Playing politics with broadband saddles taxpayer with €2.6bn liability

When the EU-IMF troika was in town, the Irish government adopted a policy of underpromising and overachieving. In the three years of the bailout programme (2010-2013), it sailed through the financial targets set for it. Perhaps our European creditors were in on the act. At the time, the EU was mired in a debt crisis and desperate for a success story and there was far more chance of that being the Republic than Greece or Portugal.

The Department of Finance has maintained this culture of erring on the downside so as to surprise on the upside.

Contrast that with the Government's National Broadband Plan (NBP) which promises what no country on the planet has done – to connect a scattergram of rural housing, which includes thousands of remote cottages and out-of-the-way holiday homes, to a state-of-the-art broadband network, bypassing 50 years of bad or zero planning.

The cost? A whopping €5½ billion, including a €2.6 billion State subsidy and without ownership of the end product.

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The rollout? Mired in delays and difficulties to do with the complex terrain and dilapidatedcondition of existing infrastructure – poles and ducts.

Predictable

This was all predictable. Other countries have made similar promises only to baulk at the cost and logistics when they got down to it. Boris Johnson’s Conservative party recently ditched its £5 billion election manifesto pledge to give all homes across the UK superfast broadband by 2025.

Somewhere along the line, broadband became politicised, emblematic of the Republic's two-tier economy, rural depopulation and Dublin's hegemony. And Leinster House, underpinned by a strong rural lobby, decided it would write a blank cheque to fix the problem.

Due diligence and cost-benefit analysis were shoved to one side.

Former secretary general at the Department of Public Expenditure Robert Watt said as much in a letter to the Minister for Finance, recommending against the plan on grounds of affordability, risk and value for money.

Justification for spending this amount of money was not presented and involved costs and excessive risks with questionable benefits, he said.

Contrast the Republic's approach with that taken in Northern Ireland. Authorities there allocated a sum of money to deal with the problem rather than insisting on 100 per cent coverage upfront. This meant a significant block of the harder to reach homes in the North were omitted on cost grounds.

The North’s scheme provides a state subsidy of just £165 million (€184 million) to connect 76,000 homes, which works out – on a per unit basis – at €2,500 per home. The Republic’s €2.6 billion subsidy for 542,000 homes works out at over €5,000 per home.

Alarm bells

The disparity North and South reflects two things: the Government’s insistence on doing all the homes and the more complex tapestry of rural homes in the South, a legacy of bad planning. The industry’s shunning of the NBP project – Eir and Siro exited the Government’s tender process half way through – with such a big subsidy on the table should have set alarm bells ringing.

National Broadband Ireland (NBI), the company behind the project, on Thursday told the Oireachtas committee on transport and communications that it would now not make its two-year, end of January target to pass 60,000 homes.

"As we roll out the network, we have encountered a number of issues, the majority of which have been beyond our direct control, meaning it is difficult to predict completion dates for premises with absolute certainty," said NBI chief executive Peter Hendrick.

This is the second time NBI has missed its target. Last year it had already cut the end of January rollout target from 115,000 to 60,000, saying the project had been disrupted by coronavirus. It’s not entirely obvious how small teams working in remote areas would have been so affected by restrictions. A more likely explanation is difficultly of the terrain and/or getting incumbent Eir to fix the crumbling infrastructure.

The project is utilising the former State monopoly’s network of poles and ducts to get at the houses in the intervention area. But much of it is in poor shape. Hendrick said the company had contracted Eir to increase the volume of pole replacement and duct installation to increase “operational efficiencies”.

Inflated cost

Part of the inflated cost of the project relates to the potential cost of renting poles, ducts and other infrastructure from Eir, estimated at €900 million over the lifetime of the project.

Another element that came up at the Oireachtas committee was “encroachment” . The NBP contract provides a mechanism for NBI to apply for compensation in the event that other commercial operators begin to offer rival services in the intervention area as the project is being rolled out, capped at €100 million.

The issue is not the compensation but the notion that part of this expensive project might be overtaken by rival operators or alternative technologies. Consultation on the NBP intervention map – carried out in the second half of 2019 in advance of contract award which established industry’s up-to-date infrastructure and future plans – has reduced significantly the likelihood of the encroachment element of the contingency subsidy being sought, the Government has said.

But this project won’t get to these remote homes for five to seven years. What will the technology landscape look like then? Even if the NBP manages to achieve its top-line objective, it’s not obvious the cost will have been worth it.