Saturday 25 May 2019

Adrian Weckler: 'New value on NBP network helps case, but more data is needed'

 

'Worse, it's fibre cable - which costs more to maintain and run in rural areas than cities because of the spread-out locations it's in' Stock Image
'Worse, it's fibre cable - which costs more to maintain and run in rural areas than cities because of the spread-out locations it's in' Stock Image
Adrian Weckler

Adrian Weckler

The revelation that the completed National Broadband Plan to 540,000 homes may be worth less than 15pc of the €3bn State subsidy used to build it may raise eyebrows.

But for those looking at exactly at what is being built, it comes as little surprise.

What is it, after all, that the State is spending its money on? Largely, it's the cost of buying and laying out fibre, together with the rental of another company's (Eir's) poles. Worse, it's fibre cable - which costs more to maintain and run in rural areas than cities because of the spread-out locations it's in.

So the network 'asset' that either reverts to the bidder or the State is now confirmed as being nothing like a €3bn prize. According to Communications Minister Richard Bruton, it will be more like €350m.

Even still, that's a hefty sum of money. How can the State justify leaving that in the hands of a private operator when it could construct the NBP contract in a way that sees the fibre cable reverting to its own control?

Mr Bruton's main answer to this is that if the management company knows the cable will fall out of its ownership in a few years, it will be "incentivised" to let it run down in quality and service. By being allowed to keep it, it may be motivated in the opposite way: to invest more in it so that it remains a modern service in the long run.

But wouldn't it be possible to counteract this effect with a carefully-constructed public-private partnership contract outlining strict quality thresholds that needed to be maintained on pain of penalties?

Maybe, Mr Bruton says. (For more on this, listen to The Big Tech Podcast at independent.ie/podcasts.)

There remains a lot to be desired about some details being withheld in this procurement process. It's understandable that a certain set of financial contractual details are considered commercially sensitive. This is mainly because if the bidder publishes its expected costs for each of the 1,000 or 2,000 things it has to procure itself, sub-contractors and suppliers may simply jack the price up. That will cost us all, either through higher subsidies or worse service levels.

But other secrets are less easy to justify. For example, there is significant and legitimate public interest in the profit and return level which NBI is allowed to make before clawbacks start kicking in. The Government says that this is all commercially sensitive, but that it has set a level that reflects our best interests.

But we know the equivalent levels that other regulated telecoms entities are afforded. Eir, for example, is allowed no more than 8pc of a return on the poles it will rent to NBI. Why is a similar level of disclosure inappropriate for the company running a unique, subsidised, regulated rural fibre network?

Indo Business

Also in Business