Fianna Fáil wants the transfer of the National Broadband Plan to the firm behind Irish Water or another semi-state, leaving political support for the current process hanging by a thread.
The future of the Government could now depend on the administration’s ability to rescue the plan from the brink of collapse.
Fianna Fáil’s position will play a pivotal role in upcoming negotiations on whether the party will continue to support a Fine Gael-led administration.
The Government’s existing tender process is “hopelessly compromised”, according to Fianna Fáil, with little chance of redemption from the audit now being conducted by Peter Smyth.
Fianna Fáil now wants companies such as Ervia to take on the task of bringing high-speed internet to 540,000 rural homes and businesses.
ESB and Bord na Móna have also been put forward as potential firms to take on the role.
Fianna Fáil communications spokesman Timmy Dooley said: “They understand large infrastructure projects, financing and asset management.”
It may also be a sign of increasing political desperation to see delivery of the broadband expedited, regardless of the method.
But senior Fianna Fáil sources have told this newspaper they feel the Government has "ignored" their concerns about the process for the past 14 months.
The latest developments come as the Government is set to concede that none of the 1.1 million rural residents currently languishing without broadband will get connected to the State-backed scheme as promised in 2019.
Instead, it will be at least 2020 until the first premises are connected, with an even further delay now being threatened.
Hundreds of thousands of households are therefore in the dark about when they can expect the broadband rollout.
A spokeswoman for Ervia, the semi-State firm previously known as Irish Water, said the company could not "speculate" on the proposal "as the current process is ongoing".
Ervia owns Aurora, a substantial telecoms infrastructure company with a national fibre network that is used by large companies and other operators.
It is currently extending its network and owns its own cable infrastructure.
The semi-state company also has an extensive 'dark fibre' network in Dublin.
An executive from one of the semi-state firms mentioned, who did not wish to be named, told the Irish Independent that it would "have to consider it if asked by the minister".
However, an executive from another of the semi-states said that the proposal is unlikely to be workable in the short term.
"It's nowhere in our universe," said the executive, who spoke to the Irish Independent on condition of anonymity.
"I can't debunk this enough," they added.
The Government is currently waiting on the results of an audit on the NBP tendering process.
This is specifically to investigate whether "the integrity" of the process has been irredeemably damaged.
There was huge political fallout following revelations about meetings held by the former Minister for Communications, Denis Naughten and the head of the last remaining bidding consortium, David McCourt.
Mr Naughten resigned his Cabinet position in the wake of the damaging revelations and an audit process was instigated.
However, even if the appointed auditor Peter Smyth delivers a clean bill of health on the current process, then Mr Dooley indicated that his party's confidence in the tender has gone.
"The current process is hopelessly compromised," he said.
"It's hard to see how Peter Smyth can find anything other than a potential for compromise."
He said that the Government should now open talks "in parallel" with semi-state entities and major telecoms companies about an alternative approach.
"A move to a direct award could be done quickly."
There was only one reference to broadband in the original seven-page deal struck by Fianna Fáil and Fine Gael two-and-a-half years ago.
It merely stated that the Government would "increase capital investment" in broadband - but there are no figures or timelines mentioned in the original document.
However the political climate has changed and if a new document is to be agreed, it is expected that Mr Varadkar will have to give much more precise commitments.
The Irish Farmers' Association is among the rural organisations who have starkly warned there is mounting concern over the non-availability of broadband.
"It's critical that the rollout of broadband to rural areas remains a Government priority," a spokesman told the Irish Independent last night.
On the first day that Jim Hacker became a government minister in the classic British TV comedy series 'Yes Minister', his private secretary Bernard Woolley showed him around his new office. Woolley explained: "It used to be said there were two kinds of chairs to go with two kinds of ministers: one sort that folds up instantly and the other sort that goes round and round in circles."