No room for error as National Broadband Plan nears critical endgame

“When this is built, Ireland will never have a fibre deficit ever again,” a Department of Communications official said yesterday (5 July). Those words encapsulate precisely why the stakes are so high and why the year ahead is critical for Ireland’s National Broadband Plan.

Let’s hope the official’s well-meaning words don’t come back to haunt him.

There were three core pieces of news yesterday regarding Ireland’s ambitious National Broadband Plan to end the broadband deficit – or digital divide – forever:

• The first was that the Government has opted for a gap-funded model to finance the construction of the network. In plain English, this means whichever entity or entities win the lucrative contract to build the network, they will get to own it after 25 years. The reason: it will work out 50pc to 70pc cheaper for Ireland and will free up the balance sheet of the Exchequer for other pressing emergencies such as Ireland’s spiralling housing and homelessness crisis.
• The second piece of news was that three out of five consortia have been shortlisted – these are understood to be Eir, SIRO (that’s the Vodafone/ESB joint venture) and Enet. What will follow will be a year of tough dialogue and negotiation before a final winner or winners to serve the top and bottom halves of the Republic of Ireland is decided.
• The third bombshell was that there are 170,000 premises in areas that are supposed to be provided with broadband by commercial operators, but aren’t. The plan is being augmented to cater for these premises, bringing the intervention footprint from 757,000 to 927,000 homes and businesses. 170,000 premises is almost a fifth of this and a huge oversight.

 Ireland, you have one chance… just one chance!

The reason this has set off alarm bells in my mind is the fact that Ireland has only one chance to get this right. So how on earth did 170,000 premises get overlooked?

The broadband map of Ireland – built with collaboration from the telecoms industry – divides Ireland into two colours, amber and blue. Blue represents the mostly urban areas where all is supposed to be hunky dory, fine and rosy, and which don’t require intervention. While amber represents the 96pc of the country in need of intervention because the telecoms companies said it was commercially not viable to serve those areas.

The reason for the intervention is to make it commercially viable to give people infrastructure comparable in social and economic impact to the electrification of rural Ireland in the 20th century.

When the network is built it will be one of the finest fibre networks in the world and will cover 96pc of the Republic’s land mass – equal to some 100,000 kilometre of road.

Minister Naughten explained that the operators themselves weren’t to blame because it was only after the exchanges were built or the cabinets went in that it was discovered some premises, even yards from the exchanges, could not be served.

The future of broadband in Ireland

If the National Broadband Plan succeeds, it will be like a lightning bolt for Ireland’s rural economy.

If it fails, Ireland will never get the chance to tackle such core digital infrastructure in the same way again. The moment will be lost forever.

It is testament to the complexity of the project that it now involves two government departments – Communications and Rural Affairs – and will involve the establishment of a Broadband Taskforce that will also involve a large number of wireless ISPs (WISPs), as well as mainstream telcos.

‘The real issue is that there is no fibre in many areas, but once the network is built that fibre will be there forever. We will be putting a fibre ring around every village and town and we will never again have a fibre deficit’

^{– OFFICIAL AT DEPARTMENT OF COMMUNICATIONS}

To understand what the outcome will be requires envisioning what it will look like in the end – in 2021.

If all goes well, Ireland will have a network that will at the very minimum provide 30Mbps to every home and business, although this could be higher, at 1Gbps in some places. It will be the envy of Europe and far ahead of anything envisaged or deployed elsewhere in Europe. It is also quite possible that homes in the intervention area that were previously starved of broadband will have speeds superior to their counterparts in large cities and towns.

The network could be owned and run by a single entity or divided north and south between two entities. Each entity will have to set up a new, separate wholesale body – let’s called it NBP-Co – that will have to deal fairly and equally to allow all other operators to access the network and provide services.

There will be no fiefdoms or preferential treatment allowed and if Naughten has his way there will be a universal service obligation (USO) for any operator that is designated with having significant market power (SMP) in a geographic area to ensure every need is met.

Quite simply, broadband access will be a legal right similar to today’s legal right to a voice telephone line.

The devil is in the detail

As I sat at the table at a press briefing with Naughten, I got the sense that the firebrand independent TD was getting a taste of the Yes Minister realities of being in Government: a front row in compromise.

He winced as he said: “Anyone who googles my views in relation to state infrastructure would know that I believe it should remain in state ownership. We made a mistake with Telecom Eireann.”

He pointed, however, to a study by KPMG that recommended the gap-funded model where the asset would be built and owned by the contract winner. The other model, “full concession”, would be a huge burden on State finances – between €500m and €600m would go onto the national balance sheet –until the network is built, and this would divert capital away from pressing emergencies like the housing crisis and health.

“If we go down that road, the legal contracts involved would also be complex because it would also mean piggybacking on existing infrastructure owned by some or all of the contracts.”

This, he said, would delay the National Broadband Plan even further and could work out between 50pc and 70pc more expensive for the State.

In 25 years’ time, he said, the ownership of the network will revert to the winning bidder(s).

He also emphasised that the 170,000 premises overlooked in the blue areas won’t add additional cost or time to the existing plan.

Now that three bidders have been shortlisted, a year of intense negotiation lies ahead and there can be no margin of error.

That’s why to this writer the revelation of 170,000 overlooked premises is setting off alarm bells.

Every second counts in terms of precise negotiation between now and when the contracts are signed in June 2017 and the rollout commences. Operators will need to balance the prestige of winning such a vital contract with the realities of delivering it.

Commitment from telcos

Telecoms firms will need to be honest and committed to the plan and  have their eyes fully open to what they are potentially taking on: a huge commitment for 25 years with strict financial penalties if deadlines aren’t met.

Put simply, the State will not release capital until targets are met and people are served with quality connections.

Minister Naughten said he expects the final contract to be win-win for the State, not only in terms of economic stimulus but value for money.

“There is an incentive stick for these bidders to come forward with more capital because they will own the network. Our aim is to extract as much capital from the market as possible without taking from the public purse.

“Everyone will have high-speed broadband – there are strict contracts – and we will have a dedicated body of people monitoring it.”

Naughten’s objective of securing a universal service obligation (USO), which will guarantee broadband for every citizen that wants it, will be pivotal.

“It worked for voice telephony. We will be handing over a monopoly that was built with state support. It is likely to be highly regulated and designated significant market power (SMP) to wholesale.”

A department official added: “The real issue is that there is no fibre in many areas, but once the network is built that fibre will be there forever. We will be putting a fibre ring around every village and town and we will never again have a fibre deficit.”

In a year’s time, a contract will be signed that could unlock economic wealth for future generations of Irish people and place an asset in the hands of a telecoms operator that will be the envy of other nations.

The idea that telcos asking for more time with paperwork has already put the plan back six months is unthinkable. The idea that 170,000 premises were nearly overlooked does not inspire confidence.

A lot is at stake. There is no more margin for error. Because there will be no more second chances.