Thursday 14 November 2019

Jody Corcoran: 'Is this the real reason Varadkar 'bottled' general election call?'

State is on the hook for compensation of up to €500m if broadband deal breaches aid rules, writes Jody Corcoran

Taoiseach Leo Varadkar. Photo by Steve Humphreys
Taoiseach Leo Varadkar. Photo by Steve Humphreys
Jody Corcoran

Jody Corcoran

Newly minted statesman Leo Varadkar, fresh from his abandonment of Remainers in the UK, has bottled calling an election here which Simon Harris and Eoghan Murphy crave most, if only to free them from the purgatory of their failures in the departments of health and housing.

Sometimes leaders have to make decisions, as opposed to issue press releases. Varadkar opted for a deal with the wild man of Workington, Boris Johnson, rather than risk a no-deal Brexit. For that he is lauded a statesman. The praise is too soon. Last week we got a further insight into the Taoiseach's thinking.

He eschewed the election that even the comfortable Josepha Madigan demanded (on the basis of an opinion poll) because - as predicted here a few weeks ago - Brexit is still too unsettled. Nigel Farage may yet emerge kingmaker and the wild man of Workington may yet have to abandon his deal with Leo.

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It could go the other way too. Remainers may yet have their day. Theresa May called a seven-week campaign; the wild man has called six weeks. Anything could happen. On balance though, Leo made the right decision: do a deal with Boris and postpone the election here. We can acknowledge that, but continue to question his motivation.

While all of this was going on, quietly among the living dead of a Dail obsessed with buttons and fobs, the Fianna Fail leader, Micheal Martin, asked the Taoiseach a question on October 1 to do with the National Broadband Plan.

You will remember that plan, committed to ink at the cost of around €3bn on the eve of the local elections when Fine Gael was haemorrhaging support in the provinces, and in the teeth of fierce opposition from the secretary general in the Department of Public Expenditure.

This was the exchange in the Dail:

Varadkar: "On the National Broadband Plan, the contract has not been signed but we have appointed a preferred bidder. Imagine has challenged the maps and that has caused a delay. Deputies will be aware that Imagine provides a service in many parts of rural Ireland and has challenged the intervention area. We anticipate being able to..."

Martin: "To whom was the intervention area challenged? Was it challenged to Europe?"

Varadkar: "The challenge was initially made to the department. The department was then required to consult the European Commission for reasons relating to State aid rules. We anticipate that the contract will be signed by the end of year."

Following this exchange, a statement was issued by Imagine, an internet provider for regional and rural Ireland, to the effect that rather than it randomly challenging the intervention area, it had responded to a request by the department, on July 26, as required under the State aid approval process.

The department told me last week that, as it happens, more than 180 submissions, including 30 from operators, were received by the deadline of September 30.

Here, it gets a little confusing, but we will try to keep it simple with a question: was Leo Varadkar motivated last week to not call an election by concern that the European Commission will torpedo his National Broadband Plan under State aid rules?

Under these rules, the State can only provide aid where there is market failure. In advance, the Department of Communications must inform itself of existing services in the area. This must be taken into consideration before granting State aid. The department must also assess future plans for up to seven years of operators in the intervention area.

On foot of the recent consultation, the question is: has the department now accounted for existing services when agreeing the maps which will form part of its National Broadband Plan (NBP) contract with National Broadband Ireland (NBI)? If so, it would be interesting to know the size of the 'new' intervention area.

Imagine's existing services cover 234,000 of the 540,000 premises within the intervention area. Eir also has services within the area of about 30,000. That would leave an intervention area of about 270,000 premises.

Here is a further question: has the department assessed the future plans of private operators within these remaining 270,000 premises and what do they see as the implications arising from those plans?

A serious issue arises in relation to these questions: if the department ignores the existing services of private operators, then the State may be liable to NBI for compensation; or once taken into account, the intervention area may be reduced to around 170,000 premises, and be commercially unviable to the preferred bidder on current terms. Further, if the State provides the NBP contract based on an intervention area of 540,000 premises then it may be in breach of State aid provisions.

Last week, the department told me that, under the contract, NBI can apply for compensation for encroachment by other operators of high-speed broadband during deployment and that a subsidy may be available up to a maximum capped amount (and this is included in the €3bn figure), but that "the department does not expect this subsidy will be required".

However, there was less certainty on the issue of State aid rules: "The findings of the consultation, which will be available in the coming weeks, will ensure that the State Intervention Area is up to date, in advance of a contract being signed later this year. This will be an important element in concluding the State aid approval process with the European Commission."

In short, the State remains on the hook for compensation of up to €500m if the National Broadband Plan deal is found to be in breach of State aid rules.

And on the back of the escalating cost debacle in relation to the National Children's Hospital, for example, that would not be good news to emerge during a general election campaign.

Indeed, should that be the eventual outcome, it would likely destroy Varadkar's election chances, even if that election were to be held in April or May next year.

The Granahan McCourt boys, now part of preferred bidders NBI, were said to be in town last week.

Word is that the contract is to be signed on November 12, should the State aid approval process be concluded, of course.

Watch this space…

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