Monday 21 October 2019

National Broadband Plan may cost €1bn less - government officials

Richard Bruton. Photo: Gareth Chaney, Collins
Richard Bruton. Photo: Gareth Chaney, Collins
Adrian Weckler

Adrian Weckler

The National Broadband Plan may cost the state €1bn less than the reported €3bn figure, the head of the state-subsidised process has told TDs.

Fergal Mulligan, programme director of the National Broadband Plan, told the Joint Committee on Communications, Climate Action and environment that a “best case scenario” could see the state subsidy for the rural fibre broadband rollout come down by a third.

“It’s possible that a number of things could come in under cost,” he said. “You can see that subsidy coming down by up to €1bn.”

He said that the most predictable base cost will be €1bn to ‘pass’ premises with fibre broadband cable.

“We have a good handle on that,” he said. “This includes things likes 144,000 kilometres of fibre cable, brackets, maybe some poles. It also includes things like optical line equipment in exchanges.”

Mr Mulligan said that further costs could turn out to be more variable.

“Connecting to each home is the biggest unknown cost,” he said. “We think it will be somewhere in the order of between €400 million to €700 million. However, it’s only paid on costs incurred. So if connecting homes comes in at €300 million, that’s all we’ll pay.”

Mr Mulligan said that the government will be looking to reduce the subsidy “on a quarter by quarter basis”.

The National Broadband Plan has been estimated to cost up to €3bn in state subsidies, made up of a maximum of €2.1bn in infrastructure payments, VAT on that and €480m in “contingency funding” for unexpected events.

The preferred bidder for the 25-year contract, National Broadband Ireland, has said that it will put up €175m of initial capital and a further €45m in working costs. Department officials say while state funding is capped, the bidder’s costs are uncapped and may rise if rollout targets are not met.

Questioned by Fianna Fail Communications spokesman Timmy Dooley, Mr Mulligan said that “clawbacks” that may be due to the state are common in other countries building large infrastructure projects.

Green Party leader Eamon Ryan asked why the state was proceeding with a procurement model that saw the asset revert to the bidder at the end of the contract, adding that it would surely be a “valuable asset”.

Mr O’hObain answered that the value of the asset is likely or be low because the profitability is likely to be low. Mr Mulligan added that a number of rural households may still be unprofitable when the network is funded and rolled out, but that the bidding company will still be obliged to serve them.

Last week, Communications Minister Richard Bruton told that the finished network would be one tenth the size of Eir, which recently sold for €3.5bn. However, unlike Eir, it will not own the bulk of its own poles to deliver the broadband, instead renting it from Eir.

Eamon Ryan also asked why the government, and the Department of Communications in particular, could not build the rural broadband network itself.

Mr O’hObain said that the Department Of Communications does not have the skills and resources to do so relative to the expertise available in the private sector.

Mr Dooley asked about the companies providing financial backup for the bid by National Broadband Ireland, the firm controlled by US businessman David McCourt that is now the preferred bidder for the 25-year state contract for broadband to 540,000 rural homes and businesses.

The assistant secretary general of the Communications Department, Ciaran O’hObain, said that the two companies which provided letters of financial support are Tetrad, a company controlled by the family of US billionaire Walter Scott, a longtime business partner of David McCourt, and McCourt Global, a firm controlled by David McCourt’s brother, Frank McCourt.

Mr O’hObain said that Tetrad is a shareholder in National Broadband Ireland, adding that the Department would publish a chart outlining the shareholders.

Mr Mulligan said that the Department Of Communications will now spend “two or three months” preparing the contract.

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