NBP: Ownership

clohamon

IrelandOffline has asked for the costings that led Minister Naughten to opt for a gap-funding (private) rather than a full concession (public) model.

Yesterday Deputy Brian Stanley (SF) also asked the Minister in the Dáil about the ownership issue.

11. Deputy Brian Stanley asked the Minister for Communications, Energy and Natural Resources Denis Naughten if he has estimated the future capital value of the national broadband network by 2043. [21518/16]

Deputy Brian Stanley: The question relates to the roll-out of the national broadband plan. The establishment of a national broadband network will be welcomed in my constituency, which covers Laois and part of south County Kildare, and every corner of the State. The question asks what will be the value of the network.

Deputy Denis Naughten: The programme for a partnership Government commits to the delivery of high-speed broadband under the national broadband plan as a matter of priority. This is being achieved through private investment by commercial telecommunications companies and a State intervention under the national broadband plan in areas where commercial investment is not forthcoming.

On 5 July 2016, the Government selected the commercial stimulus model as the optimum ownership model for the network that will be part-funded by the Exchequer. The Government considered two ownership models, having narrowed down the options last December from five models. The two models are the commercial stimulus model under which the private sector finances, designs, builds, owns and operates the network, with contractual obligations to the Department, and the full concession model under which the private sector finances, designs, builds and operates the network with contractual obligations to the Department. In the latter model, assets funded by the State are handed back to the State after 25 years, while commercial assets that support the national broadband plan infrastructure would however remain in private ownership.

Both models will deliver the same network, with the same service specifications and controls for 25 years. In both models, the winning bidder or bidders will be subject to stringent contract provisions to ensure the network delivers quality, affordable high-speed broadband to all parts of Ireland that cannot access services.

The Department has completed detailed costings, down to every individual premises in the intervention area. On that basis, it has modelled the likely cost of each ownership model. It would not be appropriate to publish the expected cost of building the network, the likely cost to the State or the expected terminal value of the network while a major public procurement process is under way. I do not intend, therefore, to indicate the overall estimated Exchequer funding parameters or projected costs or values of the network. Ultimately, the costs will depend on the price bidder quote in the tender process. The future capital value of the network will rely on a variety of factors, including the level of demand, technology developments over the next 25 years and potential alternative networks. Any estimation of the value of the network in 25 years' time would be highly speculative.

Deputy Brian Stanley: The national broadband plan is a major undertaking which has been compared with rural electrification. It will certainly be as important as rural electrification from a social and economic point of view. As a representative of a rural constituency, the Minister will be aware that the lack of broadband has retarded social and economic development in rural areas. While Sinn Féin wants the network to be rolled out quickly and without delay, we also want taxpayers to obtain value for their investment. The potential return to the State of delivering high-speed broadband to rural areas will be quickly realised. As the Minister stated in reply to an earlier question, 26 years is a long time. However, it is not that long since the lads to my right on the Fianna Fáil benches privatised Telecom Éireann. I remember that decision clearly and we have lived with its negative effects. For this reason, we need to take a long view.

Deputy Denis Naughten: I am conscious of the point made by the Deputy, and other Deputies in a Private Members' debate last week. I have the same inclination as the Deputy in respect of public assets. It is important to note, however, that the asset we are purchasing is not like the Telecom Éireann asset, which was a full copper network that covered every corner of the country. We are purchasing part of a network by building onto a network that is in private ownership. The private sector has spent €2 billion developing this network to which we will connect a further 1 million homes. This is akin to buying a car without an engine and part of the problem is that we are not buying a full car.

The Government weighed up the commercial stimulus model and had regard to the full impact of the full concession model on the Government balance sheet over the period in question. We made our decision based on this impact and the delays in the roll-out of broadband that would arise under the second model.

Deputy Brian Stanley: The key issues are the need to roll out a national broadband network and to secure value for money for service users and the taxpayers who will provide the funding for the plan. Control and efficiency are the key pillars on which the plan must be built if it is to succeed.

On the last mile - I cannot think of a better way to describe it - the private sector will own the mains infrastructure. Some private sector companies are concerned about this, as the Minister and I both know because they have raised the matter with us.

Deputy Denis Naughten: I ask the Deputy to elaborate as I am not getting the gist of his argument.

Deputy Brian Stanley: At least one major company has serious concerns about the private sector controlling and owning the mains channels. Who will own the last mile, in other words, the hard to reach part for which the State will pay? Who will own that cable?

Deputy Denis Naughten: I agree with everything the Deputy said on the objectives behind the national broadband plan. This is the reason I made the decision with a heavy heart. However, the model I selected met all of the criteria the Deputy set out compared with the other model.

To respond to the Deputy's question on the last mile, 26 years from now, the last mile will be owned by the private sector. For the next 25 years, however, it will be controlled by the State and managed by a separate entity. However, we now have 25 years to put in place proper regulations, including a universal service obligation. It should be noted that we have a universal service obligation in place for voice services and we are not inundated with complaints from people who cannot get access to a telephone line. The universal service obligation on voice services is, therefore, working and we must ensure a similar obligation is in place in 26 years to ensure people have access to real and genuine high-speed broadband.

clohamon

Mick Barry TD (AAA) asks the minister..

... the measures he will take to ensure future investment in the broadband network infrastructure, once ownership has been transferred to a private company after the 25 year national broadband plan contract has expired; and if he will make a statement on the matter.

Minister Naughten:

....The contract(s) with the preferred bidder(s) will include robust governance provisions and an appropriate minimum set of risk management measures. Provisions will be in place for the State to claw-back a portion of any network build, or operating profits over and above those anticipated in the contract(s). There will also be mechanisms to deduct service credits from the contractor(s), where milestones or contract conditions are not met.
In addition to contract provisions, if the winning bidder(s) is deemed by ComReg to have significant market dominance in the Intervention Area, regulation will provide an added layer of control over and above the contract with the State. Through regulation, ComReg has the statutory obligation* to incentivise re-investment in a regulated network, to promote competition and to protect the interests of end users. It must also ensure that regulation in Ireland and the activities of regulated companies in Ireland are consistent with other comparable Member States. ComReg will play a key role in monitoring the activity of the winning bidder(s), and may, subject to whether the winning bidder(s) has significant market dominance or not, regulate the winning bidder(s) during and post-contract.
I am conscious of the need to put in place strong contract governance structures to manage the contract(s) over a 25 year period. To this end, I will bring forward proposals in the coming months, including legislation, to establish a dedicated entity to manage this and other State telecoms contracts or to assign this role to an existing State entity.
I am also aware of the need to ensure continuity of service in 26 years, when the contract has expired. My Department has already had discussions with ComReg with a view to putting in place legislation that could enhance ComReg's regulatory oversight. I have also discussed with ComReg, the possibility of a Universal Service Obligation as an effective mechanism to ensure continuity of services beyond 2042 when the contract expires. In anticipation of the need for such an arrangement, I have raised this issue at European level in advance of the review of the Telecommunications Regulatory Framework which is scheduled to commence later this year.

Fairly typical language from DCENR. Qualified, conditional and essentially commits to nothing at all. (emphasis added in bold)

*Not to be confused with what ComReg actually does.