Sunday 24 March 2019

Shrinking reach of the broadband plan raises concern over its future

Major broadband announcements by Eir and Imagine this week have led to new questions over the stuttering National Broadband Plan. Adrian Weckler explains what's going on and what to expect next.

Waiting game: Many parts of rural Ireland are still lacking in high-speed broadband
Waiting game: Many parts of rural Ireland are still lacking in high-speed broadband
Carolan Lennon, CEO of former bidder Eir

Adrian Weckler Technology Editor

IS THE National Broadband Plan shrinking? This week, announcements from a number of telecom operators threaten to substantially reduce the size of the Government's 'intervention area', currently measured at 540,000 homes and businesses, or more than 1m people, in mostly rural areas.

Eir said that it has already upgraded 30,000 extra homes in the intervention area as an overrun to the fibre-to-the-home build-out (to 300,000 rural homes) that it agreed with the Government two years ago. Announcing a major new upgrade to its overall national network, Eir CEO Carolan Lennon said a further 50,000 of the intervention area will now be covered as part of a 1.4m home expansion plan.

This brings the size of the NBP intervention area down to 510,000 at present and 460,000 when (and if) Eir completes its fibre-to-the-home upgrade.

Then Imagine chief executive Sean Bolger said that the company's wireless rollout to 1m Irish homes would include a whopping 400,000 homes in the National Broadband Plan area.

Cumulatively, these announcements could bring the overall number of rural homes down by over three quarters, to under 140,000. So what's going to happen? Will the National Broadband Plan need to go back to the drawing board again? What's happening with the State-subsidised process at the moment anyway?

Here's an overview on where the National Broadband Plan stands at present and where it might be headed next.

1. What's happening with the National Broadband Plan at present?

The Department of Communications is still deciding whether or not to proceed to a 'preferred bidder' status with Granahan McCourt, the telecoms consortium which is the only remaining bidder in the Government's National Broadband Plan process. A decision on this has been waited on for almost four months. Sources close to the process say that it's still "weeks" away, although there is a possibility of a formal decision by the end of February.

If 'preferred bidder' status is conferred upon Granahan McCourt, the Government and that company will then move to sign a contract for the 25-year deal. This will see the Government commit to subsidising the build-out of a (mostly) fibre broadband network to the 'intervention area' of 540,000 homes and businesses in mostly rural areas. At the end of the 25-year period, the company gets to keep the rural network.

2. Why is it taking so long?

This has been the overarching theme of the entire National Broadband Plan process, which is now entering its seventh year. The Government insists that it has to get the detail right, given the magnitude of what's at stake: this is arguably the most ambitious broadband project in Europe. Politically, there are landmines everywhere if it gets sloppy. For instance, the last communications minister, Denis Naughten, was forced to resign after meeting the CEO of the bidding company Granahan McCourt on a number of occasions. Although an audit report cleared the process to continue, the Government was politically wounded. Sources say that it is determined not to prioritise speed over due diligence. One practical hurdle is that the documentation associated with the contract is said to run into thousands of pages.

3. Remind me why Eir and Siro, the two biggest bidders for the NBP contract, pulled out.

Both Eir and Siro said that they couldn't see a business case as a private company, albeit for different reasons. Siro, the joint venture between Vodafone and the ESB, said that the Government's deal with Eir over connecting 300,000 of the (then) 840,000 homes identified in the 'intervention area' ruined the prospect of long-term viability for the project in its eyes. It pulled out in late 2017.

A few months later, Eir also withdrew. Last week, the company's CEO, Carolan Lennon, gave fresh insight into why.

"It was very, very complex," she said. "A lot of extra cost came with that complexity, especially for us as the ex-incumbent. One example is that we couldn't use our existing wholesale Open Eir business, with 80 people and all its systems, to sell the NBP as a wholesale service. We would have been required to create another separate wholesale division with another team. We just couldn't justify the complexity or the cost."

Another reason, she said, was the sheer volume of detail in the contractual obligations.

"The contract we signed with the Government for the 300,000 rural homes ran to 40 pages," she said. "That was our own money. But the contract for the NBP runs to thousands of pages. There's a big overhead in reporting to the Government, too. That would drive cost. There was no business case we could make to say this was a good move for us. We spent over €7m on it before we withdrew."

4. So what's going to happen if the number of homes to be covered by the NBP shrinks? Does this jeopardise the whole thing?

The Government doesn't think so, despite Imagine's Sean Bolger suggesting that the State might not want to continue with a plan to subsidise a fibre-to-the-home broadband service in an area where his company will now build its own service.

Asked whether he would take legal action to stop the current NBP process, Bolger refused to rule it out but said that he did not think a legal battle "will arise".

Eir has a more benign view. "We won't be taking any action [against the State, where its 80,000 homes may duplicate the state's NBP footprint]," said Ms Lennon when asked this question. "We just want to get on with it," she added.

The reason that the Government doesn't think this is a threat is an assertion that its 540,000 figure is not set in stone. "With regard to the National Broadband Plan, the procurement process allows for changes to the map over the coming years in the event that new commercial plans are announced," a spokeswoman for the department told the Irish Independent.

In other words, the 30,000 that Eir has already covered may now formally be knocked off the NBP's intervention area when the next formal appraisal is done. And the same thing could happen if Imagine's planned build-out proceeds, especially if done in advance of the NBP being started.

The result is that even after the announcements from Eir and Imagine, "the area identified as requiring a State-led intervention remains as set out on the high-speed broadband map for the purposes of the NBP procurement process" for now, she said.

But if either of these commercial plans from Eir and Imagine don't materialise in full or in part, the Government says that the NBP can accommodate that too.

"In 2017 as a direct result of this monitoring the department added a further 84.5k premises to the NBP State Intervention Area where commercial investment plans previously provided to the department had failed to materialise," said the Department of Communications.

5. Will Eir and Imagine definitely build these new promised broadband connections?

Eir, which is promising the biggest overhaul, looks set to conclude its initial rural fibre rollout to 335,000 homes this June, even if that is six months late on its original commitment. It says that while it took two-and-a-half years to build 335,000, it will take five years to reach another 1.4m homes, as most of them are in urban or well-populated areas.

Imagine's roadmap is harder to gauge. It is now well-funded, having recently taken €120m in fresh finance from the investment firm Brookfield. It currently offers wireless broadband in some areas of the country. However, it ran into significant difficulties with WiMax, the wireless delivery service it previously hoped would become a national wireless service. A lengthy legal battle with Motorola ensued, while the WiMax service withered. Nevertheless, Mr Bolger has considerable experience in the Irish telecoms market.

6. Is Eir's new fibre rollout really 'fibre'?

This time it is. Unfortunately, the company will have a significant challenge in getting people to believe that it is really delivering fibre broadband - which is the highest currently available standard - instead of just a rebadged copper landline service. Eir's difficulty here is that it has been marketing a product called 'eFibre' for some years. But this is nowhere near as good a service as actual fibre broadband. It uses a home's old copper landline to connect to a fibre line somewhere down the street (or on another street, far away).

As a result, many 'eFibre' connections are slow to the point of their homes being officially classed as deprived internet zones. Eir's fibre-to-the-home product, by contrast, has no such problem. It is capable of delivering speeds of more than 1,000Mbs, far faster than most need.

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