the two States individually.Not many Member States have used guarantee schemes to support the development of transport infrastructure projects. Hereunder is a non-exhaustive list of some existing schemes:In Italy a law decree[1] adopted in 2002 allows the creation of a guarantee fund to cover revenue shortfalls. The budget dedicated to this guarantee fund amounts to EUR 1 billion and its aim is to increase the level of private funding and reduce the State contribution. However, the operational rules are not yet in place.The Irish National Development Finance Agency Act, which was adopted end-2002, allows the National Development Finance Agency (NDFA) the provision of guarantees. This option has not yet been used.In the UK[2], the government plans to test the use of a new way to finance certain PFI projects, such as a Credit Guarantee Finance scheme. Under this scheme, the government will provide loans which shall be guaranteed by the private sector i.e. financial institutions or monoline insurers.Outside of the EU, the Transport Infrastructure Finance and Innovation Act of 1998 (TIFIA) in the United States authorises the provision of three forms of assistance to large infrastructure projects. This assistance can be in the form of secured direct loans, loan guarantees and stand-by lines of credit to surface transportation projects of national or regional significance. Projects may include highway, transit, passenger rail and intermodal facilities. Generally, under current law, project costs must equal or exceed $100 million. Between 1999 and 2003, 11 projects benefited mainly from TIFIA direct loans. Only one credit line over $ 600 million was guaranteed by TIFIA, however this credit line has not been drawn.RISKS INHERENT IN TRANSPORT INFRASTRUCTURE PROJECTSOne may distinguish three main periods of a transport infrastructure project after its study phase: the pre-construction, construction and post-construction period. The various participants in the financing of a project are usually best equipped to assume differing roles, depending on the project status, with a view to ensure the most efficient risk allocation and the overall "bankability" of projects.Pre-construction period: During the pre-construction period, both the responsibility for delays and risk thereof are usually shared between the public and the private sector. While the responsibility for right-of-way acquisition[3], environmental compliance and other public domain requirements can only be covered by the public sector, the risks related to the choice of the technical solution and other planning risks, which may cause delays and cost overruns during the project development are covered by the private sector.Construction period: Since discrepancies between planned and actual construction costs and schedules are quite common, the financing of the construction stage requires flexibility and timely decisions. Equity shareholders can only partly cover the total financial burden related to the construction costs. Commercial bank loans appear to be the best choice for construction financing, as banks have expertise in assessing, mitigating and managing construction risks[4].Post-construction period: Notwithstanding their advantages in construction financing, commercial banks have a limited ability and willingness to commit for the very long maturities that are needed to ensure financial equilibrium of transport infrastructure projects. This is valid especially to greenfield projects for which traffic forecasts, availability of corridors and possible interoperability, systems’ integration and all types of operational and technical incompatibilities lead to increased level of risks. In particular, the early years of the post-construction phase, the so-called ramp-up period, are regarded as the most risky period of the post-construction phase, because the revenue flows are rather uncertain. In general, commercial bank loans rarely exceed 15 years, including the construction period, whereas most infrastructure projects require 20 to 30 years of amortization after their construction. As a result, once the project has successfully reached the operational phase, project sponsors often refinance bank debt with private placements or public bond issues with longer maturities.The aim of structuring the overall financing package of a project is to combine various financial instruments that appropriately allocate risks throughout the various development stages of a project to the appropriate participants.STAND-BY CREDIT LINESStand-by credit lines are often structured in project finance transactions to provide a cushion for unexpected shortfalls in the cash flow available for debt service. In this respect, such lines are considered as additional revenue sources for the purpose of the calculations of the senior debt service coverage, thereby helping the senior debt receive a better, possibly investment grade, rating. Stand-by lines are sometimes mandatory under the terms of concession agreements as they reduce the possibility of financial distress, particularly during a project’s construction and ramp-up phases[5].The maximum amount that can be drawn under these lines represents around 10% of the total senior debt and can go up to 20% in certain cases depending on the scale and uncertainty of project revenues and costs. It is possible that different credit lines are made available, some covering the construction period, others activated only upon satisfactory completion of construction works according to contractual arrangements. In principle, the availability of a stand-by credit line might be tied to specific events, for example a change in legislation that has material economic impact on the project or a traffic shortfall relative to specified levels. However, excessively restrictive conditions for utilisation may hamper the very role that the credit line is supposed to play and credit lines that are available for general purposes have the highest value to the project. Rather than accepting too restrictive conditions for utilisation, borrowers are often willing to grant a priority for reimbursement to amounts drawn under the stand-by credit line. Thus, should the borrower have sufficient revenue to reimburse the line during the following year, it would have to reimburse the amount drawn. In case of further negative developments, the line can be drawn again until its maturity. Should there be an outstanding amount at maturity, there would be a need to re-finance the stand-by credit line or a guarantee could be called.INDICATIVE MAIN FEATURES OF THE GUARANTEE INSTRUMENTThe main features are summarised hereunder and at a later stage those have to be formalised by a term sheet.Aim of the guarantee: The Guarantee would be designed as an EC commitment backing a subordinated facility made available to a TEN project during the “ramp up” period of the project, i.e. from the end of the construction to the stabilization of the cash-flows (typically between 3 and 5 years). It will be issued in respect of “liquidity”, “working capital” or other stand-by credit lines, negotiated by the borrower to ensure service of senior debt in the presence of shortfalls in cash-flow available for service of the senior debt of the borrower during the availability period. These credit lines would be subordinated to senior debt, in order to provide a credit enhancement to the latter, and are intended to be activated following a reduction in cash-flows that is imputable to either lower traffic, or availability/performance risk.Eligible projects: All projects that are eligible for support for a TEN grant, and in particular TEN priority projects, are also eligible for support by the TEN-T guarantee instrument. The senior loans granted for the project should achieve a creditworthiness that is close to investment grade on a standalone basis. It is therefore expected that establishment of EU-guaranteed subordinated lines of credit will allow senior debt to attain investment grade creditworthiness. The project should demonstrate the commitment of national/regional authorities to financially support it and the project should demonstrate an appropriate level of private participation in the form of equity and debt depending on the type of the project (greenfield or brownfield, road or rail).Guarantee rate : The guarantee would cover up to 100% of a stand-by credit line. The stand-by credit line should not exceed 20% of the total amount of the senior debt committed at financial close and still outstanding at the starting date of the ramp-up period.Availability of the EU guarantee : The guarantee would be part of the overall financing package i.e. the guarantee agreement would be signed between the applicant and the agent in the beginning of the construction period. The EU guarantee would become effective only at the start of the operations which has to be certified by an appropriate body to the agent. If no amounts are drawn under the stand-by credit line at its expiration, the guarantee would also expire.Dedicated revenue sources : Project financing must be repayable, in whole or in part, from tolls, user fees, availability payments or other dedicated sources.Flexibility: The guarantee should be transferable from one beneficiary to another, for example in the case of restructuring of the financing package or in case the concessionaire is changed. This would cover instances of debt restructuring, the stepping in of the capital markets in a project and possibly let the banks use the released funds for further infrastructure financing.Call on the guarantee : If the stand-by credit line was drawn and the project were unable to service outstanding amounts, the guarantee can be called. In this case, the EU would, irrespective of an actual default by the borrower, subrogate into the rights of the stand-by credit provider, and acquire a subordinated claim on the project cash-flows.Pricing of the guarantee is twofold:-  A commitment fee for the guarantee;-  If the guarantee were called: The borrower will have to pay interest, which is set taking into account the subordinated ranking of the EU claim. This interest will, in all cases, exceed the corresponding interest paid on senior debt and will be priced taking into account the underlying risk.Reimbursement of the outstanding amount : The reimbursement schedule of the principal would be based on cash-flow forecasts. In the case that it is deemed to be necessary for an optimal sharing of the risks, flexible reimbursement mechanisms could be envisaged.Risk-weighting : The underlying stand-by credit line guaranteed by the guarantee instrument would benefit from a zero risk weighting for regulatory purposes.Prepayment: The EU subordinated claim can be prepaid in whole or in part at any time without penalty.An illustration of a possible financing structure during the operational phase of the project after the grant contributions of the national authorities and EU could be as follows:Senior Debt, 30 years maturity | 90% |(Stand-by credit line to cover debt service shortfalls, 5 years maturity, guaranteed by the EU) | (20% of the senior debt) |Equity, open ended | 10% |In the case that the stand-by credit line would be fully drawn at its expiration, the EU would subrogate into a subordinated financial claim thus leading to the following financing structure after 5 years of operations. In this illustration, 100% of the stand-by credit line would be drawn (excluding interest and other possible charges):Senior debt, still 25 years maturity | 72% |Sub-ordinated loan (to be reimbursed when the revenues can cover more than the operational costs and the reimbursement of the senior debt) | 18% |Equity (dividends would be distributed when revenues can cover more than the operational costs and the reimbursement of the senior debt), open ended | 10% |PROVISIONINGThe Commission services developed a provisioning model, which can be found in Annex 3 (pdf-file). On the basis of the model and of the current estimated cost for TEN priority projects, it appears that during the Financial Perspective 2007-2013 a budget allocation of EUR 1 billion in total is needed. Annex 2 gives further details on how such an amount is determined and a proposed annual breakdown of indicative budget allocations.Tasks of the MANAGING AGENTThe managing agent should have an in-depth knowledge of project financing, together with appropriate credit risk management systems in place in order to assess the project risks and to manage the provisioning system and the liquidity fund in the long-term. It should also have in-house legal expertise and the appropriate front office staff to interface with financial institutions, monoline insurers, venture capital funds, national authorities and/or shareholders.The managing agent could be expected to also be a major provider of senior debt to many of the projects. It would be therefore essential to ensure that appropriate mechanisms would be put in place so that that the additional benefits of the EU guarantee, i.e. risk reduction, would be shared equally among all senior lenders. No additional benefits would accrue to the managing agent.The managing agent’s tasks could encompass in particular:4.  The evaluation of eligibility for the guarantees, due diligence and risk assessment of the projects;5.  Negotiation of the detailed terms under each guarantee contract;6.  Monitoring and controlling the financial performance of the projects;7.  Defending Community interests in the event of restructuring of the financing package;8.  Reporting to the Commission;9.  Opening and maintaining a trust account for the liquidity fund;10.  Provisioning of the budgetary funds for the individual projects and the management of the liquidity fund and the subsequent treasury operations under the mandate;11.  Charging of fees and other receivables from the beneficiaries, making payments, verifying guarantee calls, collecting reimbursements.ANNEX 1 AIDE-MÉMOIREPOSSIBLE EU GUARANTEE INSTRUMENT TO SUPPORT TEN TRANSPORT PROJECTS(Please note that this aide-mémoire is based on the initial proposal following the Commission Communication of November 2003. It was used during the market testing exercise in Spring 2004. This is not the final proposal for the design of the instrument.)Within the framework of the European Initiative for Growth, the European Council of 12 December 2003 invited the Commission, in co-operation with the Member States, to examine the idea of developing a specific EU guarantee instrument for certain post-construction risks in TEN transport (TEN-T)[6] projects, to report on the results of the examination, and, if appropriate, to present a proposal in this regard. It is essential that the guarantee instrument should provide a workable response to the needs of market operators who will finance and manage the projects concerned. The Commission has therefore started a process of market testing with interested parties.The Guarantee instrumentAim: The Facility would offer guarantees covering specific commercial risks. The aim of the instrument is to-  leverage private sector funding of TENs-  reduce the financing cost of projects-  to accelerate the conclusion of financial packages.Risk covered: The EU guarantee instrument would focus on post-construction risks in projects such as the risk of traffic and/or revenue shortfalls.Period covered: The guarantee would partially cover shortfalls measured relative to an agreed break-even base scenario during an initial period (3-5 years) of the post construction phase.Eligible projects: The guarantee would be available to TEN-T projects that are economically sound and cost-effective and, after grant aid, have an acceptable prospect of financial viability. An investment grade rating could be certified by an independent third party (e.g. rating agency). A priority would be given to cross-border projects, in line with the Quick Start programme[7] of the European Initiative for Growth;Beneficiaries: The guarantee would be available to debt providers who would benefit from appropriate debt-service for the initial period of the post-construction phase. Loans backed by EU guarantees would benefit from a 0% risk weighting.Guarantee type: As a debt-service guarantee the instrument would work in a similar way to the insurance offered by monoline insurers. The guarantee instrument would provide the beneficiary with a time-limited substitute for the revenue sources that would normally support regular debt repayments. The guarantee would therefore not cover acceleration of debt repayment.Guarantee rate: The guarantee instrument would cover a share of the annual debt service over the respective period (3-5 years), the remainder to be taken by the Member State(s) and the private sector.Risk premium: The intention is to charge the beneficiary a premium calculated on a risk basis.Risk sharing with Member States: The Commission would expect the Member States to offer at least comparable support to the project as that offered by the instrument.Risk sharing with the private sector: A portion of the risk would be borne by the private sector.Event of default: The event of default would be defined as the shortfall measured relative to an agreed break-even base scenario.Issues for discussion12.  Whether the EU guarantee would respond to market demand.13.  Alternative ways of leveraging private sector investment.14.  Impact of the EU guarantee on the financing costs of projects.15.  Whether the EU guarantee could substantially facilitate the conclusion of financial packages.16.  Appropriateness of a debt service guarantee.17.  Added value vis-à-vis monoline insurers.18.  Minimum critical mass.19.  Reasonable risk sharing between Private sector/Member States/Community.20.  Whether non-commercial post construction risk, such as failure to meet contractual commitments by public authorities, are adequately covered by other legal or market mechanisms (insurance).21.  Applications of risk sharing techniques on the management of the portfolio.ANNEX 2 INDICATIVE ANNUAL BUDGET ALLOCATIONSThe Commission proposal for a Regulation of the European Parliament and of the Council determining the general rules for the granting of Community financial aid in the field of trans-European transport networks and energy and amending Council Regulation (EC) N° 2236/95 (COM(2004)475 final of 14.7.2004) states that “The financial requirements of the 30 priority projects identified in annex III of the guidelines for trans- European transport networks by the Council and the Parliament alone account for EUR 225 billion, the largest part of which falls in the period 2007-2013 - about EUR 140 billion.” Furthermore, “the Van Miert Report considered that the private sector could contribute up to 20% of the total cost of these projects but under certain conditions ”. Consequently, the total private sector contribution can be estimated at around EUR 28 billion. A majority of this contribution is expected to take the form of senior debt, EUR 20-25 billion, with equity and quasi-equity making up the balance.A precise quantification of the annual budget allocations for the EU Loan Guarantee Instrument is difficult at this stage, due to limited availability of projections of eligible projects that are expected to involve private sector participation. A working assumption, consistent with the overall Van Miert objectives, is to consider a flow of private sector debt financing of the order of EUR 3 billion per year in the period 2007-2013, with all the TEN priority projects receiving private support.Based on the provisioning model in Annex 1, the table below presents a scenario requiring a total budget allocation of around EUR 1 billion, with a specified annual breakdown. It should be noted that, while the exact amount needed and the timing will vary, front-loading of approximately one third of the total budget in the first year would be needed for the following reasons. Firstly, as the portfolio effect builds up only gradually, the level of provisioning needed for the first project is almost twice as large as the amount needed for the last one. Secondly, as interest accumulates on the early budget allocations, the overall need for budget allocation in the later years is further diminished.These indicative calculations do not take into account the fees paid by the beneficiaries for the guarantee, nor the management costs of the guarantee instrument.Amounts in millions of EURPrivate sector lending | Number of projects | Provisioning Calculation | Interest | Budgetary needs |Year |Annual |Cumul. |Cumul. |Rate |Cumul. |Cumul. Buffer |Cumul. total |*) |Annual |Request | |2007 |3,000 |3,000 |5 |10.3% |309 |0 |309 |0 |309 | 310 | |2008 |3,000 |6,000 |10 |7.1% |426 |43 |469 |15 |144 | 150 | |2009 |3,000 |9,000 |15 |6.2% |558 |56 |614 |23 |122 | 120 | |2010 |3,000 |12,000 |20 |5.7% |684 |68 |752 |31 |108 | 120 | |2011 |3,000 |15,000 |25 |5.5% |825 |83 |908 |38 |117 | 120 | |2012 |3,000 |18,000 |30 |5.5% |990 |99 |1,089 |45 |136 | 120 | |2013 |3,000 |21,000 |35 |5.3% |1,113 |111 |1,224 |54 |81 | 80 | | | 21,000 | | | | | | | |1,017 | 1,020 | |‘Cumul.’ means cumulative figures*) Provisioned amounts are capitalised at a 5% annual rateAnnex 3 TECHNICAL PAPER[pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][pic][1] La Legge Finanziaria 2003, Artiche 71 (Legge n. 289 del 27 dicembre 2002).[2] PFI: Meeting the Investment Challenge” explains the Private Finance Initiative programme’s role in the delivery of the Government’s investment plans for public services.[3] Right-of-way is a strip of property that includes the corridor plus the parkway (area between the corridor and private property). The Right-of-way acquisition is the process of acquiring private property needed for projects, including drainage improvements, roadway or rail improvements, parks, etc.[4] A small group of experienced lenders can more easily react to unexpected events than a large group of inexperienced bondholders. Moreover, bank loans can be incrementally disbursed according to the actual funding requirements of the project, while bonds are usually issued in one tranche.[5] The early years of the operational phase of a transport project are called ‘the ramp-up period’. This period is regarded to be the most risky period of the post-construction phase, because the revenue flows are rather uncertain.[6] The legal basis for the TEN-T is provided in the Treaty of the European Union. On July 1996 the European Parliament and the Council adopted a Decision on Community guidelines for the development of the trans-European network (TEN-T). These guidelines comprise roads, railways, inland waterways, airports, seaports, inland ports and traffic management systems which serve the entire continent, carry tye bulk of the long distance traffic and bring the geographical and economic areas of the Untion closer together. These guidelines are a general reference framework for the implementation of the network and identification of projects of common interest (TEN-T projects).[7] Following a request by the European Council in October 2003, the Commission and the EIB established a list of projects in an enlarged Union meeting the following criteria: high level of maturity, trans-frontier dimension, impact on growth and innovation in the enlarged EU and benefits to the environment. In addition to transport sector, the Quick Start list includes projects related to research, innovation and development as well as broadband networks.