Has ship sailed on €1.5bn-plus National Broadband Plan?

Two big things fell out of the Government’s rural broadband process in 2018, the minister in charge and the lead bidder.

In January, Eir, the State’s largest telco, exited the National Broadband Plan, citing problems with the tender, leaving just one bidder in the race and the Government over a barrel on price.

In October, then communications minister Denis Naughten resigned over a mounting controversy relating to his contacts with the remaining bidder, US investment firm Granahan McCourt.

Somehow the process has limped on but broadband is now central to the Government's increasingly shaky confidence-and-supply arrangement with Fianna Fáil and another misstep could trigger an election.

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The Department of Communications was to have made a decision on whether or not to accept Granahan McCourt’s bid prior to Christmas, but it was shelved until the New Year.

“We want to make sure that the contractor can deliver,” Taoiseach Leo Varadkar said last week. “We’ll make a decision, I would anticipate, in the first two months of the new year as to whether we sign that broadband contract or not.”

Either course of action comes with risks. The Government could opt to pull the plug on the tender by rejecting the only remaining bid, potentially setting the clock back to zero on a process that has already taken six years and outlasted three ministers.

The political fallout would be considerable and may require a communications strategy of its own, predicated on a feasible alternative plan, whatever that might be.

Or, it could unveil Granahan McCourt as the preferred bidder despite concerns about the company’s ability to deliver and the shifting nature of its consortium, which now includes Denis O’Brien’s Actavo.

With no other bidders in the race, the group has driven the Government hard on price. We know this from the minutes of various meetings published in the wake of Naughten’s resignation. Estimates for the overall cost of the scheme range from €1.5 billion to €3 billion.

Where all this leaves rural communities caught on the wrong side of Ireland’s digital divide – struggling with business closures, a youth exodus and the overhanging threat of Brexit – is hard to say.

The Government insists the bulk of the 542,000 homes and businesses covered by the plan will be connected to a new network by 2020 – a mere 12 months away. The timelines are getting tighter and tighter.

All along, the Government has been desperate to avoid another controversy connected with the sale of a large telecoms asset – the sale of the State’s second mobile phone licence 20 years ago scarred the body politic, led to a 14-year long tribunal, and continues to be the subject of litigation from losing parties.

Capital costs

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, largely because the technology keeps morphing.

The UK recently dumped a plan to equip all rural households with fibre broadband on cost grounds, while Germany’s plan to upgrade its ageing copper network with a new vectoring technology has also run into problems.

The broadband controversy here has prompted suggestions that maybe the cost of laying fibre optic cable, the preferred technology, is too high and that we should consider next generation mobile technologies such as 5G, especially given the unique nature of our rural sprawl.

Proponents point to the high capital costs of fibre and the relatively low take-up rates particularly in remote areas.

But fibre advocates argue that their technology is the only one that can safeguard against early obsolescence, a feature of previous failed plans, and that mobile technology wouldn’t have the necessary firepower.

It has always been assumed that a significant chunk of the most remote households would be serviced by alternative technologies, but that’s different than going for a full 5G solution.

Like the Brexit imbroglio across the water, we seem to be having these arguments very late in the day. The controversies and the delays have damaged the Government's standing in rural communities and led to suggestions that a semi-state body such as the ESB or Ervia should be mandated to take over the delivery of rural broadband.

This would necessitate the Government dumping its current gap-funding model, whereby the State coughs up a portion of the costs in conjunction with a private operator.

On the prospect of revising the terms of the contract so the State would own the infrastructure, Varadkar said: “I’m not sure we can do that at this stage. I’ll have to check that with Richard [Bruton, the current communications Minister]. The boat may have sailed on that.”

The coming year will decide whether the Government’s rural broadband plan sinks or swims.