Will Siro drop out of the NBP?
IS the National Broadband Plan facing a walkout by one its three main bidders? Siro, a joint venture between Vodafone and the ESB, was set up partially to bid for the State’s upcoming rural broadband contract tender. But it’s sounding increasingly gloomy about it.
Ostensibly, the reason is down to the reduction of the number of homes and businesses to be included. It was 750,000 until the Government agreed that Eir would take care of 300,000. Siro thinks that those 300,000 may be critical to making a business case for an overall bid.
“There has been a very material change to the competition,” a Siro spokesman told me last week. “We are looking at this very closely now and considering whether there is still a business case.”
If Siro pulls out, that leaves only Eir and Enet as shortlisted bidders for the contract to run fibre-grade broadband to every last rural home and business in the country by 2023. That could mean either a higher taxpayer cost (we still don’t know what the bill will be) or a longer rollout period because the bids would be less competitive.
In short, it would be bad news for Ireland.
For its part, the Government doesn’t believe that Siro will pull out. Communications Minister Denis Naughten said as much a few weeks ago when announcing the 300,000 allocation for Eir.
Rival competitor Enet, which has spent millions on preparing a bid for the contract, also remains publicly committed to the process.
“The Enet consortium remains engaged in and supportive of the NBP process,” a spokesman told me on Friday. “We truly believe that the National Broadband Plan can have a lasting effect on Ireland’s future by addressing our broadband issues once and for all.”
Enet’s position is critical here. If anything, it would have potentially higher costs and bigger structural challenges than Siro if it won the tender.
This is because Enet would probably have to wade through Eir infrastructure to get to the rural homes listed in the Government tender, whereas Siro supposedly has ESB lines to bypass it all.
This is worth explaining in a little more detail. Typically, rural broadband connections start in small towns or villages, where the density of homes and businesses is highest. The fibre is then laid down so that it spiders its way to the outskirts. That’s where the ribbon developments start to get more spread out and where one-off housing, with farms and other buildings, is the norm.
What Eir has done in offering to cover 300,000 of the 750,000 premises is to take these rural town centres. That means that anyone who wins the contract for the remaining 450,000 homes and businesses 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. Both situations have their challenges. If you’re building fresh alongside Eir’s already-built fibre lines, there’s a much slimmer chance you’ll make money off it (although it will also dent Eir’s chances of profitability too). Alternatively, if you base your business model on transit over Eir’s network, you risk certainty. Comreg has repeatedly found Eir in breach of service agreements to rival operators using its network infrastructure.
From Eir’s perspective, all of this is an aggressive — but potentially very smart — competitive move. It wins a little, no matter what happens.
To be fair to the Government, it may not have had much choice in accepting Eir’s plan. Eir already has some 40,000 of the 300,000 built out. Under EU law, the State can’t intervene with services where a private supplier is offering them.
One question over Siro’s current concerns is that these infrastructural challenges are more pertinent to Enet than to Siro. After all, Siro’s entire model is based on a partnership with the ESB. That means it is supposed to have the means, chutes, poles and ditches to already carry its own fibre lines in a way that’s not dependent on Eir or anyone else. Enet doesn’t have any of this but remains more upbeat about staying in the competition.
So is it possible that Siro is simply having second thoughts about the whole thing? That it’s all starting to look a lot more difficult and expensive in practice than it seemed a year or two ago?
The company isn’t shy about rolling out its own fibre. It has already connected up a number of large towns, including Drogheda, Tralee and Mullingar. It has workers on the ground building more.
But building out infrastructure in Ireland is hard and expensive. A hundred different things crop up to prevent stages of it happening on time. Siro itself is probably behind on its own stated targets. It was to have 500,000 homes and businesses connectable by the end of 2018. To date, it only has 70,000 completed. It will be surprising if it somehow reaches another 430,000 premises in the next 18 months, a rate of some 25,000 premises per month.
This undoubtedly isn’t because the company is not committed. It’s just a very, very hard thing to do. With this experience now under its belt, maybe Siro is wondering whether a further massive infrastructure project, with all of the deadlines, penalties and unknown issues that it would bring, would be the best use of its time and resources.
To be clear, the company has not suggested this or guided it. It has stuck pretty firmly to its original statement, which is that it is simply re-evaluating the business case in a straightforward way.
It also says that it will make its decision in weeks to come.
But it looks like there is a genuine chance that the National Broadband Plan tendering process may shrink from three competitors to two. That would not be good news for a million people currently without proper broadband.