Irish State will not own National Broadband Plan network when it is built

6 Jul 2016

For cost reasons the Irish government has chosen a gap-funded model for building the National Broadband Plan network, with ownership resting in the hands of the business or businesses that built it

When it is built, it will be one of the finest fibre networks in Europe, but it won’t be owned by the Irish State. Instead, the National Broadband Plan network – which is budgeted between €500m and €600m – will be owned by the successful bidder or bidders for the vital contract.

Yesterday (5 July), the Irish Government’s cabinet approved the ownership model for the National Broadband Plan, which will bring more than 1.8m people and 38pc of the country’s working population across the digital divide.

Once built, the network, which will be future-proofed and guarantees a minimum of 30Mbps download and 6Mbps upload, will be a jewel in Europe’s telecoms infrastructure crown.

‘This procurement is on the scale and significance of rural electrification in the last century’

Future Human

The Irish Government had two choices: a commercial stimulus model (gap funding) where the private sector contract winners builds, owns and operates the network; or a full-concession model where the private sector builds the network and hands it back to the state after 25 years.

The Minister for Communications Denis Naughten TD said that while his preference would have been State ownership, the final decision of ownership came down to cost reasons.

At the briefing, Minister Naughten explained the decision was made reluctantly but for practical reasons.

He said that if the Government had gone with the option of owning the network it would have meant having to put €500m to €600m on the Exchequer’s balance sheet, which, under EU State Aid rules, would have impacted funding for other State emergencies, such as housing and climate change.

Naughten also conceded that if the Irish Government had gone for the full-concession model, it would have worked out at 50pc to 70pc more expensive for the Exchequer.

“While I recognise the potential long-term value in the State owning any network that is built, I am advised that under a full-concession model, the entire cost of the project would be placed on the Government’s balance sheet, with serious implications for the available capital funding over the next five to six years.

“Given that both models will deliver the same services and be governed by an almost identical contract(s), I cannot justify reducing the amount of money available to Government for other critical priorities such as climate change, housing and health, over the next six years.”

The National Broadband Plan, the start of which has been delayed until June 2017, is one of the most ambitious infrastructure projects undertaken by the Irish State and, when built, will have vital social and economic consequences for over 1.8m people.

Its consequences could be so transformative that Naughten said: “This procurement is on the scale and significance of rural electrification in the last century.”

Cracks in the fibre

However, problems are already beginning to emerge. Not only has the project been delayed for six months, but it has now emerged that some 170,000 additional premises thought to be in areas already served with broadband will have to be accommodated in the plan as telcos didn’t provide the full picture during the vital mapping exercise. This will bring the footprint of the intervention area from 757,000 premises to 927,000 premises.

It is understood that out of five consortia bidding for the contract, three have been shortlisted.

The Minister’s colleagues were tightlipped about the identity of the three consortia and the Minister said even he did not know himself. However, a report in the Irish Independent claimed that Eir, Enet and SIRO (the joint venture between Vodafone and ESB) have made it through to the next stage, while two consortia, Imagine and Gigabit Ethernet, have been told they did not make the shortlist.

The next step is a detailed dialogue on commercial, technical and governance of the National Broadband Plan network.

It is hoped that, by June 2017, the network rollout will begin, with up to 75pc of the premises served with high-speed broadband by 2019.

Minister Naughten said he is in negotiations with ComReg and has urged his colleagues in the European Commission around copper-fastening universal service obligations (USO) of the eventual network owner/owners to ensure broadband access is a legal right for every citizen in Ireland.

Digital Ireland image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years