Sunday 23 October 2016

Private bidder to be sought for rural broadband network

Published 05/07/2016 | 02:30

Denis Naughten, the Minister for Communications, Climate Change and Natural Resources, at Leinster House Photo: Tom Burke
Denis Naughten, the Minister for Communications, Climate Change and Natural Resources, at Leinster House Photo: Tom Burke

The Government is poised to choose a private ownership model for Ireland's €500m state-subsidised rural broadband network.

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The Irish Independent understands that Minister for Communications Denis Naughten will present the Cabinet with a private ownership model to keep costs down and prevent further delays.

Mr Naughten has previously argued that any state-funded broadband network should stay in public ownership.

But he is now understood to believe that private ownership would lower the cost to the state by up to 50pc. The National Broadband Plan network, which is due to begin construction next summer and could cost the taxpayer an initial €500m, promises to connect up to 750,000 homes and businesses without adequate broadband.

Mr Naughten will say that handing ownership of the rural network over to a winning private bidder would prevent a further six-month delay in getting the process started.

"With other critical policy priorities such as climate change, homelessness and health to be considered, the minister believes that the benefit of owning the network after 25 years does not outweigh the opportunity cost of having to forgo other very important Government projects," said a source close to the Government.

If the Government pursued a public ownership model, it would "reduce the Exchequer's Capital Funding Envelope by €500m to €600m over the next six years", said the source.

The move comes after a KPMG report on the issue recommended private ownership as the "least risk" option to the State.

The National Broadband Plan has already been beset by delays. Under the Government's current plans, completion of the network is not expected until 2021.

The scheme promises to connect every rural home and business to fibre-speed broadband of at least 30 megabits per second. The Government has drawn up a map of the 760,000 premises to be connected, saying private operators such as Eir or Virgin won't provide high speed services there because of their remoteness.

However, Eir has said that it will provide new fibre broadband to over 100,000 of the rural premises identified, which could lower the number of homes to receive the publicly funded service.

"The KPMG report presents many other arguments in favour of the [private ownership] model, including the fact that this model places all of the technology and demand risk on the private sector, while costing the Exchequer less," said a government source.

"The minister's principal reason for opting with that model is because of the very significant impact on the Exchequer and on the timing of the project."

In June, the Government identified five companies bidding to make the shortlist for the 26-year contract. They are: Eir, Enet, Imagine, Gigabit Fibre and Siro, the joint venture between Vodafone and the ESB.

Eir and Siro are regarded as frontrunners for the project, which promises fibre-speed broadband to every Irish rural home and business at the same prices as city broadband customers. Gigabit Fibre, co-founded by former O2 Ireland boss Danuta Gray, is regarded as a dark horse, with a number of powerful global telecoms and financial companies behind it.

The winner of the contract, which could be worth more than €300m, is due to be announced a year from now.

Irish Independent

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