Monday 17 June 2019

Adrian Weckler: Broadband rollout plan lives on

SSE Ireland boss Stephen Wheeler
SSE Ireland boss Stephen Wheeler
Adrian Weckler

Adrian Weckler

It seems that the National Broadband Plan isn't dead. Yes, SSE won't be replaced. But the Government is now satisfied that it doesn't need to be.

In SSE's place, a number of senior network architects and designers have come in to take charge of designing and building a rural broadband network that will reach 540,000 rural businesses and homes.

These include senior former executives from North American networks, including Canada's biggest telecoms company, Rogers Telecom.

They appear to have convinced key Department of Communications figures, up to and including Communications Minister Denis Naughten, that they can handle the network build.

Against the backdrop of incessant criticism over the SSE departure, people close to the process in government and in industry are now insistent that the planning and construction process is moving forward.

Some even say that things have improved in recent weeks.

In the last few days, the most public declaration of this was from Business Minister Heather Humphreys, who said that a contract (with Enet) is expected to be signed next month, despite the departure of SSE.

Taoiseach Leo Varadkar has backed this position up.

And the Government is internally planning a launch date of September 16 for the announcement of Enet as the winner of the state-backed competition.

So how come SSE's departure is being handled like it's no big deal?

The answer may lie in the manner by which SSE faded out of the process.

From talking to those close to the process on all sides, my understanding is that SSE had gradually disengaged from a technical partnership role earlier this year. Instead, the Scottish energy giant had drifted into an equity backup position.

That was still useful: SSE has revenues of some €40bn a year. It's a huge company with lots of money.

But then a handful of things happened that created internal difficulties within the consortium, including the departure of former chief executive Conal Henry in February.

So SSE started to lose enthusiasm for the project. Along the way, insufficient progress on a project plan that SSE and Enet had publicly embarked on - a private regional fibre broadband network that would connect 115,000 homes and businesses.

(The two companies, led by David McCourt and Stephen Wheeler, even got Minister Denis Naughten to launch the project in his own constituency last September, as it was in western towns that the fibre network was to be built.)

So with insufficient progress on the network they had committed to and interest in the NBP's machinations waning, SSE finally said goodbye.

One key question that arises now is finance. The Department appears to believe that Enet still possesses the technical know-how and capability to build the rural network out.

But it's not clear (at all) how (or who) the equity and finance is being backed up.

SSE was an anchor. Who might step in to cover that position? Does anyone need to or is Enet's (wealthy, but maybe not that wealthy) American boss David McCourt preparing new financial backing? John Laing is a consortium partner, but may not want to expand its exposure.

One wouldn't doubt the hustling or organisational ability of McCourt to put together new backers. At this stage, he must already have done that or the bid, presumably, would be in meltdown.

These details will be in Enet's final submission to government, which is due in the next three weeks.

One thing that seems definitely off the table is any enhanced structural role for Eir.

Eir executives have dismissed the notion, as have other insiders around the process.

However, Eir still has a pivotal role to play in the overall operational success of the network rollout.

Policy makers and network planners remain worried about a standoff between Eir and Enet over how much Eir would charge Enet to cross its rural network (using its poles). There isn't really any way around Eir's network, partially because of the way the incumbent telco set up its own 300,000-home rural fibre network. (This was the tranche of semi-rural homes that Eir sliced off the state's original 840,000 intervention area, which ultimately resulted in Siro and Eir leaving the NBP process because of the difficulty in connecting the remaining 540,000.)

Eir says there's an existing regulated price set by ComReg and that Enet has to cough up the full price. Enet says that's ridiculous, that the regulated price was created with an entirely different set of competitive conditions in mind, before any notion of a state-subsidised rural network was even imagined.

The key players here are the Government and ComReg. The Government wants Eir to compromise on the price and is talking about legislation to force them to do it. It's possible that ComReg could get more powers over Eir as part of this legislative push, something Eir really wouldn't want.

So that question could come down to a strategic decision by Eir's new owners as to how much they want to be at loggerheads with the Government.

If it's not resolved, Enet's subsidy from the taxpayer may need to be considerably larger.

On the other hand, Eir knows that the Government is desperate to get this process into construction. It's a fair bet that the Government will be willing to pay Eir more so as not to occasion more delays.

No matter how anyone around the process spins it, time is at a greater premium than money right now.

I think Paddy Power would set odds that this will still proceed, despite all the setbacks. But it's going to be close.

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