Wednesday 21 August 2019

Eir chief drops a grenade into broadband plan at key moment

Eir chief executive Carolan Lennon. Photo: Steve Humphreys
Eir chief executive Carolan Lennon. Photo: Steve Humphreys
Richard Curran

Richard Curran

Eir chief executive Carolan Lennon has dropped a bit of a grenade into the National Broadband Plan. The timing, from Eir's point of view, couldn't be better. Granahan McCourt, the preferred bidder, has not yet signed the licence from the State but must meet certain criteria in the coming months before doing so.

In the meantime, urban dwellers are getting more and more anxious about the structure of the proposed deal with Granahan McCourt, because it would see it benefit from a multi-billion-euro state subsidy, while owning the infrastructure at a future point in time.

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Rural dwellers stuck on 1MG broadband, or none, are sick of the delays and just want something as quickly as possible.

What is most striking about the Eir intervention is not whether it is a serious runner or not. It isn't, by the way. It doesn't fit the original specifications on what the government wants and changing the spec would probably see the State fall foul of EU state aid rules. No, the real strike from Eir is that it raises the question of who should pay for the service. Eir could deliver broadband capability to rural homes for a lot less but would need to charge people a greater connection fee. We will bring it close to your house but if you want to get connected, you will have to pay for it.

So, the taxpayer pays less, the user pays more. This is a pretty appealing argument for those who are not going to benefit directly from the scheme.

Eir's contribution has also raised some serious questions about the deliverability of the Granahan McCourt proposal. For example, Eir withdrew from the process because it believed the service obligations being placed on the operator were too harsh and probably unachievable. At the same time, Eir also didn't want price regulation set by ComReg.

The Granahan McCourt deal envisages the American consortium providing very high levels of customer service, ie, fixing things very quickly, no matter where they are. At the same time, the consortium will not be able to simply jack up the price to cover these costs, and especially if there is a poor level of take-up of the product.

If Eir's assertions are commercially realistic, it raises the question of whether anybody, not least a private equity fund, can deliver what is required. If Eir doesn't believe it could make a profit from it, given its experience, then how will Granahan McCourt?

Well, by getting a massive state subsidy. Eir's new plan and the Granahan McCourt plan are not directly comparable.

In a way, the points raised by the Eir chief executive undermine two fundamental parts of this whole process: the question of whether the State is paying too much, and whether the levels of service and delivery can actually be achieved. Eir has targeted the weak spots and gone right after them. It seems there is a big difference between providing connectivity capability to every rural home in Ireland and actually connecting them up. Connectivity capability means there is enough fibre in the vicinity of the house to connect it up. But actually connecting up the house will cost more and the user should pay the additional costs, instead of the taxpayer as a whole.

It throws petrol on to the urban/rural divide and who should pay for what.

Even more worrying than the higher state cost are the questions raised by Eir about whether this project can be delivered and operated as specified by the State.

If it cannot, then somebody is going to lose out. It could be Granahan McCourt if it finds itself losing a fortune through low levels of take-up and funding a service level on rural broadband that is either unrealistic or incredibly expensive.

Eir suggested you would have to have crews permanently on standby in places like Donegal, waiting on something to go wrong, in order to meet the service level obligations.

The state could lose out if it has to change the model further down the road. Some rural residents could lose out if all of these challenges come to the fore long before the broadband rollout is complete.

These are all further seeds of doubt but they may come to 'nowt'. The Government is wedded to this process and both Leo Varadkar and Richard Bruton have made that pretty clear in recent days. This one looks like going ahead - eventually.

New Central Bank boss will be glad to get on plane out of NZ

'Oops!' might have been the phrase used by incoming Central Bank governor Gabriel Makhlouf when he read the findings of a report into a budget leak at his old job in New Zealand.

Makhlouf was found to have "acted unreasonably" when he characterised as hacking a leak of parts of the 2019 budget from his department.

Was he a bit rash to presume it was a hack? It appears so. Did he suffer from the usual tendency among senior civil servants to assume the problem didn't come from within his own department? Perhaps a little.

Does this fundamentally undermine his judgement and how he is seen to handle certain circumstances? I don't think so.

A lot has been written about whether it reflects poorly on his judgement or whether his instinct was to protect his own when it came to a mistake having been made.

It has also been suggested that he was too quick to blame the person who found the information on the website, instead of questioning how this information could have been accidentally released on to it.

Anything to do with budget confidentiality is political. Politicians in New Zealand have had lots of fun with this one. In fact, it has been a turkey shoot. But the publicity may be overstating the seriousness of what has happened.

Makhlouf may feel a little relieved, despite being criticised in the report. If this had happened before his appointment or interview for the job, would he have got it? We will never know for sure but it is quite possible he wouldn't have. At the very least, he will have learned some valuable lessons about responding to internal cock-ups and how to handle them. In future, he may look inside his organisation first, which would be no bad thing.

And bear in mind he is coming to a country where budget confidentiality is a fairly loose concept. Remember our current EU Commissioner, Phil Hogan, resigned as junior finance minister back in the 1990s when one of his staff faxed the budget to the Evening Herald.

Nobody faxes it any more, but its contents are usually very well known before the Minister for Finance takes to his feet.

Betting firms continue to win out in regulation stakes

The lack of gambling regulation shows enormous political cowardice or political complacency.

During the week, the UK's Gambling Commission announced that it had fined betting firms €21.8m last year for failing to protect problem gamblers and stop money launderers.

In some cases, the same betting companies are being fined in the UK by the regulator while involved in voluntary codes of conduct here. This includes Flutter Entertainment (aka Paddy Power), which was fined €2.5m.

If betting companies know there is a regulator in the UK who can impose heavy fines and they still break the rules, how could anyone believe they are going to adhere to the highest standards in Ireland, where there is no regulator, no penalties and no fines?

The situation has got so bad that the betting firms are voluntarily coming up with their own codes of conduct and agreements about advertising etc, because politicians have failed to step in. It is as if they are almost embarrassed with what they are allowed to do here.

It has to be said that some of the bigger firms say they would welcome regulation in Ireland, which is further proof that it is badly needed. In the meantime, it is business as usual.

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