National Broadband Plan has been dogged by confusion and underestimation of costs

24 October 2019

I am from the heart of rural Ireland, Ballynacargy, and I am acutely aware of the vital importance of the delivery of broadband to many hundreds of people who reside in areas like Rathowen, Legan, Ballymore, Drumraney, Carrickboy, Abbeyshrule, Milltown and so many other rural areas. Many in those areas could set up telecottage-type industries and work productively from their homes. I acknowledge the importance of this online infrastructure in sustaining and revitalising rural Ireland. Although it seems it is too late to control the scandalous cost overrun of the national children’s hospital, when built, the hospital will at least belong to the people of Ireland. This project for the provision of a rural broadband network is costed at €3 billion despite being originally estimated at €500 million. There is only one company remaining, Granahan McCourt, which is willing to implement the national broadband plan. The deal that this single, monopoly bidder is being offered is incredible. The preferred rural broadband bidder will get its money back within seven or eight years and will carry very little risk thereafter, while the State, which has invested €3 billion, will have no ownership rights. To ensure maximum control and maximum profit for Granahan McCourt, the State has agreed to nominate only one member of the national broadband board that will oversee the delivery of the project. In the light of these figures, it is hardly surprising that the Joint Committee on Communications, Climate Action and Environment recommended that the network when completed should remain in public ownership.

The rural broadband strategy has been dogged by confusion and underestimation of costs since its inception. Providing broadband to low-density rural households is inevitably costly but technology has moved on dramatically since the national broadband plan was formulated. Since Granahan McCourt submitted its tender, two companies, Eir and Imagine, have announced their willingness to provide high-speed broadband to many of the households and businesses that do not have it. Of the 540,000 premises which do not have high-speed broadband, Eir is offering to connect 80,000, while Imagine is offering to connect 320,000. If Imagine can deliver on its promise, only 140,000 premises will remain to be connected by Granahan McCourt, which would result in an exorbitant cost per premises connected and would be unlikely to be commercially viable. The connection costs for these remaining houses would then be so high that few would be willing to pay for the cost of connection. While the Eir and Imagine proposals are based on existing technology, by the time the broadband network is built an emerging technology which does not require a wired network, low Earth orbit, LEO, satellites, may be delivering broadband at gigabit speed globally. They could also play a role in Ireland’s national broadband plan. LEO satellites are an emerging disrupter in global Internet communications, which is now progressing rapidly. If it goes ahead with the present broadband plan, the State may be committing €3 billion to invest in technology that will soon be outdated and surpassed.

At the communications committee debate in August last, Fine Gael tried to put through a motion calling for immediate implementation of the €3 billion plan. There is clearly an ideological commitment by the Government that wherever possible, the private sector should be allowed to reap the benefits of public investment. We have seen this with Deputy Noonan encouraging vulture funds to acquire NAMA properties and ensuring that they pay no tax on the profits they are reaping. Fine Gael is an enthusiastic supporter of public private partnerships, PPPs, where the Government bears all the risk and the private company gets all the profit. We have seen this in the case of the Shannon tunnel and the last section of the M3, where the taxpayer must make up the revenues of private companies running these facilities if tolls do not reach a target level. We seem to have learned nothing from the negative consequences of previous privatisations and PPPs. The privatisation of Eircom is now largely blamed for the losses incurred by people who bought shares in the company. A much more serious consequence was the loss of control of the network. Eircom was asset-stripped, sold and resold and today its successor, Eir, owns a network of poles and ducts outside towns. If the national broadband plan goes ahead, the State will have to pay Eir for access to them. This will add hundreds of millions in additional costs to the rural broadband provision, which would not be incurred if the network was still State-owned. Fianna Fáil bears responsibility for that. If the network was State-owned, it could have been expanded as part of the State’s strategic infrastructure but Eir and its predecessor, Eircom, were interested only in maximising profits by increasing charges to existing customers and invested very little in the network.

A large part of the cost of this project will be profit for the venture capitalists who are providing some of the capital. When built, the network can be sold to private equity companies and control of vital infrastructure will be lost. As happened when Eircom was privatised, the broadband network can be managed so as to extract the maximum profit from those depending on it. With no alternative supplier, the ball is at their foot. When the M50 was being built, it was known from the outset that it would have to include a bridge across the Liffey valley. I go home that way every evening. The Government of the day decided that a motorway built at taxpayers’ expense would have a toll bridge and the tolls on this bridge, instead of being used to fund the motorway, would be assigned to a private company that would fund the bridge. National Toll Roads had recouped its investment in the West Link bridge within ten years and by 2007, it was earning more than the €43 million it had invested in a single year. The State was eventually forced to buy the bridge back at a cost of €1.15 billion from National Toll Roads, which had built the bridge for €58 million. One could not make it up. We are heading the same way with this. The State will eventually have to buy back the rural broadband network from Granahan McCourt for a huge multiple of what the company has invested in it. It is vital that we learn from the mistakes made in privatising Eircom and the fiasco of the West Link bridge. We must retain the rural broadband network in public ownership.

The argument I heard the Minister make that revisiting the Granahan McCourt plan would set back provision is specious. If it had been known ten years ago that the cost of building the national children’s hospital would eventually be ten times the original estimate, nobody would have accepted the argument that building should commence at once regardless of the escalation of cost. The current proposal for rural broadband should be subject to a rigorous cost-benefit analysis and whatever scheme is implemented, ownership of the network should remain in the hands of the taxpayers who will bear all of the risk and a substantial part of the funding. I am strongly fortified in my viewpoint, which no doubt is that of my party, that while PPPs were once the way to go, especially in the context of a severe economic downturn when Exchequers worldwide were empty, this no longer holds true. There has been a significant turn back from PPPs as people and governments realise that they are a way of having the taxpayer carry all of the load and all of the risk while the developers are the non-risk takers scooping all of the profits. If governments across Europe are shying away from PPPs, we should wake up, smell the coffee and join the band.

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