The Irish Times view on the National Broadband Plan contract: Devil may lie in unknown detail

The 25-year contract requires National Broadband Ireland (NBI) – the vehicle set up by winning bidder US firm Granahan McCourt – to deliver high-speed broadband to 542,000 mainly rural homes and premises

 

A heavily redacted version of the contract for the National Broadband Plan (NBP) was published last week, nine months after the controversial €3 billion project was given the go-ahead. The Government signed off on the plan last November after a protracted bidding process, which produced only one bidder and a sequence of delays and controversies, including the resignation of former minister for communications Denis Naughten.

The 25-year contract requires National Broadband Ireland (NBI) – the vehicle set up by winning bidder US firm Granahan McCourt – to deliver high-speed broadband to 542,000 mainly rural homes and premises.

Those who campaigned to have the contract published will be disappointed, however, as large swathes of the 2,200-page document were withheld for commercial reasons. Of the 50 schedules in the contract, 13 were fully redacted and 16 were partially redacted and just 21 were published in full. Crucial details about subsidy payments were withheld, as were details about “performance levels” and “operational performance”.

Under the contract, the maximum possible cost to the State is €3 billion over 25 years, which includes VAT of €355 million that is returned to the State and a contingency fund of €545 million, which is subject to strict drawdown conditions. The price tag works out at roughly €6,000 per household, making it, by far, the most expensive State contract ever awarded to a third party.

And the State will not own the network after the contract concludes. That’s the bit that most people find difficult to comprehend, particularly when the contractor is stumping up just €220 million in equity and working capital to fund it..

From the start, the Department of Communications took an incredibly legalistic approach to the tender, tying bidders up in mountains of paperwork. Combined with the cost of deploying an expensive fibre network across a complex tapestry of one-off housing, this appeared to spook the industry here, resulting in the exit of pre-race favourites Eir and ESB-Vodafone joint venture Siro. This left just one bidder and the Government effectively over a barrel on price.

Many will link the State’s broadband woes to the privatisation of Eir’s predecessor, Telecom Éireann, in the late 1990s. Instead of bringing private sector efficiency, Eircom and then Eir was tossed back and forth by private sector interests, landed with mountains of debt and drained of resources when the industry was going through the most transformative process in over a century, the shift to digitalisation. Ironically Eir will benefit from the NBP by about €1 billion over the 25-year term as the contractor – in this case NBI – has to lease much of the former semi state’s infrastructure – poles and ducts – to get at the homes and businesses in the intervention area.

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