Monday 16 September 2019

Colm McCarthy: 'It's time for an inquiry into this colossal failure'

National Broadband Plan has lurched from crisis to crisis since its inception, writes Colm McCarthy

The Department of Communications has consistently claimed, for many years and until very recently, that the plan to deliver high-speed broadband to every unserved property in Ireland would cost €500m, one-sixth of the figure revealed by Pat Leahy. Stock image
The Department of Communications has consistently claimed, for many years and until very recently, that the plan to deliver high-speed broadband to every unserved property in Ireland would cost €500m, one-sixth of the figure revealed by Pat Leahy. Stock image
Colm McCarthy

Colm McCarthy

Writing in The Irish Times on October 26, Pat Leahy reported: "There are growing fears at the highest level of Government about the escalating costs of the National Broadband Plan, now estimated at some €3bn, and officials are working on 'plan B' in case the entire process collapses."

The Department of Communications has consistently claimed, for many years and until very recently, that the plan to deliver high-speed broadband to every unserved property in Ireland would cost €500m, one-sixth of the figure revealed by Pat Leahy.

If the cost turns out to be €3bn, or anything close to it, this project will rank as another dispiriting failure in the evaluation and management of large public projects.

The only response from government to date has been the replacement of Denis Naughten as minister. Mr Naughten resigned on fears that he had compromised the bidder selection process for the construction of the network. He had engaged directly with the sole remaining bidder, a company controlled by an American telecoms investor called David McCourt.

The Government has a published procedure for the management of capital projects. It is called the Public Spending Code and it requires that any proposal costing more than €20m should not go to procurement until it has survived a proper cost-benefit analysis.

This procedure is followed diligently for many smaller schemes but is circumnavigated whenever the political imperatives dictate. The broadband plan has lurched from crisis to crisis since politicians first began to promise urban-standard broadband, without connection charges and at urban prices, to every dwelling and every business premises, however remote, throughout the country. The modus operandi, as with Metro North, appears to be that projects are exempt from the rigours of the Public Spending Code provided they are sufficiently costly.

The promise to deliver fibre-optic cables to every premises in the country, ensuring superfast broadband, at zero connection fee and with ongoing charges no higher than faced in urban areas, has been made by no other government in Europe. Nor is it available for any other public utility in Ireland.

The ESB's upfront charge for connecting a single rural dwelling is €1,947, inclusive of VAT, with a discount for clusters of dwellings which bring the cost below €1,000 for a development of 10 or more houses. There is an element of subsidy for remote households through this flat charging system since they do not face the full distance-related cost. Farm buildings for non-residential use are connected at 50pc of cost, although there are extra charges for power upgrades.

The ESB charge cost-related fees to commercial users in rural areas for trenching and overhead lines. Trenching costs are about €50 per metre in grassland but €150 per metre through roads or footpaths, according to the ESB website.

Residential electricity users in rural areas pay about €30 per annum more than urban users in the form of standing charges.

The situation is much the same for water supplies and waste water disposal. Rural dwellers pay their own costs for sinking wells while private group water schemes, although in receipt of public subsidy, also levy charges on members.

Connection costs were formerly bundled into the development levies imposed by local authorities but will in future be charged directly by Irish Water in accordance with proposals from the Commission for Utility Regulation. Connection to the public water and sewerage system for new one-off rural dwellings will cost as much as €5,000, according to press reports.

The fixed-line telephone provider Eir also charges for installation and line rental, including cost recovery for connections to distant customers. Fixed-line telephone penetration in Ireland never reached 100pc, the political target summoned from thin air for broadband.

Where natural gas is an option, Gas Networks Ireland charge €249.70 per household for connections up to 15 metres and €51.32 per metre thereafter, both figures inclusive of VAT. The decision to promise free fibre broadband connections throughout rural Ireland, for commercial as well as residential users, is entirely without precedent.

The project promoters are the Department of Communications. All projects must have a promoter, but the overall capital programme must identify priorities, hence the Public Spending Code. In the Irish system the task of project evaluation is assigned to the project champion, with predictable results. Time and again, consultants are engaged to produce weighty tomes favourable to the scheme as proposed. These are often couched in the language of cost-benefit analysis although containing no quantification of either costs or benefits.

In 2015, the Department of Communications released a series of reports by consulting firms preparatory to a public consultation process. The report on costs was not released at all and the report on benefits contains assertions but no quantified estimates. There is no cost-benefit study available in public view.

That this should have been permitted is a straight flouting of the Public Spending Code. It would be at least consistent if the Department of Finance would now issue a circular formally announcing that the Public Spending Code has been withdrawn.

The intention in 2015 had been to connect about 800,000 premises through some form of competitive tender process, with the State offering substantial subsidy of the upfront capital costs to the successful bidder or bidders. A cost of €500m was estimated as adequate to eliminate connection charges to the new customers, a figure questioned at the time and now apparently accepted as absurdly low.

The first consequence of the policy design was the decision by Eir to connect roughly 300,000 premises at its own cost, leaving about 500,000 for the State-subsidised scheme. Naturally enough, Eir chose the 300,000 premises closest to its existing core network, those easiest and cheapest to reach.

This diminished the attractions of the remainder and all potential bidders, including a consortium involving the ESB, dropped out, leaving the current mess. Presumably the ESB have a good idea what it really costs to build a network of wires to every premises in Ireland, since they already have one.

Interestingly the extra Eir network added in recent times has had a limited take-up, under 20pc according to industry sources, even though the new premises 'passed' by fibre-optic have been offered connection at zero or little cost by Eir.

No official figure has been released and it would be nice to know what demand is really like for broadband service outside urban areas.

Over the next few years it is likely that the mobile companies will provide 5G coverage throughout the country. If they do there will be an alternative technology available to those currently without superfast broadband.

In that eventuality, the take-up on the national, 100pc coverage and free, broadband network could be even lower than in Eir's recent expansion.

The broadband plan is featuring prominently in the talks between Fine Gael and Fianna Fail about the renewal of the confidence-and-supply agreement, necessary to avoid an early election. It is tempting for opposition politicians to demand that rural voters be delivered the bounty they have been promised.

But the temptation should be resisted. The National Broadband Plan has been, from inception, a colossal failure of public administration. There should be a full public inquiry.

Sunday Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss