Ten­sions abound as broad­band scheme en­ters cru­cial phase

Irish Independent - Business Week - - BUSINESSWEEK TECHNOLOGYTECHNOLOGY -

RE­CENTLY, the gov­ern­ment in­ad­ver­tently pub­lished some in­ter­nal gov­ern­ment doc­u­ments re­veal­ing ex­tra de­tails on the cost and ten­sion be­hind the Na­tional Broad­band Plan roll­out.

I say ‘ in­ad­ver­tently’ be­cause the Gov­ern­ment tried to redact the doc­u­ment but didn’t do it prop­erly – any­one with a cur­sory knowl­edge of com­put­ers could un­mask the black redacted strips.

One key is­sue re­vealed in the pri­vate memo was that the deal with Eir – to move 300,000 rural home and busi­nesses out of the State’s 850,000-premise roll­out in­ter­ven­tion zone and into Eir’s own ex­pe­dited roll­out plans – will prob­a­bly end up cost­ing the State money and hit the roll­out sched­ule, too.

“The depart­ment’s own sub­sidy mod­el­ling sug­gests that the smaller in­ter­ven­tion area could lead to an in­crease in the over­all cost of the state in­ter­ven­tion,” said the doc­u­ment.

But how can cov­er­ing an area with 550,000 premises cost more than an area of 850,000 premises?

They’re much harder to hook up, re­turn less rev­enue 850,000 rural premises is to take th­ese rural town cen­tres and ex­tend a cou­ple of kilo­me­tres out. That means that any­one who wins the con­tract for the re­main­ing 450,000 homes and busi­nesses (in one- off sce­nar­ios be­tween towns and vil­lages) will face a tough choice. Ei­ther they du­pli­cate a fi­bre net­work build them­selves from the town cen­tre (thus repli­cat­ing Eir’s build and thin­ning out any re­turns) or they ap­ply to use Eir’s in­fra­struc­ture to carry their ser­vice out to where the re­mote rural premises are.

“All three bid­ders have in­di­cated that ac­cess to the new in­fra­struc­ture built as part of the Eir 300,000 rural de­ploy­ment will be cen­tral to their bids,” says the redacted doc­u­ment. “The cost to bid­ders of ac­cess­ing this in­fra­struc­ture in or­der to reach the in­ter­ven­tion area is a crit­i­cal fac­tor that could sig­nif­i­cantly im­pact on the level of sub­sidy sought by bid­ders in the pro­cure­ment process.

“The depart­ment’s model sug­gests that un­der the base case, the level of sub­sidy bid­ders might seek for the re­duced in­ter­ven­tion area could in­crease by be­tween 10pc and 15pc if an in­cre­men­tal cost is ap­plied to in­fra­struc­ture ac­cess and by more than 60pc if the ex­ist­ing reg­u­lated price for pole and duct ac­cess is ap­plied.”

The Gov­ern­ment wants Eir to charge a re­duced price to this in­fra­struc­ture while Eir in­sists that it is en­ti­tled to charge the ex­ist­ing reg­u­lated rate. “Ap­ply­ing the ex­ist­ing reg­u­lated price for pole and duct ac­cess, rather than a price based on in­cre­men­tal costs, could sig­nif­i­cantly in­crease the level of sub­sidy sought by bid­ders.”

With no specifics on fi­nances, cal­cu­lat­ing the over­all cost of the Na­tional Broad­band Plan is still guess­work. The memo sug­gests the to­tal bill will be a mul­ti­ple of the €200m ear­marked by Eir to build out 300,000 fi­bre con­nec­tions.

The in­crease in cost is likely to be ab­sorbed by the tax­payer, as the Gov­ern­ment has promised that cit­i­zen ac­cess to State-sub­sidised rural broad­band will not ex­ceed av­er­age prices in ur­ban ar­eas.

How­ever, it could now mean de­lays to some part of the process.

The State-sub­sidised Na­tional Broad­band Plan, which aims to pro­vide 542,000 rural homes and busi­nesses with fi­bre broad­band, was ini­tially due to com­mence con­struc­tion last year. How­ever, a se­ries of de­lays has pushed its roll­out back by over two years. Many in­dus­try ex­perts do not now ex­pect the process to be com­pleted be­fore 2023.

Eir, Siro and Enet are the three bid­ders short­listed for the tax­payer-funded roll­out plan.

Siro, a joint ven­ture be­tween Voda­fone and the ESB, is still con­sid­er­ing with­drawal from the process be­cause of a deal done be­tween the gov­ern­ment and Eir that split 300,000 homes away from the Gov­ern­ment in­ter­ven­tion plan and into Eir’s com­mer­cial roll­out zones.

The in­crease in cost is likely to be ab­sorbed by the tax­payer

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