National Broadband Ireland : implementation and progress

Taxpayers are subsidising the rollout of high-speed broadband to tens of thousands of homes and businesses that already have access to high-speed internet through Eir's network, the Business Post can reveal.

Data obtained by this newspaper shows Eir has already passed more than 45,000 premises included in the government's €5.7 billion National Broadband Plan, which aims to deliver fast, reliable broadband to more than 550,000 premises currently without it.

The rollout of the plan by National Broadband Ireland (NBI) to those same premises already served by Eir would cost the taxpayer more than €245 million in costs to effectively duplicate the existing services.

Alternatively, the company and the Department of Communications could choose to strip the premises from the NBP and allow NBI to claim up to €100 million in compensation for encroachment by private operators in the areas earmarked for the plan.

The revelation is set to heap further pressure on NBI and the Department of Communications, both of which are already battling to contain the fallout from the scheme’s slow start with just 2,700 of the 554,000 premises in the plan connected to date.

NBI had initially planned to pass 115,000 homes and businesses this year, but has scaled the target back to 60,000. So far, only 17,000 or so of those homes and businesses can access the network.

An NBI spokesman said that “for network integrity and cost rationale”, there was “potential for passing premises that are serviced by another entity in order to deliver a high-speed broadband service to more remote premises”.

He added: “Where there are premises that are already passed with fibre, it may be possible in some instances to design them out where identified at the survey stage. In other cases, those premises could end up by being passed by two networks. NBI is not concerned that this negatively impacts the overall objective of the NBP and from a consumer point of view, competition, can only be viewed as a positive outcome.

“While NBI does not have exclusivity in the intervention area and we cannot prevent a network operator from building fibre networks in the intervention area (IA), we are obligated to provide services to all premises in the IA, unless a formal change procedure is undertaken, in accordance with the project agreement.”

The department was warned prior to signing the plan contract with NBI, which is headed by David McCourt, the US businessman, that commercial operators were likely to continue expanding their services over the seven-year lifetime of the scheme.

In a strongly-worded memo advising the government against proceeding with the plan in 2019, Robert Watt, the secretary general at the Department of Public Expenditure at the time, described spending billions of euro providing a service that was likely to be “substantially, if not 100 per cent” delivered by private firms over time as a “significant risk” to the state.

Based on the maximum state subsidy of €2.7 billion, each home or business costs an average of about €5,500 to pass.

A spokesman for the department, however, said it had carried out extensive consultations with commercial operators to take account of their plans prior to the NBP’s intervention area being settled.

“This concluded in late 2019, when the European Commission handed down a positive state aid decision confirming this area and the conditions under which the state could subsidise the intervention. From 2019, any commercial operator deciding to build in the intervention area did so with full knowledge that state-subsidised network was approved for that area and that they should have no expectation that the Intervention will be amended,” he said.

A spokeswoman for Eir said its current fibre build programme was focused on urban locations, cities, towns and villages across Ireland.

“Eir is not building in the rural geographical intervention area which forms the government’s National Broadband Plan (NBP),” she added.

Data seen by this newspaper, however, shows the overlap between premises to be covered by the NBP and those already passed by Eir has increased consistently month by month, however.

Some of the extensive overlap between Eir and NBI is as a result of pre-existing fibre-to-the-cabinet (FTTC) services which the NBP appears not to have excluded.

The rest is accounted for by newer fibre-to-the-home (FTTH) broadband which Eir has been investing heavily in rolling out across the country.

Under the terms of the NBP contract, NBI is entitled to claim compensation of up to €100 million from the state for encroachment by commercial operators.

According to the Department of Communications, NBI must “demonstrate that the impact of removing premises from the contract is a net cost to their commercial model”.

To date, no claim has been submitted by NBI. DECC said it was not possible for NBI to be paid for passing a premises and to also claim compensation for encroachment in relation to the same site.

NBI did not respond to a query on whether it intended to pass the 45,000 already covered by Eir or to claim compensation for removing them from the project, nor did it issue a response when asked if it considered it appropriate to spend considerable sums of public money duplicating an existing network in those areas.

About 2,000 premises currently have access to both NBI and Eir’s networks, according to data seen by the Business Post.

The €100 million encroachment contingency is included in the overall maximum subsidy provided by the state.

Carolan Lennon was in combative form as she appeared before the Oireachtas communications committee mid-way through 2019.

The Eir chief executive had been invited to Leinster House to discuss the multi-billion-euro National Broadband Plan (NBP) which had garnered plenty of headlines over the previous months, most of which were negative.

The controversial procurement process that the Department of Communications (DECC) ran, and from which Eir withdrew, delivered a single bidder for the scheme, the aim of which was to subsidise the rollout of high-speed broadband to 540,000 or so homes and businesses.

Chief among the concerns of committee members was the cost of the project. Just a month previously Leo Varadkar, the then Taoiseach, had told the Dáil the total bill could reach €6 billion, including Vat and contingencies.

“It remains a source of regret for Eir, and for me personally, that we ultimately found ourselves in a position where we could no longer remain in the National Broadband Plan bid process,” Lennon said.

“I want to make it clear that we completely support the policy of 100 per cent connectivity for rural Ireland,” she added.

The purpose of Lennon’s comments was two-fold: to defend Eir and pledge its support for the state-supported broadband plan it had decided not to oversee.

But Eir had already taken 300,000 or so premises out of the NBP at that stage by bringing its network to those homes and businesses instead.

Carolan Lennon, chief executive of Eir: Lennon told an Oireachtas committee that Eir was likely to pick up more premises in the NBP as part of its national build. Picture: Rollingnews

Later in the hearing, Lennon told committee members that Eir was also likely to pick up more premises in the NBP “as part of our national [network] build”.

Her comments suggested those additional homes and business would likely be limited in number and near to urban areas rather than in the most rural areas included in the plan.

Now, however, it appears Eir’s presence in the NBP intervention area (IA) is far greater as the Business Post has learned that its network is already available to more than 40,000 homes and business included in the state’s plan.

Faced with Eir’s presence on its turf, how will NBI respond? Will it continue with its plans to build the network for those premises anyway, at great cost to the taxpayer?

Or alternatively, will it strip them from the plan and claim compensation from the state for Eir’s encroachment?

Doing so would not only cost the taxpayer, but also limit the future revenue NBI could earn from the network and potentially damage the network’s viability.

For the government, and indeed taxpayers, there appears to be few good options.

Claim for compensation

The Business Post has seen evidence of extensive encroachment by Eir via its wholesale arm, OpenEir, into areas covered by the NBP.

According to data obtained by this newspaper, more than 45,000 homes and businesses set to be passed by the NBP already have access to high-speed broadband via Eir’s network.

Of these, about a third have access to older fibre-to-the-cabinet (FTTC) broadband with speeds greater than 30Mbps. The NBP is designed to offer high-speed broadband to those who do not have access to internet with speeds of 30Mbps or less.

The remaining two-thirds of the overlap is newer fibre-to-the-home (FTTH) broadband which Eir had been rolling out in recent years. FTTH is considered the gold standard and is what NBI is also providing through its rollout.

The situation leaves NBI with two options: either build its network in the same area as Eir and get paid for doing so or strip them from the plan and receive compensation capped at a maximum of €100 million.

The Department of Communications said that NBI could either be paid for passing the premises or claim for compensation under the terms of the contract, but not both.

“The NBP contract includes a contingency to cater for encroachment by commercial operators into the intervention area, whereby NBI could seek compensation of no more than €100 million where they can demonstrate that the impact of removing premises from the contract is a net cost to their commercial model.

“It is at the sole discretion of the department and NBI under the contract and the state aid decision on whether any new build by commercial operators in the intervention area requires an amendment to the intervention area. There is however no requirement to do so and NBI is fully permitted to build to all premises under the current contract regardless of any incremental build by commercial operators,” the department’s spokesman said.

Of the 45,000 or so premises in the intervention area served by Eir, about 2,000 already have access to the NBI network as well, while no claim for compensation has been made by NBI yet.

This would suggest that NBI plans on continuing its rollout even in areas passed by Eir. Ultimately, the taxpayer is on the hook regardless of which option it chooses.

With tens of thousands of premises in question, the amount of public money that would be spent to provide good quality broadband to customers who already have access to it from a commercial operator would be significant.

As the department has been at pains to point out lately as the NBP rollout has lagged far behind schedule, NBI only gets paid for work it has completed.

The average cost to the taxpayer of passing one home or business under the NBP is about €5,500. Taking a conservative overbuild figure of 45,000, about €245 million would be spent by the state subsiding NBI to replicate a broadband network for people who already have access to one. This is contrary to the objective of the NBP.

“Eir are continually, continually eating into the NBI territory. It’s absolutely scandalous that an Eircode is passed by OpenEir and NBI are going to come and do the same and charge the government for it,” an informed source with knowledge of the overbuild said.

“And there is no way NBI aren’t going to pass those homes – because they want to get paid.”

No power to stop competitors

Where Lennon suggested in 2019 that Eir could pick up some NBP premises near to towns and cities, what are known as “urban infill” areas, the data obtained by this newspaper shows that the firm’s continued march into NBP territory is widespread across the country.

Based on that information, Eir has eaten into the NBP in every province, including many in remote rural areas.

Of further potential concern to the department is the fact that Eir’s network rollout in NBP territory is expanding all the time.

According to well-placed sources, the number of homes and businesses passed by Eir in NBP areas is increasing by several hundred per month.

A spokesman for NBI said there was “potential” for premises served by existing commercial networks to also be passed by its network “in order to deliver high speed broadband service to more remote premises”.

“Where there are premises that are already passed with fibre, it may be possible in some instances to design them out where identified at the survey stage. In other cases... those premises could end up being passed by two networks. NBI are not concerned that this negatively impacts the overall objective of the NBP and from a consumer point of view, competition, can only be viewed as a positive outcome,” he said.

NBI had no power to stop competitors building on its turf, the spokesman added.

A department spokesman said that from 2019 any commercial operator deciding to build in the intervention area did so with “full knowledge” that [the] state subsidised network was approved for that area and added that they should have “no expectation that the intervention will be amended”.

Extensive consultations had taken place with private operators before the intervention area was finalised to take account of their commercial rollout plans, he added.

For its part Eir said it is not building in areas to be covered by the NBP, despite the Business Post’s evidence of a clear overlap between its rollout and that of NBI.

“Eir's current fibre build programme is focused on urban locations, cities, towns and villages across Ireland. Eir is not building in the rural geographical intervention area which forms the government’s National Broadband Plan (NBP),” a spokeswoman said.

Scathing assessment

A month before Lennon’s appearance before the Oireachtas committee in June 2019, Robert Watt, the then Secretary General at the Department of Public Expenditure and Reform, issued a stark warning to government over the National Broadband Plan.

Contained in his scathing assessment of the plan was a warning that “further commercial activity is to be anticipated”.

Among the list of “significant risks for the state” associated with the plan, Watt wrote:

“Diversion of significant levels of public funds to provide a service that is likely to be – at least substantially if not 100 per cent of premises – delivered commercially over time.”

Less than two years into the plan – and with the rollout of the NBP lagging far behind its initial targets – the warnings issued by Watt look increasingly prescient.