Tuesday 22 January 2019

Ivan Yates: 'Time to pull the plug on broadband debacle'

Broadband saga: Former minister Denis Naughten's resignation made the review process academic. Photo: MAXWELLPHOTOGRAPHY.IE
Broadband saga: Former minister Denis Naughten's resignation made the review process academic. Photo: MAXWELLPHOTOGRAPHY.IE
Ivan Yates

Ivan Yates

You've heard of Murphy's Law - what can go wrong, will go wrong. But perhaps you haven't heard of O'Toole's Law - Murphy was an optimist. The National Broadband Plan (NBP) has operated under O'Toole's Law. Since 2012, every setback that could scupper provision of nationwide rural broadband has contrived to bedevil successive governments' false dawns.

The latest twist in the saga is that former communications minister Denis Naughten apparently acted appropriately in conducting 18 meetings, five dinners and nine phone conversations with the remaining bidder, Granahan McCourt. You don't need an independent assessor's report to reveal the official and ministerial desperation to keep any player at the table.

Auditor Peter Smyth's report highlights the vague looseness of departmental protocols in dealings with tendering, the weakness of reliance on the individuals' bona fides, and how Naughten resigning made the review academic anyway.

Broadband is the key to securing survival of rural enterprises and communities much more than retaining sub post offices, Garda stations, rural public transport or one-teacher primary schools.

Communications ministers are like 26A buses. There'll be another one coming along soon. Procuring cost-effective nationwide broadband is a one-off opportunity.

We've seven broadband providers in Ireland: Eir, Vodafone, Virgin Media, Sky Ireland, Pure Telecom, Ripple Communications and Digiweb - with an additional host of niche retail operators of ISP infrastructure and microwave broadband networks. The pace of technological development is so rapid that any single solution won't work. Instead, hybrid configurations of commercial fibre and wireless technology are required.

The insurmountable difficulty with delivering on Taoiseach Leo Varadkar's 'personal crusade' is that most of the players in the market aren't now involved in the ultimate consortium to deliver the NBP.

First the withdrawal of Siro. Their €450m joint venture between Vodafone and the ESB, established in 2015, plans to connect 450,000 customers with speeds of up to 1,000Mb per second, spread across 50 medium-sized towns. This represents a parallel universe to the NBP.

The subsequent departure of Eir from the NBP process signalled the death knell for a sustainable credible tendering competition. Facilitating their strategy to extricate 330,000 homes from the original NBP strategy favouring its own commercial roll-out scuppered Siro.

These departures effectively drove the taxpayer NBP exposure through the roof, by leaving it with only one putative operator.

But then even the remaining bid, which had the credibility of a consortium led by both Enet and SSE, proceeded to fall apart over the summer as the contractual deadline loomed.

First it was SSE, a publicly listed UK utility giant with massive automated billing systems. It has a significant foothold in the Irish electricity market through Airtricity.

But then the wholesale operator - and ISIF-owned - Enet itself disappeared from the final consortium, leaving us with the lead role of Granahan McCourt Capital.

All incumbents came to the same conclusion, that executing 110,000km of fibre-optic cable into the most remote parts of the country would cost in excess of €1.5bn, with no guarantee as to the number of customers taking up the service. They abandoned up to €10m each on wasted terminated tenders, rather than put good money after bad.

They concluded regulatory and governance criteria didn't provide a sustainable business case for shareholders. They can't all be wrong.

Despite having skin in the sector, they relinquished the opportunity to leverage their established networks of telecommunications assets into the NBP. We're expected to believe that a newcomer, with no market experience or synergies, could obtain value.

Dream on. This contradicts the original KPMG recommendations to the department as to procuring the optimal funding model and best value for money for taxpayers. The logical conclusion is that signing a contract with the only remaining bidder, with no significant assets-base in the sector, will mean higher taxpayer subsidies. The NBP, as currently stands, is a busted flush.

Current Communications Minister Richard Bruton will become the Comical Ali of communications unless he realises he should stop digging deeper in this futile hole. Reports that he's recommending Government to sign the contract in January, with the Granahan McCourt consortium, is seriously ill-advised. It's an open-ended blank cheque of behalf of taxpayers, without safety nets.

Meanwhile, ComReg fails to curb Eir's excessive connection charges to its ducts, poles and network; wholesale pricing inhibits others' investor roll-out.

Ireland isn't alone in struggling to provide broadband to the most remote corners of the country. EU states encounter roll-out delays and elusive 100pc availability.

The fundamentals of the NBP are dubiously utopian. Would anyone promise a dual-carriageway from Malin to Mizen Head? The era of universal service obligations, like a phone copper wire to every home from a monopoly provider, are gone. Political pipedream promises need to be retracted, especially on the basis of cost-free connections to users.

Britain introduced a subsidy scheme in 2010, whereby BT invested £1.7bn in rural broadband, where not commercially viable. The UK government recouped £258m when four million rural homes were connected over a six-year period. UK's Better Broadband Subsidy Scheme ensured householders and businesses wouldn't pay more initially than £400 to access basic broadband speeds of at least 2mb per second.

Government should swallow its pride and acknowledge that the NBP cannot deliver on its original objectives.

The options now are to re-open a tendering competition to entice back incumbents with scale; introduce subsidy schemes to the remotest users; or work with ComReg to devise a State roll-out of a publicly owned fibre and wireless network to run in parallel with the existing communications market. To proceed on the current track is doomed to failure. It's overly reliant on one fibre technology to deliver the necessary connectivity. It means excessive costs are related to the potential uptake. It could take up to a generation to deliver - and then be out of date.

There's never a wrong time to do the right thing.

Irish Independent

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