Cliff Taylor: Time for a Plan B for rural broadband

The Government has to make a call – it can’t let this broadband saga drag on and on

October 11th, 2018: Taoiseach Leo Varadkar asked Denis Naughten to resign as minister for communications after he revealed he had four private dinners with the key bidder in the broadband procurement process. Video: Oireachtas TV

 

It was simpler in the old days. When the State wanted to provide a major piece of economic infrastructure, it went ahead and did it, often via what used to be called a semi-State company. The ESB electrified the country, for example, and the State paid for airports, ports and roads. These were “public goods” and provided via public funds.

Now the world is more complicated – and the National Broadband Plan is a classic example of just how complex and difficult it is. In most modern economies, the State has withdrawn from many areas of infrastructure provision. Projects are typically undertaken by private operators and the State often no longer has the capacity to undertake them. Building a major piece of infrastructure often involves complex tendering procedures, finding a way to make it commercially attractive for the private operator and complying with EU state-aid rules.

As we have seen with the broadband plan, this can be difficult to do and can drag out interminably. Indeed Ireland is just one of many countries where controversy has dogged the construction of broadband infrastructure. It is tricky and difficult – all the more so because technology is changing all the time. If the State hadn’t sold the telecoms network as part of the Eircom sale in 1999 it might all have been different. But that’s another story.

Other factors have slowed and disrupted the process here including initial uncertainty about what model to use and difficulty in designing the process. Bidders have said the Department of Communications was strict and legalistic as they got involved – seen as a response to the second mobile phone licence controversy in 1996 – and that this delayed things further. Relations between the department and one of the key bidders, Eir, seemed to fracture, leading them to pull out.

Indeed the whole thing has looked like a slow bicycle race, with consortiums willingly falling off their saddles. Recently even the last remaining bidder has been fundamentally reshaped.

And now it has all got really messy, due to Denis Naughten’s decision, when minister for communications, to meet and dine with bidder for the contract, David McCourt, sparking a real dilemma for the Government. Has the process been damaged beyond repair? We await the findings of the independent auditor who will report to the Government on this, but the process may well be fatally damaged. The latest revelations that Naughten negotiated directly with the McCourt consortium in his department raises yet more questions.

It is time to start scoping out a plan B.

This is not about who wins the deal, as there is only one bidder left. It is all about what deal the winner gets. In the light of this week’s events any hint of favouritism to the winning bidder in the terms of the contract would be toxic. And as the terms of the deal see the winners taking ownership of the network after 20 years – a strategy designed during the crisis to minimise State financial involvement – the terms will be closely scrutinised.Other players in the market will now be on alert.

Rural development

Rural broadband is, in the words of then minister for communications Pat Rabbitte when he launched the policy in 2012, “the rural electrification of the 21st-century”. It is key to the development of the rural economy which will feel the biggest hit from Brexit. It is also central to the Government’s own National Development Plan which envisages wealth and activity spilling out from new regional centres – Cork, Limerick, Galway and so on.

If there is no decent broadband a few miles down the road, the spillover won’t spill very far.

So whatever happens now, it needs to happen quickly. We can’t get let this slip into the eternal limbo of some kind of inquiry, or be put on the political long finger. The Government needs to decide – either they stick with the programme, or unveil the alternative.

The next step will be the report of the independent auditor. It is simply impossible to second-guess this, but clearly there are big questions now, There is a lot of State cash at play and the revelations that Naughten was directly involved in negotiations raises more, The original assessment was that up to €500 million of State money was on the line here, and there were already concerns that the cost is rising.

The trouble for the Government in abandoning the existing process now is twofold. First, it is not clear whether the remaining bidder would be looking for their costs back. If the tender process was designed properly, the State may have some protection here.

The second problem is knottier – what to do next? There are practical issues and also potential legal ones if, for example, some of the bidders who had dropped out sought to get involved again.

Possibly the quickest way to re-start would be to issue a tender just to build the network and pay for the construction of something which would ultimately be State-owned, unlike under the existing plan. Then a separate tender could take place for someone to operate the network. It might involve the State taking on some more debt and expense up front, but remember we do have cash in the Strategic Infrastructure Fund. It would be easier to design than to try a repeat of the current, more complex, build-and-operate contract.

There would still be a further delay – perhaps of at least a year. What’s another year, as the song said, when people in rural Ireland have been watching this unfold since 2012. Well actually, given the urgency, it is quite a long time. So a lot hangs on the auditor’s report and the wider issue of whether the reshaped final consortium now bidding to do the job is judged able to deliver.

Getting this done is surely more important for economic development than, say, the Dublin Metro or the Cork to Limerick motorway. The Taoiseach needs to make a call, and quickly. This one can’t be put on the backburner in an attempt to let the political heat subside.

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