Payback on €176m investment unlikely
TELECOMMUNICATIONS:THERE IS “little prospect” of a significant monetary payback for the State’s €176 million investment in fibre optic telecommunications networks in regional towns and cities, the CAG has concluded.
The report cites figures from the Department of Communications which found that towns with a Metropolitan Area Network (Man) increased their share of foreign direct investment (FDI) from 24 per cent prior to them being built to more than 89 per cent in 2007.
E-net, the private sector firm which has a 15-year concession to manage, maintain and operate the Man returned €805,000 to the State in 2008, through a revenue share agreement and investment in the network. The department was paid €233,517 and this was split 50/50 with the local authorities who paid 10 per cent of the costs and managed their construction.
In 2002 a cross-department working group on telecommunications concluded that broadband was essential for Ireland to be competitive and attract FDI but that Government intervention, in tandem with local authorities, was necessary to provide it. Shortly afterwards construction of a Man in 27 regional towns began at a cost of €78 million, with work completed in 2005. Phase II, at a cost of €98 million, covers another 66 towns.
The report notes these investments are now “sunk costs” and says further spending “aimed solely at increasing the usage of existing Man is considered unjustified”. The report also concludes use of the Man is hampered by the lack of a nationwide backhaul network to connect it to other networks. Of the Phase I Man scheme, Kiltimagh, Kingscourt, Gweedore and Carrickmacross have no backhaul connection.
Conal Henry, chief executive of E-net, noted the report “recognises the impact of the Mans on FDI and competition”.