Q&A: Why are firms pulling out?

Remind me how the National Broadband Plan (NBP) works?

The Government is looking to bring high-speed broadband to about 500,000 rural premises.

It’s going to give money to a private operation to build the infrastructure needed. It’s doing this by running a competition to see who will submit the cheapest bid.

What’s behind SSE’s decision to pull out?

The company gave no specific reason yesterday, but you can take it that it’s the same reason that Eir, Vodafone and the ESB have pulled out – they don’t think it makes sense from a moneymaking point of view.

When deciding how much to bid, companies have to estimate how much it will cost to carry out the plan – and if they don’t think they can do it in a profitable way, they won’t stick around. Is this the end of the National Broadband Plan?

Not for now. The remaining parties in the eNet consortium indicated that they’re going to press ahead, with a final tender offer for the project due to be submitted within weeks.

Why have so many companies pulled out of the process?

The decision to shrink the number of homes covered by the plan is believed to have had a big impact. That decision was taken because Eir said it could cover hundreds of thousands of the original premises in the plan on a commercial basis. The implication of that was that the homes left in the NBP process were in more difficult locations – making it more difficult to hook them up to broadband.

In addition, the bigger the number of homes to be covered, the easier it is to make money because you can save by buying your building materials in bulk.