Fibre optic cable for €77m was an 'appropriate risk'

A controversial high-capacity fibre optic cable paid for by the Exchequer and today valued at a fraction of its €77 million construction cost was an "appropriate risk" for the State given the importance of the IT sector to the economy, the Comptroller and Auditor General told the Dáil Public Accounts Committee yesterday.

But he expressed concern over a lack of safeguards in the contract with Global Crossing, the US firm which laid the submarine cable and leased it to the Government on a 25 year basis and is now subject to chapter 11 proceedings.

Insisting on ownership transferring to the State should Global Crossing go into liquidation might have been prudent, said Mr Purcell.

His comments came as the committee heard that the value of the Government's holding in the line, connecting the Republic to the US and Europe, has been written down by €20 million while legal proceedings are underway to recover €11 million from companies which contracted to hire capacity from the State.

Constructing the link in 1999 was seen as vital to attracting further IT investment to the Republic and to ensure multinationals already here did not move elsewhere, the secretary general of the Department of Communications, Marine and Natural Resources, Mr Brendan Tuohy, told the committee.

High speed global connectivity was deemed crucial as the State sought to reinforce its position as a leading IT player, Mr Tuohy said.

As time was of the essence, it was decided to embark on the project without private sector backing, he told the committee.

Although less than half of the capacity is actually being used by private operators, the decision to build the cable should not be seen as a waste of public funds because an upswing in the IT sector could see take-up surge, said Mr Tuohy.

But the wisdom of the project was questioned by Fine Gael's Mr Michael Noonan, who pointed to the later completion of a separate transatlantic cable by US company 360 Networks.

However, Mr Tuohy said that unlike the State-backed line, this cable did not link to Europe - as essential as a connection to the US.