Broadband mess pushes Government into ostrich mode

Cabinet presses on with expensive private contract despite mounting concerns

The Government dithered and delayed and ultimately decided to press on, fearful of the political backlash a U-turn at this late stage might trigger. Illustration: iStock

The Government dithered and delayed and ultimately decided to press on, fearful of the political backlash a U-turn at this late stage might trigger. Illustration: iStock

 

Somewhere in the middle of this broadband saga, the Government got stuck. It had been talking about doing it – rescuing rural Ireland from its broadband woes – since 2012, but really only drove the process forward after the 2016 general election, when the issue came up repeatedly on the campaign trail.

KPMG advised the Government to choose a gap-funding model, with the winning bidder retaining ownership of the new network. Such a model, the consultancy said, would lead bidders to place a high “strategic value” on securing the contract, which would trigger a more competitive process and drive down the required State subsidy in the process.

The exact opposite happened. The industry shunned the process and we were left with one bidder, a US investment firm with no direct experience of building out a project of this magnitude, and the Government over a barrel on price. That price turned out to be €2.9 billion, six times the original estimate.

The Government dithered and delayed and ultimately decided to press on – even against the advice of its own civil servants – fearful of the political backlash a U-turn at this late stage might trigger. But a U-turn may have been in the public interest.

Building telecoms infrastructure where commercial operators don’t want to go – selecting the right funding model, the correct ownership structure and the right technology mix – is proving a headache for governments everywhere for a variety of reasons.

The UK recently dumped a plan to equip all rural households with fibre broadband on cost grounds and now has Labour leader Jeremy Corbyn pledging to bring free broadband as a “universal public service” to every home and business if elected. Labour says the plan to renationalise BT’s infrastructural arm Openreach would cost £20 billion (€23.4 billion), BT claims it would cost £100 billion. Corbyn’s plan may be too costly and too ambitious, but he may have tapped into something fundamental about rural broadband – namely that the private sector can’t deliver. The Government here isn’t listening.

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