Last week the Cabinet made some important decisions which will progress the procurement process of the much awaited National Broadband Plan.
The Government decided who will own the network which will be part funded by the State and also decided on the possible inclusion of an additional 170,000 premises in the State intervention and mapping process.
The Mapping Process
Continuing to update the mapping process, which will define the precise intervention area, is very welcome. It should ensure that if there is any doubt as to whether the premises will be served in the current plans of the commercial providers, then these premises will fall under the remit of the National Broadband Plan. This will hopefully ensure that citizens and their premises do not ‘fall between the cracks’ of current planned and yet to materialise investment plans.
The Minister also invited members of the public to contact the Department at email@example.com if they have any concerns about their premises and coverage of the National Broadband Plan.
The Government also decided on the future ownership of the network selecting the Commercial Stimulus or ‘Gap Funding’ model where the private sector finances, designs, builds, owns and operates the network, with contractual obligations to the Department.
The alternative model was that of Full Concession where the private sector also finances, designs, builds and operates the network but it is then handed back to the State after 25 years.
The rationale for the selection of private ownership was based on detailed costings which under both models, the winning bidder(s) will be subject to stringent contract provisions to ensure that the network delivers quality, affordable high speed broadband over the 25 year contract.
In announcing the decision, Minister Naughten noted, “While I recognise the potential long-term value in the State owning any network that is built, I am advised that under a Full Concession Model, the entire cost of the project would be placed on the Government’s Balance Sheet, with serious implications for the available capital funding over the next five to six years.
It seems therefore that the decision to cede long term ownership of the network was based on short term capital spending needs.
Short term gain, long term deficits?
In considering the short-term/long-term issue it is useful to consider a 25 year time horizon. 25 years may seem like a long time but for those of us old enough to remember the events of 1991, it is not that long ago! As a reminder, 1991 saw the US-led invasion of Iraq and the EU Maastricht Treaty was signed (agreeing the timeframe for the introduction of the Euro). Twenty five years ago Charles Haughey was Taoiseach and the Birmingham Six were freed. Hit songs included Bryan Adams – Everything I Do (I Do It For You) and REM’s Shiny Happy People!
In considering the 25 year time horizon, the value of the future network needs to be considered. While technology may change, all over Europe there is much consensus on the benefits of investing in fibre based networks as the most future proofed solution with benefits to be realised over a 30-50 year time horizon at least.
The WDC in a submission to the Department of Communications, Energy and Natural Resources https://www.wdc.ie/wp-content/uploads/Western-Development-Commission-Final-uneditable.pdf in 2015 noted that ‘most other national infrastructure networks are in and have remained in public ownership. This is because they are considered strategically important infrastructure networks’.
This is not to say there may be downsides to public ownership. A Review of the Australian experience noted that ‘a commercially driven deployment would have been substantially better managed, providing service on schedule and to cost’. However as we know in Ireland, private ownership does not guarantee investment as the experience of eircom following privatisation has shown.
There are many aspects required to ensure successful, competitive deployment and good service delivery. It has been recognised that under the Commercial stimulus model the network would require stringent governance/regulation. As the WDC submission noted;
“From a rural perspective (most of the Intervention Area), the record of governance and regulation of the telecommunications sector in Ireland is not very good. Most recently there was much customer satisfaction in parts of the Western Region with the rollout of basic broadband services under the National Broadband Scheme (NBS). Inconsistent delivery of minimum broadband speeds as well as poor customer services were regular complaints (see Connecting the West, Next Generation Broadband in the Western Region 2012 ( 1.5Mb)”
From a regulatory perspective, the willingness and ability of the telecommunications providers to contest issues and delay resolution and ultimately service provision to the consumer is a cause for concern. Even with multiple retail providers, rural parts of Ireland are likely to have limited competition. The role of the Regulator is and will continue to be very important.
Where are we now?
The qualifying bidders, selected from an original five consortia, will now be invited to participate in dialogue with the Department outlining their detailed solutions commencing in July 2016.Following the dialogue process bidders will be invited to submit formal tenders. In 2017, it is expected that the Government will approve the 25 year contract/s and commencement of the network build will then start.
The WDC congratulates the hard work of Departmental officials in progressing the National Broadband Plan to date. However it urges the Department and Government to continually consider and prioritise the needs of the rural consumer over the short and long term in delivering on the rollout of the Plan. There is a need to ensure that contract specification and regulation are robust and resilient enough so that the ultimate beneficiary of the entire National Broadband Plan– the rural user, can access the service it needs in a timely manner at a competitive price.