Oireachtas Joint and Select Committees
Wednesday, 11 March 2015
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Operations and Functioning of National Lottery: Discussion
The committee is in public session. Session A is an overview of the operations and functioning of the national lottery. I welcome from RGDATA, Ms Tara Buckley, director general, and from the CSNA, Mr. Vincent Jennings, chief executive officer, and Mr. Joe Tierney for the national executive. The format of the meeting will be that Ms Buckley and Mr. Jennings will make short opening statements of five minutes each and a question and answer session will follow to clarify any matters. I remind members, witnesses and those in the public Gallery that all mobile phones must be switched off.
I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter to only qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable. Finally, members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person or persons outside the Houses or an official by name or in such a way as to make him or her identifiable.
As we are time constricted here this afternoon I will insist that it is a five-minute opening presentation. I ask Ms Buckley to begin.
Ms Tara Buckley:
I thank the Chairman for the opportunity to speak to the committee. At the outset I think it is important to put on the record that RGDATA members are and always have been very strong supporters of the national lottery in Ireland. Our members are the owners of around 4,000 shops, convenience stores, forecourt stores and supermarkets, the majority of which are national lottery agents. They have helped to build the national lottery to the successful national brand that it is today. The partnership with the national lottery is important to our members' businesses. The presence of a national lottery terminal and scratch card games in a shop helps attract footfall and encourages customers to the premises. In addition, as owners of businesses that are rooted in their communities, our members recognise that the national lottery plays and important role in contributing to good causes locally and, as community-based retailers, local shop owners also share in the development and support of community facilities established with national lottery funding.
My members operate in a fast, demanding and extremely competitive and customer-focused environment. They are used to change and innovation and work hard to ensure that their customers are satisfied with the service that they receive. They work hard to get customers into their shops and try to ensure that they have a pleasant shopping experience each time. My members are also adept at embracing new technology and are happy to work with suppliers to ensure that the latest systems are introduced and applied effectively and efficiently.
When the Government announced that it was preparing to sell the national lottery licence, RGDATA campaigned to ensure that the retail agents' margin was ring-fenced in any licence agreement. I am happy to say that the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, and many Members of this House supported us in this cause and the Minister recognised the importance that the modest margin made to local shops and he agreed to our request.
When Premier Lotteries Ireland, the new operator of the national lottery, was appointed, retailers were ready and prepared to work with it to ensure that the fine reputation of the national lottery established over 29 years was maintained and grown. They have been willing to embrace new technology and have been assured that the new operator was committed to the retail channel and would be investing in in-store service for retail agents and the many lotto customers who like to purchase national lottery products in shops.
There were indications of some teething problems around the end of 2014 when the new ticket terminals went live. Retailers were generally prepared to be patient with the operator to see if these problems could be resolved. However, the scale of the problems that have emerged since have been significant and the initial response of the national lottery to address these genuine problems raised by retailers was poor. Earlier this year when RGDATA circulated the results of a members' survey that clearly highlighted retailers' concerns, instead of accepting the deficiencies in the service and addressing them in an upfront fashion, the national lottery seemed to be more interested in denying the problems and shooting the messenger.
I am happy to say that situation has changed and a lot has been done since then. We believe we need to work hard together to restore customer confidence.
What lies at the core of the retailer frustration in regard to the national lottery is some very poor communication by the lottery with both retailers and customers. This poor communication has compounded and fuelled dissatisfaction over repeated technical issues that have emerged and led to a lack of confidence on the part of retailers about the new operator's approach to customer service and technical competence. We want to rebuild that confidence.
I want to give the joint committee a flavour of what RGDATA members have been saying about the national lottery. This is from the full gamut of RGDATA members who cover symbol group stores and independent, non-aligned retailers. All of our members have experienced technical issues with the new terminals. These include problems with the operation of the new machines, the sensitivity of the scanning system, and the system constantly freezing and having to be rebooted.
They have also had complaints from customers about the new playslips being difficult to read. Retailers have complained about the surface on some of the scratch cards that the scanner will not read. The absence of self-service ticket checkers has proven to be a significant irritation both to lotto customers and retail agents. It means that customers are unable to check if they have a winning ticket and are dependent on the retailer to scan the ticket. When the retailer's scanner is not working this leads to real customer frustration, queues and anger. Retailers are getting the blame for these queues and delays, not the national lottery. One retailer was told by a customer that if he paid his Internet bills on time he would not get cut off.
There have also been problems with outages with the services. There have been a number of outages with the ticket terminals, where machines have crashed for significant periods of time. As members of the committee know, this led in one instance to the postponement of a national lottery draw for the first time. Even yesterday, members we spoke to said they were still experiencing stoppages and having to reboot terminals.
We have also received complaints about plasma screens that are not working. These big, 42-inch plasma screens are in a prominent position by the till to advertise new draws, big jackpots and provide countdowns to draws. For example, a screen in one member's shop in Kerry has been out of commission since last November. He is obviously frustrated at the lack of response to his telephone calls to the national lottery asking it to deal with the issue. Another member in Cork says his screen is down and there is no word on when it will be back in service.
We have also had complaints about poor customer service and responsiveness. My understanding is that may be improving but I am telling the committee about the experience of retailers since the changeover occurred. RGDATA members who have contacted the national lottery customer service desk by telephone have been frustrated by calls ringing out, no call-backs, and inadequate information being provided to retailers. We will be seeking reassurances that the national lottery has staffed up the customer service line and will be dealing with these issues.
Another issue that has arisen for our members-----
Ms Tara Buckley:
That is fine but may I finish what I was saying? We want to work with the national lottery, as we have worked with it for all these years, to regain customer confidence and the retail agents' confidence in the system. It is in all our interests that the national lottery is a success and works.
Mr. Vincent Jennings:
I thank the Chairman and other members for their invitation to appear before the joint committee.
The Convenience Stores and Newsagents' Association, CSNA, welcomes the opportunity to address the committee on the review of operations and functioning of the national lottery under the new licence holder. The CSNA represents over 1,200 individuals in 1,500 stores throughout the Republic of Ireland. The vast majority of these stores are agents of the national lottery.
When the Government announced its intention to offer the operation to license the national lottery for a 20-year period, we engaged the services of Mr. Anthony Foley of DCU's economics department to prepare a submission for the association to assist us in our attempts to ensure that the existing commissions earned by our members were maintained at the levels enjoyed under the licences held by An Post – The National Lottery, levels that were not fixed in the original legislation setting up the national lottery. Both Mr. Foley and the association attended meetings with the team that the Minister for Public Expenditure and Reform, Deputy Howlin, had assembled to oversee the process. We were pleased to secure the commitment of the Minister that the retailers' commission would be safeguarded and maintained at the existing 6% level.
The association met with the national lottery and Camelot on a number of occasions to discuss matters of vital importance to our members in advance of the tender process. While we were prepared to deal with any of the prospective owners, we made it clear to the Department of Finance and the Department of Public Expenditure and Reform that our working relationship with the management of An Post - The National Lottery was very strong and we would be best pleased to continue working with them after the new owners took over.
Our relationship with the national lottery is over 27 years old. We have taken part in assisting new applicants to familiarise themselves with the licensing process and the day-to-day accounting requirements to prevent, or minimise, internal and external fraud. We were responsible for promoting the idea of a lottery agents' council to Malachy Moynihan and Ray Bates, taking a leaf from Crowning the Customer, the book by Senator Feargal Quinn who is a strong advocate of listening to the customer.
The agents' council has been responsible for many years for teasing out various initiatives that have been to the benefit of the playing public. We can say with certainty that each of the CSNA representatives on the agents' council has been diligent in informing the association on the deliberations and decisions being considered. My colleague, Joe Tierney, is a member of the CSNA national executive and is on the national lottery agents' council. He will be able to address any questions regarding the present level of communication and actions that both the CSNA and the Lottery have engaged in over the past six months in the lead-in to, and during, the transition.
As chief executive, I had five high-level meetings with senior management in the lottery to discuss various commercial options that needed to be considered when the financial aspects of the licence moved from the Department of Finance into that of a private company. These included the migration of direct debits, the standing of existing securities or guarantees, the transitional periods' accounting processes, and the extinguishing of liabilities due to the old company.
We were at all times briefed by the national lottery on the transitional roll-out, both directly and via the agents' council representatives, and provided updated information to all our members through our weekly e-zine. The date for the changeover was in doubt up until the final few days, as the lottery was awaiting final checks from its software providers that the system was good to go. We had discussions with the lottery on the merits and detractions in deferring the roll-out until after Christmas and told them that if the roll-out was deferred, they would need to reconvene the training sessions that had previously been held, as the time-lag would be too great for retailers and their staff to retain information given to them at a distance of more than two months. We had no reason to believe that there were any problems beneath the surface.
The roll-out was the largest single logistical operation in our FMCG sector since the advent of the euro. Every detail had been considered and checked. Those areas affecting retailers were advised to the council and they expressed themselves to be satisfied with the process as planned. Planning and attention to detail was not the problem.
The teams assembled by the national lottery worked diligently and methodically to achieve a seamless transition of the product from the old to the new. It may have been considered that the advent of a new operator would wish to change the logo or signage in our stores, but such was the level of belief in the brand that there was no determination to change.
It is our belief that there are two central criticisms that need to be addressed. The first is the decision to move from a primarily broadband-connected service to one that relies upon wireless free. The second criticism is the lack of communication with the public both on the transition and the difficulties being experienced in accessing products and services that the public had become accustomed to using. Retailers are agents of the national lottery but were not given timely information on difficulties being experienced. Nor were they the recipients of any posters or leaflets for display until CSNA demanded that they be printed and forwarded explaining that certain delays and faults were at lottery-level and not the fault of any individual retailer.
Only the national lottery can answer why it moved from broadband and whether the decision to install a certain type of terminal was the correct option, or the least expensive one. There are concerns within our industry that such choices may not have been made if the old An Post - The National Lottery company was making that decision. We represent members that rely significantly upon the direct and indirect income derived from the sale of national lottery products. We do not wish to drag either PLI or any of their shareholders or staff into areas that would injure the brand, given the importance that we attach to selling a unique and hitherto blemish-free product.
We acknowledge the desire of the committee to consider what, if any, systemic problems may be present in the current set-up. We respectfully suggest, however, that it does nothing that would further damage the level of trust the public has with a product designed to promote good causes, and which brings a little joy into all of our lives.
The national executive of CSNA endorses the unanimous affirmation given by the agents' council to continue to work with the lottery to resolve all outstanding issues.
I welcome the witnesses here today. We are pleased to have an opportunity to discuss these issues in respect of the national lottery. It is probably the first time that this committee or anybody in the Oireachtas has ever felt the need for such a meeting. The witnesses have outlined the reasons why such a meeting is necessary and we independently came to same conclusion.
The public has not been able to check tickets in the ticket-checking machines in various retail outlets throughout the country. It reflected badly on the retailers and I can understand that from the witnesses' viewpoint. When somebody goes to a shop, having bought a national lottery ticket, and sees that the ticket-checking machine does not work, they begin to wonder about the retailer. They eventually realise, however, that it is not the retailer's fault. I sympathise with front-line staff who have taken unnecessary flak on behalf of the national lottery.
The reason we are here is that the Government decided to privatise the national lottery licence. It has been implied that some of these problems might not have happened under the former management regime when broadband was used.
I have a number of brief questions arising from the decision to raise money by privatising the licence. I know An Post has a 20% stake in the new franchise but it is very much a small player. Those who have studied the change will know that the problem has arisen because of the move from broadband to one that relies on wireless free service. To most people that sounds like a backwards not a forwards step. I propose to raise this issue with the national lottery operators when they come before the committee.
Will the witnesses outline the impact that has had on shops? We know that wireless free signal even in the long term is not always secure as local outages can easily happen. I also know that things can happen with broadband but the wireless free system is not as reliable as broadband.
The national lottery had a blemish-free record and I worry about its future record. Perhaps we are only seeing the tip of the icebergs in the problems that might arise. I know that the new equipment will be honky dory by the end of the month. We have been hearing that assurance for a while.
The witness have suggested that the move to the wireless free service may have been a cheaper option, and I am beginning to consider that was a reason for taking that route, but will they outline the implications of moving from a broadband connected service to a wireless free service?
Mr. Joe Tierney:
I have a newsagents, Tierney's Newsagents in Navan. We are the oldest family newsagents in the country. We have been proud national lottery agents since the inception of the national lottery some 28 years ago. The outage of service last month was the first time that had happened in 28 years. It has been well documented that this was the first time the national lottery had to cancel a draw. The old regime used broadband and we had no issues.
The national lottery has full confidence in the wireless free system as a suitable system and that it moves from the strongest signal each time. The national lottery, however, had the perfect storm of a new system, machines and terminals that the agents and staff were not familiar with and an outage of Telefónica in Spain that brought down all of the wireless system in Spain for two hours. The national lottery delegates will explain when they come before the joint committee why it took nine hours rather than two hours for our terminals to work. This led to major issues in stores with people having to come back a few times. Eventually the lottery took the correct decision to move the draw to the following day and give everybody a second bite of the cherry or to those people who had not got a chance to buy a ticket.
There is no question but that there are current teething issues with the new system but after 27 years of the one system and 20,000 parts that have gone into 3,800 stores across the county that would be expected. The main time we would have expected a problem was on 30 November when the changeover happened, but that was pretty much a seamless operation. Since that there have been a number of outages, each for different reasons and the lottery said as recently as last week that other issues may come down the line and that they cannot categorically state they will not be other issues. Part of the problem is down to the newness of the system and the adaptability of being able to fix it as quickly as they would have been to fix the broadband service. Change brings its own problems.
Mr. Jennings alluded to the National Lottery Users Council, a council that was set up 15 years ago, which invites two members from the CSNA, NFRN, RGDATA and the Postmasters' Union to meet with the lottery on at least three occasions a year. Since the advent of the changeover we have met monthly for the past seven months. At all times the national lottery has kept us very well informed of the procedure on a month by month basis, have come back and asked us for our views and in most cases have implemented what we as agents and those operating the machines are observing and would like to see changed.
I thank the witnesses for their presentations. Will Mr. Jennings elaborate on the engagement with the national lottery prior to the launch of the new system on 30 November? Clearly some people had identified issues with the system and felt it necessary to highlight to the national lottery that the changeover should not happen until the new year.
Has there ever been a discussion on compensating retailers for the inconvenience, particularly on the day when the whole system collapsed?
Mr. Vincent Jennings:
We were in constant contact with the national lottery in the run-up to the changeover. A date had been picked for the launch and the national lottery were trying to make certain, as far as it was concerned, that everything was right. There had been a delay and it was going down to the wire. Obviously we needed to know so that our staff would know the style of play tickets and which terminal to use, as we had both terminals side by side. Literally three or four days beforehand, we knew it was all go. It was not that we had highlighted a difficulty but the lottery when it was doing its systems processes, needed to be absolutely certain.
In hindsight it may have been better from a sales point of view for the changeover not to have taken place in December because we lost a number of sales opportunities that traditionally would happen throughout the Christmas period but as one knows, from having a family business, when one loses on one thing one pulls up some bit on another.
I will allude to the issue of compensation. If my newspaper distributor chooses not to deliver papers to me today because it is snowing I cannot get compensation. There are many unfair practices levelled against retailers and small businesses. Compensation did not form part of our thought process. In a 20 year time span with thousands of sales, all we wanted to do was to ensure that we had the system we were hoping to have. We are not jumping up and down looking for compensation. All we want is to be able to sell the product, sell as much of it as possible quickly and efficiently. As it so happened the day following the outage, our sales were more or less at the same level if not better than they would have been. We did not lose out. We are not crying for compensation. That is not our mentality. The Senator knows the breed.
Does Mr. Jennings believe that significant damage has been done to the reputation of the national lottery as a result of all of these difficulties? It would seem that on a number of fronts, be it the problems with the lotto or the television show on a Saturday night that serious damage has been done to the credibility of the national lottery? What is Mr. Jennings view of that?
Ms Tara Buckley:
As the Senator knows our members are the front line for the national lottery so they are hearing about the public perception. We have given feedback to the national lottery that there are people complaining that they do not like the television programme so they are not buying the winning streak scratch card or the other scratch cards associated with the television programme.
I think they know that.
Ms Tara Buckley:
We fed that back to the national lottery. We believe it is possible, with the retail agents and the national lottery working together, to sort out the technology problems and that customers will come back. Some work needs to be done to rebuild the confidence. A system that has integrity and a back-up system to ensure it does not collapse is vital. There was very good consultation before the changeover but the one area on which we all might have slipped up was the self-service ticket checkers. It is only since their absence that we have realised how much people liked them and how they are an essential part of the entire process. We would urge the national lottery to get those up and running as soon as possible.
Fáilte roimh, Ms Buckley. I want to ask about two assertions she makes in her document. She did not get to mention them when speaking but we have them here in the written format. The first observation was that the operators paid a high price for the national lottery and that they would be anxious to get a return on their investment. We will agree that is fair enough from their point of view. She then says it is important that they do not pursue a return on their investment through either delivering technical solutions or customer support systems that are not adequate to ensure system integrity and reliability of the games. Will Ms Buckley explain what she means? I take that she either believes or suspects that they are pursuing a return on their investment by shoddy technical solutions and shoddy customer support.
Ms Tara Buckley:
No, I did not say that. What I said was that we want to make sure that does not happen. We understand they paid a lot of money for it; people were surprised by how much they paid for it. That is why the first thing we did was ensure that we ring-fenced the retail agents' margin because we felt the first move they would try to make would be to reduce the margin.
I understand that. That was wise from Ms Buckley's point of view but when I look at the feedback she got from her interaction with her membership - those she represents - it seems they may suspect that return on the investment is being pursued through shoddy approaches to technical solutions or customer supports systems that are not adequate, to use her diplomatic language. I do not want to put words in Ms Buckley's mouth but there is at least a concern that the technical solutions and customer support is below par. Would that be a fair comment?
Ms Tara Buckley:
When some of these outages started happening there was very little communication from the national lottery. That has been sorted out. It is communicating now, but it needed to be asked to do that. They have consulted with the retail council and the retail council has given them feedback. We asked the national lottery for information at the point of sale explaining problems, so now there are messages on the ticket checkers and so on. They have started to do that but they were not doing it at the time. When my members were surveyed many of them said the situation has improved, but we would still say there should be a very good functioning telephone response service with well-trained staff answering the queries of the retail agents and coming back to them.
Ms Buckley also says it is important that they do not pursue a return on their investment through technical solutions or customer support systems that are not adequate. We will say that to them as and when we see them.
I was intrigued by a second point. Ms Buckley states that the national lottery is not a franchise to be squeezed by a private operator for maximum return without regard for its important role and function nationally. I agree strongly with that sentiment, which is very well put. Is it Ms Buckley's view that the national lottery franchise is being squeezed by this operator?
Ms Tara Buckley:
The rumour machine is that the next step is to put more numbers on the draw and to increase the cost of the tickets. That is fine. I understand businesses try to expand, and retailers like to roll-overs, which are good for sales, but on the other hand work needs to be done now to ensure that customers have absolute faith in the national lottery. They need to focus now on rebuilding that integrity and customer trust, and not move to increasing prices or adding more numbers.
I have one question for Mr. Jennings. He stated in his presentation that he acknowledges that we want to consider systemic problems in the current set-up but respectively suggests that we do nothing that would further damage the level of trust the public has in the product designed to promote good causes and bring a little bit of joy into our lives. Hallelujah to that, but what does Mr. Jennings imagine we might do that might further damage the public's level of trust? Is there something looming that we should be watching out for?
Mr. Vincent Jennings:
Absolutely not. I hope not. If the Deputy had asked me three months ago if we would be here today discussing matters I would have said, "No. Go away and do something more important", and yet we are here. We cannot look into a crystal ball and say there are no problems. That ball is very cloudy, but we do not want to shake it too much; that is enough of those analogies.
We are very concerned because this man makes his money from the sale of a product. He has built it, along with the national lottery, for 25 or 27 years. This House assisted him in doing so. This House has provided him with that level of income. We cannot have a situation where the brand becomes something that is less than what it is, and in that regard the committee, the national lottery, the retailers and us, the representatives, must work together and be very clear because there is no competition to the national lottery.
Mr. Vincent Jennings:
With respect, the question that needs to be asked is about the level of expenditure being considered to develop the brand, the level of losses of staff and whether that has had an effect on communications and getting the message out to retailers. That is a very significant part of an asset, namely, the people working there.
The witnesses are very welcome. In terms of the skill-set they put together with Anthony Foley when they were making a team, An Post is a 20% stakeholder in the national lottery. It has a core competency of operating the national lottery for the past 27 years, so it has a relationship with the retailers also. That was a seamless relationship between the national lottery, via the agent, and the customer. Everybody found it to be satisfactory, not just for all involved in the playing of it but the people who have benefited from the national lottery, namely, those who developed the GAA hurling fields, the rugby fields and basketball halls. The people have seen utilities and facilities developed on the back of the national lottery. Now that 80% of it has been sold, Premier Lotteries Ireland, PLI, need that level of loyalty and customer behaviour to consistently perform. That must be in decline as a result of some problems that have arisen, which Ms Buckley has highlighted. She said the integrity of the brand has been damaged marginally and that it to be restored. That will cost the operators money ultimately so in terms of my question, if An Post has a 20% stake and a core competency in terms of operating the lottery, what role is it playing currently in providing the service? Surely that is the solution because PLI, as well as the retailers, have a headache in this regard, if I know anything about ducks and drakes.
Before that question is answered I have to say it is impossible to hear the contributions by members when there is interference from telephones. I could hear interference from a telephone throughout your contribution, Deputy.
Unfortunately, no one could hear what the Deputy was saying.
Mr. Vincent Jennings:
Deputy Spring opened up by speaking of the report prepared by Tony Foley. That report was for the CSNA and at that stage, it did not matter who was going to be the owner or whether An Post would be involved. We were looking at the kind of numbers and, given that the Minister already had ring-fenced a certain amount of the expenditure for good causes, how we could ensure of position. We were scratching our heads as to how this licence was going to make money for somebody because we were not going to concede readily. That is the major concern to which Ms Tara Buckley and Deputy Sean Fleming have alluded. Our biggest concern is that both savings and shavings have been made. Deputy Spring thinks that An Post somehow or other would be able to do otherwise but given the circumstances, it is working under completely different strictures now as this is a private body. This is the land in which we live, that is, in a capitalist society. We understand the need for an investment but this €405 million is a lot of money and were one to put it on deposit, one would make a lot more than one might make on-----
If I may interject for a moment, Premier Lotteries Ireland, PLI, cannot be happy with the manner in which this is performing. It cannot be happy with the way things have worked out over the past couple of months. The valuation placed on any business like this is determined by its cash flow. The cash flow has been damaged slightly and therefore, the value of the company must be lessened. Consequently, PLI must go back to the drawing board to ascertain what skill-set it had that kept it working perfectly well for the retailers all along, as well as for the customers ultimately.
Mr. Vincent Jennings:
It is a 20-year licence and I suppose it has time to make things right over the next couple of years. However, the CSNA obviously wants that to be done as quickly as possible to turn the ship around because every person who moves away from it is a customer not only lost to our 6% but to all the other products they may have bought within the store. It is of vital importance to us that we get this one right. PLI has the ability because it has the same management structure as was there in the past. We have not lost faith in the ability of the existing management.
What kind of engagement have the witnesses had? Mr. Jennings mentioned that RGDATA has spoken to the national lottery owner. Does Mr. Jennings think PLI is taking that on board or is doing anything about it?
Consequently, one would imagine that any prudent businesspeople, particularly of the magnitude of these guys, would do everything they could to make sure the retailers and customers are satisfied as soon as possible.
Mr. Vincent Jennings:
Deputy Spring is speaking rationally but unfortunately, there are times when some of the suppliers with whom we deal, including large multinational businesses, do not appear to operate in anything other than a macho fashion. I do not suggest the national lottery in Ireland is like that but the most simple of solutions is not always staring somebody else in the face.
If I can summarise and Ms Buckley may wish to comment, the largest difficulty pertains to the technical difficulties and the style of administering the games now, rather than what was the precursor to the lottery being sold.
I thank the witnesses for their submissions. I was one of those who opposed the sell-off and it does not altogether surprise me that since privatisation, what the witnesses appearing to be hinting at is occurring. Since the national lottery was first established 27 years ago, we have had 27 years in which the lottery worked perfectly and which never experienced an outage. Its brand recognition and credibility were untarnished in all of those years and as soon as it was handed over to Camelot and this other gang called PLI, things started to go belly up. That pretty much tells its own story, does it not? I acknowledge that the witnesses are here to ring alarm bells and many of the questions must be directed towards PLI. However, apart from smiling and talking to the witnesses in an open way, do the witnesses think the national lottery is taking on board the concerns they have raised with it in terms of adequate investment and the right decisions on technology and the data? Jobs were mentioned and is there evidence or do the witnesses know whether the numbers of people employed have reduced or are inadequate? I invite them to elaborate on that a little.
Mr. Vincent Jennings:
Under the transfer of undertakings, people have the right to move over to the new company. A number of people chose not to, as was their right. Some positions have not been filled while others have been reduced. That may have been all right on paper when one was doing a seamless transition but it caused enormous difficulties when problems arose because there were not enough people to answer telephones and there were not enough representatives out on the road. I might add that the national lottery has an incredibly good sales force but I refer to a time when one has fewer people and encounters a real problem, when every call is now taking twice and thrice as long as it had previously and one has people frustrated because no answers are forthcoming. As a representative association, the CSNA sent out text messages and e-zines to contact our members. We had no difficulty with doing the work that perhaps was a shared job or a job of the lottery. However, it is very difficult when one cannot get information in those crucial times and when one knows that somebody else who should be there is being paid to do it. Yes, there have been fewer people on the ground in certain areas and this has been crucial. I reiterate that in a seamless transition, it may not have been as noticeable but certainly when a problem at that level arises, it certainly is frustrating when people do not answer telephones.
Perhaps, as he stated, Mr. Jennings does not wish to shake up the glass too much but implicit in what he is saying is that these operators have come in and they simply wish to milk the brand that has all this credibility, while cutting investment and running the thing down in a manner that potentially could derail and damage the entire credibility of the national lottery. Does Mr. Jennings suspect that is what is going on? The owners just want to get the money and are not really-----
I have two further brief questions. Mr. Jennings drew a distinction between the lottery management and the company standing above it. If it is not the management, about who specifically are we talking? Does Mr. Jennings think the problems are with Camelot or the people above it, that is, with PLI?
Mr. Joe Tierney:
To a relatively small extent. There are a lot of misconceptions and urban myths out there. There is a great deal of bad media and the media appear to want only two things from the national lottery, that is, €10 million winners in syndicates or bad news. If the media can get a scandal, it circulates.
At shop floor level we have had some hassle and some problems. The biggest problem is with the ticket checker. One never realises how much one uses something until it is gone. If any of us were to have our mobile telephone take from us today we would feel like our left hand had been taken away. The ticket checker worked well. It allowed people to find out quickly whether they had a winning ticket or not. Now, counter staff have to check the tickets and tell people whether or not they have winning tickets. The national lottery direction is that we give tickets back to people. However, many people ask us to tear them up. Sometimes people come back saying they believe the ticket they were told was not a winning ticket was in fact a winning ticket, which is unsavoury. We only discovered in September-October last that the ticket checkers put in place under the old regime were not going to be compatible with the new system and that there would be a period during which they would be inoperable. That was a big shock to everybody, not least the national lottery itself. Why it took so long for it to realise is a question that will have to be raised with it.
From that point on national lottery sales became a hassle in the shops. Did it lose credibility for the lottery? I am not sure. Are tickets sales down? I do not think so. The national lottery reading last week, based on its projections for the year, is that lottery sales are up by 0.02%. The number of outlets now licensed as lottery agents has increased by 300 under the new agreement. In regard to whether people are no longer playing the lottery because of the recent fiascoes, the answer is that is not the case. Jackpots are reaching the same levels as before and people are playing the lottery. Some shops say that they are not selling as many tickets but according to the national lottery, sales have increased.
Another urban myth is that prizes have decreased. The percentage of prizes is copperfastened. That is the information from the national lottery. We have no reason not to believe what we are being told by the national lottery. Last week, we were given a tour of the help-desk area, where we saw 12 people manning the phones and charts on the walls indicating that the level of calls have returned to those pre introduction of the new terminals.
Ms Tara Buckley:
We want the ticket checkers installed and operating. We would also like to see the technology required back up and running so that we are not being constantly faced with this problem. Regardless of urban myths and so on, this problem must be addressed. There is a perception that people are winning less on scratch cards. My message to the national lottery is do not shoot the messenger, address the perception. If the figures show that the prizes are the same then get that message out. Customers are saying to the retailers I represent that they are not winning as much.
Mr. Joe Tierney:
I would like to see ticket checkers installed. The new system is far more robust than the old one. I believe the brand which has been with us for so long will get stronger. We need to learn from what has happened. What we have witnessed is a perfect storm of a new system coupled with a crash. The users' council has been well informed by the national lottery. We endorse that it will get its act together. Our 3,700 agents will strive to grow the brand to the level expected.
This brings me back to when I sat my leaving certificate examination and my having to learn off all about crannchur náisiúnta for my oral Irish examination. The arguments back then are different to those being made now in that back then, people were concerned about the introduction of the lottery. Obviously, it has proven its worth. I am glad to see it is bringing other business into shops.
What is the end game? Why would an organisation buy a national lottery licence and then allow it to become damaged? From a business perspective, that does not make any sense. Why was there a need for a new terminal? Was proper training in that regard provided? In regard to the lack of staff, is that a savings issue? I understand that there would be long queues when a machine breaks down and so on. Do the contracts with the new agent differ significantly from the old ones? Is the sales margin still worthwhile? When the national lottery was first introduced we did not have ticket checkers. There are many ways people can check their tickets. Has the unavailability of ticket checkers in shops contributed to the increase in unclaimed prizes? It was recently reported that a large sum of money had not been claimed. Are people moving to euromillions or other foreign lotteries and are lottery agents' margins in respect of the national lottery being reduced?
Mr. Joe Tierney:
Our margin remains at the 6% we have always enjoyed. The contract has changed slightly but remains fair to the agent. There are now two types of contracts in place. A new agent is required to pay a €5,000 bond. Previously, a new agent had to pay a €10,000 bond. The second contract previously provided that an existing agent pay a deposit equal to two and a half times the average based over ten weeks but under the new contract this has been reduced to one and a half times the average over ten weeks. The week now starts on a Sunday morning and ends on a Saturday. While the cash flow does not remain with the store for too long, it reduces the amount on which the bond would be based.
Training in relation to the new terminals was very comprehensive. Every agent was requested to attend one of the 17 training venues. Those who could not attend were provided with one-on-one training by lottery representatives. The biggest problem when the system went live was the number of people contacting the help-desk for activation codes. Despite all of the preparation in this regard some issues arose on the morning in question. The national lottery had engaged with other lottery agents worldwide and knew what to expect and had extra people in place in the early days. The real grievance was that when the crash occurred there did not appear to be enough people manning the help desk and enough information was not getting out. The CSNA had sent a text message to all its members based on the most up-to-date information from the lottery, which was that the system was back up and running. Unfortunately, as soon as we had done that the system crashed again. All credibility in terms of sending out further texts was minimised at that stage.
I have had the privilege of being a member of the lottery users council. I know how difficult it was for the national lottery when as the numbers appeared online again, the system crashed again. I understand that a decision was made about 4 p.m. on the day to roll-over that game to the next day, if the system and regulator so permitted. I am privileged in that I have this information having been a member of the National Lottery Users Council. This has been a helpful instrument in us getting information to CSNA members.
We feel there has been very good transparency from the lottery about problems and otherwise. The main issue as to whether the right machinery was bought at the right price is not something we are privy to.
Mr. Vincent Jennings:
The committee is doing the right thing today. It oversaw the Bill bringing in the lottery and made its objections at that point, some of which were prescient. We are where we are and we do not want to be here. For the next 20 years, we want to be able to assist good causes and our family-run businesses. That is it.
On behalf of the joint committee, I thank all witnesses from RGDATA for participating in this meeting and for the materials they supplied to the committee. I propose to suspend for five minutes to facilitate the change of witnesses.
I welcome Mr. Dermot Griffin, chief executive officer, and Mr. Eddie Banville, head of marketing, from Premier Lotteries Ireland, and Mr. Liam Sloyan, the recently appointed national lottery regulator. Mr. Griffin and Mr. Sloyan will make some opening remarks and a question and answer session will follow to clarify any matters.
I remind members, witnesses and those in the Visitors Gallery that all mobile phones must be switched off. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the Chairman to cease giving evidence on a particular matter and continue to do so, they will be entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person or persons outside the Houses or an official either by name or in such a way as to make him or her identifiable.
I ask Mr. Griffin to begin and to keep the opening remarks as short as possible.
Mr. Dermot Griffin:
I thank the Chairman and members for the opportunity to address the committee. I am Dermot Griffin, CEO of Premier Lotteries Ireland, PLI, the new lottery operator. Prior to this role, I served as chief executive of An Post National Lottery Company for eight years from 2006 to 2014. I welcome today’s opportunity to brief the committee on the new operations of the lottery. I would also like to outline the approach we adopted to achieve a successful transition from the previous licence. I wish to update on our business performance to date where we have over 99% systems availability on the retail network and the central gaming systems. We have exceeded our sales expectations to date which means increased funds for good causes.
I also want to address the recent technology and telecommunications issues which I feel were misconstrued. I would like to take the opportunity to outline the real impact they had and corrective actions we have in progress. To be clear, this was the largest roll-out in the 28-year history of the national lottery and the largest ever in Irish retail.
Premier Lotteries Ireland is an Irish incorporated company with a separate board made up of five directors from our shareholders, An Post and Ontario Teachers' Pension Plan, OTPP. Following a competitive tender process, Premier Lotteries Ireland was awarded the licence to operate the national lottery in February 2014. PLI commenced operation on 30 November 2014 and has operated the lottery since that date with in excess of 72 million transactions taking place on our new systems. Since then, all 417 draws have been completed successfully.
We believe that PLI represents the best in lottery expertise globally and is uniquely positioned to grow the lottery in a responsible manner over the coming 20 years for the benefit of future generations in Ireland. As with any lottery of a similar size and scale, there are a number of technological, operational and logistical complexities to its successful running. To support PLI with the running of the lottery, we have five suppliers in place. Intralotis the lottery system technology partner of PLI. Intralot provides the set-up, maintenance and support of new lottery software platforms and shop terminals. Intralot is one of the top three lottery technology providers worldwide and we believe the right supplier for the Irish market. Intralot is the first international vendor in the gaming sector that has been certified according to the World Lottery Association security control standard and the highest standards of the industry. Intralot technology is used in 57 jurisdictions worldwide.
Camelot Global worked with the national lottery and Intralot to deliver the technical and business transition programme. Camelot Global draws on its experience from the UK, where it supports Europe’s largest interactive lottery. Westbase Technology is a managed telecoms provider contracting 3G services from Telefónica-O2 Ireland, now Three, and broadband from Eircom for our retail communications network. Pollard Banknote provides security printing services to PLI and has been the scratch card supplier to the national lottery for more than 20 years. KPMG continues to provide independent observer services to the national lottery. Moreover, I am supported by the existing national lottery team of more than 90 lottery professionals who have a combined experience of 1,200 years working for the lottery, many of them from the start of the business. To date, I am pleased and proud to say the national lottery has raised in excess of €4.5 billion for good causes, delivered more than €7.5 billion in prizes and created more than 450 millionaires in the process.
As the former CEO of An Post National Lottery Company and CEO of PLI, I look forward to working with this group to continue to grow and build on our legacy. PLI is regulated by the new national lottery regulator, Liam Sloyan. We will work with Mr. Sloyan and his office to ensure the national lottery continues to operate to the highest standards in all respects.
In terms of our licence obligations, there were some key requirements which included a substantial upfront payment of €405 million from the new operator to fund the new children’s hospital and many other community projects. Another key requirement was an ongoing annual contribution to good causes set at 65% of gross gaming revenues, which is sales minus prizes, incentivising PLI to grow the lottery and maximise returns to good causes over the 20-year licence term. There was also a requirement to replace all core systems, ensuring that the new operator utilises the latest technology.
We heard earlier from retailer groups. Retailers are and will remain the key point of sale for the lottery and a key objective for PLI is to grow this retail channel. It is important, however, to address some inaccurate information and to provide some context as to the scale of what has been achieved to date in retail. On cut-over, on 30 November 2014, PLI successfully connected almost 20,000 pieces of equipment in 3,700 retail outlets throughout the country. All central and telecommunications systems were replaced and PLI also introduced a new website and online gaming platform. In excess of 72 million plays have taken place on the new Intralot systems. Some 98% of all transactions are completed within three seconds. The network has been live 99.1% of the time and the central systems 99.97% of the time. This was the largest technology roll-out in the history of the national lottery and the largest ever in Irish retail.
To deliver this, we co-ordinated 44 retailer briefing seminars throughout the country last September and October. We achieved more than 90% participation, with some 3,000 retailers attending the sessions. These sessions outlined the unique logistical challenges of this project and what to expect. We sent our sales representatives to visit anyone who did not attend the training seminars to give them training in their stores. At these seminars, retail agents were informed, among other issues, of the temporary non-availability of the ticket checking service for tickets sold from the new Intralot terminals. As a matter of best practice, we have provided detailed briefs on how to operate the new technology and issued a regular newsletter, Transition Times, updating all retailers on the next steps for transition and what they need to do. PLI also met and continues to meet its agent council, on which representatives from the two retail groups represented here today – CSNA and RGDATA – sit, as well as wider retail representatives. Throughout transition, a dedicated project team of 50 developers and testers has been working to ensure that any technical issues are addressed as swiftly as possible. In advance of the roll-out and during transition to date, we have undertaken rigorous system testing to ensure that all equipment is fully compliant with World Lottery Association standards.
User acceptance testing involved the execution of approximately 2,800 test cases and included performance testing of the terminal to the central system. With regard to the supplier testing on the new terminals and related systems, data migration and interfaces, this involved the execution of more than 1,800 test cases. As I am sure the committee will understand, this has all been an enormous undertaking. There have been a number of temporary outages across parts of the retail network, but we remain committed to completing our transition and, from there, to growing our national lottery into the future.
I wish to address the events of 4 February, when we experienced major disruption due to a core failure on the Telefónica Spanish network which took down the 3G telecommunications data infrastructure and affected more than 3,500 national lottery agents for several hours. Under these circumstances and wishing that all our customers could have the opportunity to play, we made the decision to defer the draw. The regulator was made aware of our decision. The decision ensured that everyone won. The players were able to purchase their tickets for the draw, retailers were able to sell their tickets and, more important, the returns to good causes were not impacted. This was the right and only decision that could have been made. In excess of 400,000 people bought lotto tickets on Thursday, 5 February and the draw went ahead successfully that evening with one lucky winner of the €10 million jackpot.
We have received a report from Westbase Technology which outlines the problem that occurred, how the problem affected our lottery retail estate and how we can prevent this from happening again in the future. This report and reports from other outages were sent to the regulator and we are confident we can take positive learning from the experience, put appropriate contingencies in place and prevent a reoccurrence. Premier Lotteries Ireland has operated the national lottery for just over three months, having successfully completed 72 million transactions with over 99% system availability. All 417 draws were completed, sales are exceeding expectations and we are ahead of plan to grow funds for good causes which benefit the whole of society.
Mr. Liam Sloyan:
I thank the committee for inviting me here today to discuss the operation of the national lottery under the new licence. I hope the committee will understand that I will be limited at times in my presentation with respect to what I can say on specific matters. This is because, like other regulators, I have to protect confidential and commercially sensitive information and also follow due process with respect to any review I am undertaking.
It may be useful for me to begin by giving some background information on myself and the new office of regulator of the national lottery. My background is that I am an actuary who started his career in the private sector in the insurance and pensions industry. I worked mainly in finance, compliance and risk management. Prior to taking up my current role, I was chief executive of the Health Insurance Authority. This is a statutory regulator of the private health insurance market. The office of the regulator of the national lottery was established by the National Lottery Act 2013 and I was appointed as the first regulator on 17 November 2014.
The committee will be aware, and many people have referred to it already today, of the very significant contribution that the national lottery has made to society over the past 28 years. For this period, it has been enjoyed regularly by almost half the population and occasionally by two thirds. It has raised €4.5 billion for the good causes it supports. A new lottery regime began from 30 November 2014. Under the new regime, the licence to operate the national lottery is held by Premier Lotteries Ireland which is responsible for operating the lottery in accordance with the legislation and the licence. The office of the regulator has functions relating to managing the national lottery fund, overseeing and investigating the operation of the lottery, approving certain matters and enforcing compliance. The office has funding of €1.5 million per annum and sanction for ten staff.
Under the legislation, the office of the regulator carries out its functions in the manner considered most likely to ensure that there continues to be a properly run, sustainable and safe national lottery and that, subject to these requirements, funds for good causes are maximised. A properly run lottery is one in which there are processes in place and these are adhered to in order that the national lottery functions, from televised draws to the ways players and the national lottery fund are paid sums due, are carried out with all due propriety and in accordance with the legislation and the licence.
Public confidence is essential to the national lottery and, accordingly, the aim of ensuring sustainability includes protecting the reputation of the lottery in order that the community continues to have confidence in it. A safe lottery means a lottery in which the interests of participants are protected, which includes the availability of clear information for consumers, having appropriate measures in place to protect against under age and excessive play, and having fair rules and procedures for each game. Securing the greatest possible returns to good causes includes aligning the interests of good causes with those of the operator through the licence, monitoring the performance of the operator, and ensuring the allocated funds go to the right place at the right time and in the right amounts. I note that, under the legislation, the objective of maximising funds for good causes is subject to the other three objectives.
We carry out this work through the statutory powers and functions assigned to us by the Oireachtas. I will expand briefly on our primary powers and functions and work done in the context of each since the establishment of the office. The office of regulator is responsible for managing and controlling the national lottery fund. Over the first three months of the new licence, €48 million has been allocated to good causes, or €3.7 million per week. We are required to approve games and some other aspects of the licensee’s operations. Since the commencement of the new licence, there have been five requests for approvals from the licensee. As part of the process of review, we queried the original requests and nine further submissions were received, including amended requests. To date, of the five requests for approval, one request has been approved, one request was subsequently withdrawn and three requests are under consideration. Under these reviews we are concerned that risks to the objectives of the regulator have been identified and are being appropriately addressed by the operator. These objectives concern probity, sustainability, player protection and maximising funds for good causes.
With regard to the function of the regulator’s office to oversee PLI’s operations, this involves seeking and reviewing records and reports from the operator and reviewing these documents as well as on-site visits. In the context of the recent operational difficulties, we have required the operator to provide full reports on the outages, detailing the issues that arose, the reasons they arose, the extent to which they have been addressed to avoid a recurrence, the length of time taken to address them, matters outstanding and how long it will take to address those matters. A number of reports have been received and they are being reviewed.
Oversight of the operator also involves reviewing the systems and procedures in place as well as other aspects of its operations. This will involve themed reviews taking place from time to time, including on-site visits. For example, a review of the risk management systems and procedures in place at PLI against best practice standards is taking place. The office of regulator also has enforcement powers, ranging from issuing a direction to revoking the licence and including powers in relation to financial sanctions. The legislation provides for financial sanctions of up to €500,000 through application to the High Court or up to €250,000 if the operator agrees that the matter be dealt with by the regulator.
The committee will see that while PLI is responsible for operating the national lottery, the office of the regulator has important statutory functions, including overseeing the operation of the lottery, holding the operator to account and enforcing compliance with the licence and the legislation. We are determined to carry out these functions diligently in order that a safe, properly run, sustainable national lottery continues to be enjoyed by the people and, subject to this, that revenues for good causes are maximised. I hope this presentation has been useful in informing the committee on the role of the office of the regulator of the national lottery and I look forward to answering questions.
I welcome the witnesses. This is probably the first time in the 28 years of the lottery that we have had to bring people connected with the national lottery before the committee. This has happened as a result of the decision to privatise the lottery licence and pass it on to a new operator following a competitive tender which secured money for the State.
I have a question for both organisations. On the technology side, a decision was taken to move from DSL broadband and to replace it with 3G. I believe there is a connection with Three and the SIM card in the shops will hunt for another mobile network if there is a partnership agreement. 4G has been excluded, which is a better system than 3G. Most people would consider going from broadband back to a wireless system to be a retrograde step. Premier Lotteries Ireland is the first business of which I have heard that is going backwards in technology rather than forward. I can only presume that is a cost-saving measure.
Could the witnesses talk to me about the role of Camelot Global Services? I understand that Camelot, which is wholly owned by the company that runs the lottery, uses satellite in the United Kingdom and only uses the 3G licence for scratch cards in the UK. Could someone outline what the company’s website in the UK does for it? It was said that what happened with Telefónica-O2 Ireland was a freak occurrence. Could a representative of PLI outline the contingency plans in place?
Is the holding company of the operator’s licence resident in Ireland for corporation tax purposes? We raised the matter when the legislation was going through the Oireachtas. I tabled a specific amendment to the effect that the operator should be resident in the State, but the Minister rejected it. What is the residency status of the company to which the profits accrue? In what jurisdiction is it subject to corporation tax?
What is the situation regarding unclaimed prizes? I recently heard it suggested that there was change in the licence clause to allow the operator to hold on to some of the unclaimed prizes. If that is the case, the operator might have a vested interest in unclaimed prizes, which could amount to hundreds of millions over the 20-year lifespan of the licence.
It was said that the company wants to increase online business from 3% to 18%. What is the minimum price at which people can purchase tickets? I have received correspondence from people who are dissatisfied with the new approach to accounts and the priorities in that regard.
I will ask all of my questions now because I know other speakers will wish to speak. If there is insufficient time for all the information to be put on the record, it can be sent by way of correspondence in a few days time.
Mr. Sloyan is also welcome to the meeting. Could he tell us about his powers and sanctions as they seem very light? I am concerned about what I have heard. It appears that the lottery does its business and if something goes wrong, the regulator will ask for a report. That does not sound very proactive. In the past ten to 15 years the country has been bedevilled by regulators who have been at best asleep at the wheel. I hope Mr. Sloyan is at least in the car. Given what he said, I am concerned because his role seems to be to ask for a report if something goes wrong. What was Mr. Sloyan’s role on the day the major draw was cancelled? Did he sanction the decision? Can the operator cancel a draw without reference to the regulator? Was he notified after the decision was made? Whose call was it to cancel the draw? What was Mr. Sloyan’s involvement? Could he outline the ability of his staff to be in a position to manage and regulate an organisation which has a turnover of €1 billion?
My next question to the regulator relates to section 24 of the legislation, which deals with the levy. The regulator sends a bill to the operator each year and it pays a levy. To me, that means the regulator’s office is a little bit subservient. I do not mean that in a personal way but in the sense that, in simple English, the operator pays the wages of the regulator. I consider the office of the regulator to be in a compromised position. Section 28 states “Subject to subsection (3), the Regulator shall publish details of a licence or a code of practice". Has the regulator published the licence and, if not, how soon will he do it? I understand subsection (3) deals with matters of commercial sensitivity. That is a standard procedure. Given that the organisation has a monopoly for the next 20 years, no competition issues arise in terms of commercial sensitivity. We asked for the regulator’s office to be included under freedom of information legislation but the Minister did not accept the amendment on the basis that the freedom of information legislation he introduced last year captures all new organisations.
Is the regulator subject to the Freedom of Information Act?
Mr. Dermot Griffin:
I will address the questions on the telecommunications contract. We set out our requirements for modern telecommunications, and what we wanted was a telecommunications service that was fit for purpose in a modern network. In the past, we had issues with the DSL broadband network, and local outages occurred where a wire or cable was cut and agents in the locality went down. A physical repair is needed to restore this type of outage. While there have not been any national issues with the broadband service, local issues arise with it. We set out our requirements, went to tender and received a number of tenders. We used a specialist telecommunications consultant company, Analysys Mason, to assist us with the evaluation of the tenders. We have a very modern and advanced telecoms solution based on a roaming SIM card. What this means is that when these roaming SIM cards are installed in the retail terminals, it gives us the ability to utilise all the Irish mobile phone networks - Vodafone, O2 Ireland, Three and Meteor. We can then choose the strongest signal. This gives us a very high percentage coverage on the 3G network. We also have DSL broadband in the mix, because 3G is not available in certain locations and broadband is a better solution than 3G at certain sites. This has been implemented in the network. Over time, we will optimise the two technologies to ensure that where a site does not perform well on one or other of them, we can move to the second option, or, as coverage improves or broadband is rolled out further, we can optimise our telecommunications network.
The solution, the programme provided by Telefónica Spain, is utilised by 1,500 different corporate customers, including Sony, Amazon, Volkswagen and Garmin. As such, major international multinational companies use this solution for machine-to-machine communications. Over time, we intend to migrate the technology we have adopted to 4G, which is, as Deputy Fleming noted, the way to go. We took the view that current coverage was not sufficient to give us enough capability to cover an adequate area of the country. The solution we chose has the ability to evolve into a 4G solution over the lifetime of the licence. We view this matter from the perspective of the long-term licence and not only in the short term.
That is the background to the decision to go with 3G. For the information of members, we also have a limited number of satellite outlets in locations where broadband and 3G are not available. Satellites also have problems, as planning permission is required and other matters must be dealt with. Based on our evaluation, the best technology for us was a mix of 3G and some broadband.
On the role of Camelot Global Services Ireland, this operation has been provided to assist in the technical operation. It is a team that will assist on the helpdesk side dealing with the agents, and is headed up by a former employee of Eircom. As a specialist team, it will operate the technical side and helpdesk and assist us online. It will also be able to tap into our sister Camelot company in the United Kingdom to adopt best practice and avail of economies of scale in online games and so forth.
Westbase Technology is a telecommunications management provider which won the contract for the 3G and broadband service. It manages the network for us. Given that our competency is not in telecommunications, we contracted this end of the business to Westbase Technology, which will manage it on our behalf.
On the registration of Premier Lotteries Ireland, we are an Irish-incorporated company, which means we will pay Irish corporation tax and all other taxes.
The requirement on unclaimed prizes is that they be utilised for the promotion of the national lottery. This means, for example, that it can be used when we do top-ups and specials. In the past, we have sponsored the fireworks for St. Patrick's Day. It will be for that sort of activity.
I believe the Deputy asked what would be the minimum price point.
I thank representatives of the national lottery operator for coming before the joint committee to make a presentation.
There have been three well publicised outages of the lottery terminals since the new technology was introduced. Why did the national lottery release on the network new technology which is clearly unreliable and vulnerable to breakdown, and do so without any backup in place? Should the technology not have been properly tested before going live? Why was there such a hurry to rush out the new national lottery terminals without first ensuring the ticket self-scanners were functioning? Does the national lottery accept that the decision to roll out the machines without putting scanners in place was a mistake? Most customers believe it was a fundamental error. When will each shop have a ticket self-scanner?
Retailers have complained about poor customer service from the national lottery, and this is adding to their frustration because they bear the brunt of customer anger. Why has there been such a deterioration in service since the switch-over to the new operator? Where are the customer services operations based? Have they been outsourced?
There are two elements to complaints about the national lottery in recent months, namely, the deterioration in the technology offering underpinning the service and the lapse in communications with customers and retailers. Why is the new technology offering creating so many problems? The lottery operated for 26 years without one outage, yet in the three months since the new technology was introduced, we have had at least three breakdowns, including one postponed draw. There is clearly a problem. What is it? The outage on 3 February last was allegedly caused by a snowstorm in Spain. How could a snowstorm in Spain cause a lottery terminal in Killarney to no longer function?
It has been suggested that the new operator has cut back on costs as part of a measure to recoup the €405 million it paid for the lottery licence. Are the technology costs associated with the new national lottery operator lower than those incurred by the previous operator? Is the national lottery planning to increase the price of playing the lotto or add new numbers to the prize draw? If so, when will such changes take place?
Did the national lottery seek the approval of the lottery regulator before postponing the draw on 3 February?
The claim by the national lottery that sales have not been affected by the changeover is completely at variance with the feedback from retailers. Why would retailers lie? Would the national lottery publish figures to demonstrate the pattern in sales since the switchover? In the Sunday Independent, the chief executive officer said he did not expect fines or sanctions to be imposed on the operator by the national lottery regulator. Has he got an assurance in this regard from the regulator? A report in The Starmentioned a player in Wexford who got two lines with the exact same numbers on a EuroMillions quick-pick ticket despite odds of 30 million to one against this. On 7 February The Mirrorreported a player in Knowth who complained that his winning ticket purchased in December was not recognised by the new machine, and he had to battle to have his prize awarded. Player confidence in the integrity of the national lottery systems is critical, and this sort of news bemuses customers. Who audits the technical side of the national lottery? What is the role of the national lottery regulator in checking the integrity of the technical systems? Some issues have been raised in the media about the national lottery technology supplier Intralot, including concerns about its record in other countries. Are alarm bells not starting to ring for the national lottery that some of the problems that have followed Intralot may also appear here? Is it a case of “You get what you pay for”? What steps will the national lottery take to restore its credibility in the eyes of retailers and customers?
The Senator could submit his questions and I will forward them to the witnesses, because I do not think it is possible for them even to attempt to answer them in 30 seconds. I will ensure they are answered in detail.
Mr. Dermot Griffin:
Many of Senator Coghlan's questions relate to the transition programme. I will give an outline of what was involved in the changeover. The challenge the national lottery faced, which no other business faces, is that it operates with particular technology and systems and processes and, overnight, had to switch over to new technology and systems and keep the business running right through to operate a draw that evening. We had to run the An Post national lottery company up to 29 November, when we had a lotto draw. On Sunday 30 November we had to turn on new systems, a new Internet system and a new website, and take ticket sales from 8.15 that morning. We had to do this with the assistance of our agents, who had a great deal to do. We had to take all the An Post national lottery company scratch cards out of the retail network and load in new scratch cards and sell them. We held our first draw, our Daily Million draw, on that Sunday night. We did that successfully.
A requirement of the licence was to ensure that for 90 days from the ending of the An Post national lottery company we had a facility to allow players claim any outstanding prizes they had on their An Post national lottery company tickets and claim them in the retail network for a further 90 days. We had to install the new systems and co-locate them in retail outlets with the existing system. There is limited space in a typical retail outlet. We had to put in plinths to make it possible for the agent to use one machine to cash prizes from the old licence and a new machine to produce tickets and validate payments from the new licence. That is a big logistical exercise, hence the 20,000 pieces of equipment that had to be co-ordinated. To facilitate the claiming of prizes, the ticket checkers, which are independent pieces of equipment, were connected to the old GTech terminals. We had to facilitate the payments by leaving them in place.
Another challenge we faced in the transition - this was clear from the retailers, and we took it on board - was that the Christmas period is the most important time for retailers, and we had to minimise any disruption to our retailers over that Christmas period. That is why we placed so much emphasis on the planning and training, and we involved the agent council in that because we knew it was a big exercise. After 90 days of that new operation, we have completed 72 million transactions successfully. The systems have been available more than 99% of the time. We then had to collect the old An Post national lottery company scratch cards. We have collected millions of them and had to decommission them and credit the agents.
Over the past few months the management and staff of the national lottery have been, in effect, running down one company and running another one. We flagged up in advance that this would be a challenging period. No other business would change all its systems overnight. They might change the terminal and then separately change the mainframe and then the telecommunications. The requirement of the licence was to change everything in one go. We achieved that. There have been some outages, and some of these were out of our control because the Telefónica network in Spain fell over and brought down its backup. That was a once-in-a-lifetime event. Companies such as Sony and Amazon do not use a service such as that if it is not reliable and dependable. A storm affected the network there. It brought down the link between the primary system and the backup system in Spain and, in the attempt to re-route traffic so that the backup would still be in place, an erroneous code was sent to the primary system, which brought that down too. That was the problem in Spain, a really rare event for a big telecommunications operator.
Before the witnesses appeared before the committee, Convenience Stores and Newsagents Association, CSNA, and the Retail Grocery Dairy and Allied Trades Association, RGDATA, came in. They are not very happy. The witnesses are aware of this. They feel that the level of communication and customer service the national lottery provides is not up to scratch. They also told us the witnesses have resisted hearing that.
The RGDATA representatives stated that as far as Premier Lotteries Ireland was concerned, it was a case of shooting the messenger. I would prefer to put the questions in a more interactive way, so I would appreciate it if the witness would respond to that. Are the concerns well founded?
Mr. Dermot Griffin:
In terms of communication on the transition programme, we went into much detail and had a specific publication on transition times to keep retailers informed of the activities taking place and what was scheduled. Much time and effort went into communicating with the retailers. It was a big logistical exercise. I listened to Mr. Joe Tierney from the CSNA, who understands what is involved. He is at the shop face and understands the issues in terms of intertwining the two machines and the ticket checkers. We have indicated all along that we will put in the essentials, including the core systems, terminals, website and telecommunications. We were to return after the Christmas period, so as not to disrupt the prime retail period, and re-cable the ticket checkers so that they would work with the new machine. There is also the matter of the digital signage.
Mr. Dermot Griffin:
They must be cabled from the old terminal to the new terminals. More than 2,000 have already been re-cabled. Once they are all completed, we will download software to activate all of them. We will test that software, and the plan is that by early April we will activate those ticket checkers.
Mr. Dermot Griffin:
The message I took from retailers earlier, which we share in the business, is that the most important priority is to complete our transition programme and get back to having the ticket checkers and digital signage working. We need to get the old machines out of the stores, and that process is under way. With regard to any of the outages we have had-----
Mr. Dermot Griffin:
Once we complete that programme, we will consider a game development programme. We are conscious there is a requirement to increase funds for good causes and we have not been in game development mode for the past couple of years because the licence was coming to an end and a new licence had to be awarded. We will not move on that until our transition programme is finished.
I do not want to make this torturous. The only reason I am asking about these specific issues is that they were put very directly by the retailers. First, there is a feeling that people are not winning as much money. That is coming through feedback. The retailers also raised the two specific concerns relating to brand loyalty and trust. There is a concern about more numbers in the games and an increase in price. I just want Mr. Griffin to say "Yes" or "No". As we speak, are there plans on the board's table to increase either numbers or prices? That is all I want to know. It is about now and not the future.
I do not know how the retailers will interpret that. I do not know what that answer means.
Will Mr. Griffin and the regulator tell me about unclaimed prizes? Mr. Sloyan gave a figure of €48 million allocated to good causes over the first three months of the new licence. What is the figure for unclaimed prizes in the period?
It is a condition of the licence that anything unused goes back to the State. It is used purely to enhance and develop the brand and products. That is overseen by the regulator. How many staff does the regulator have?
Yes, this is my final point. With the benefit of hindsight, does Mr. Griffin think that if PLI had stuck to its original planned timeline for the change in technology, it might have avoided some of the outages and technical difficulties it encountered?
Mr. Dermot Griffin:
No. We would not have cut over unless we were absolutely satisfied. This can be seen in the level of testing. We carried out user acceptance testing. There were different routines within the business. There had been 2,800 test cases and 1,800 supplier tests before we cut over. What is key from my point of view is that the core gaming system has not been compromised in any way. We introduced the gaming system and have a separate gaming system off site. We run both systems in duplicate and also have an independent control system that takes the transactions from the terminals separately. It gives us a separate control system against which to cross check the central system. We must ensure they are in balance, to the cent, before we have the draw. We spent a great deal of time in making sure all of these controls were in place. Also, our EuroMillions partners had to conduct tests on our system because we utilise our system for entries in the EuroMillions system. They sent an IT team to carry out their checks on our system before we cut over. I am certain that none of the problems that emerged could have been identified by lengthening the time before we cut over. We were absolutely right to cut over when we did.
Mr. Liam Sloyan:
There was a question about how proactively we operated and whether we just asked for reports when things went wrong. We certainly ask for reports when things go wrong. However, we do not just leave it at that. The reports we receive are reviewed and we go back to ensure whatever went wrong is being addressed properly.
Outside that area, there are some reviews we carry out on our own intiative such as the review currently taking place of the risk management processes and structures within PLI, which I consider to be proactive. We also look rigorously at requests for approvals that we receive from the operator. When we receive these requests, we make sure they address the issues we must have addressed. At times amendments are required to address these issues. I assure the committee that we are proactive in our work.
Another question was about our involvement in the decision to postpone the draw. The rules for the lotto provide for the operator postponing the draw in given circumstances and these circumstances arose on that day. As such, it was a decision purely for the operator under the rules that had been approved and the operator made that decision. I was informed beforehand, but the decision was the operator's.
Regarding whether I think the regulator is adequately resourced, we have an income of €1.5 million per annum and resources for ten staff. I consider this to be adequate. If my views change at any time I will bring this to the attention of the Department of Public Expenditure and Reform.
There was a suggestion that because the levy came from the operator, it might compromise the office in some way. I do not accept this. The net ticket sale receipts are transferred to the lottery fund. At that point it is under my control and I take out the levy. There is no question of PLI deciding that it does not like how I do my job and that it will not pay me this quarter or month. There is no question of any element of compromise.
On publication of the licence, this is important. It is something on which we are focused and to which we will be turning shortly. I appreciate that it is included in the legislation. There is also a process under the legislation relating to ensuring that where we release commercially sensitive information, it is done because there is an overriding public interest. We will be going through the process very shortly and looking to publish the licence.
Mr. Liam Sloyan:
I envisage engaging in the process in the next quarter.
I was asked if I was included in the freedom of information legislation. The truth is that we have not yet received any freedom of information requests, but I hope I am. It makes decisions to release material much easier when there is a statutory process under which to do so. That is the honest position.
Senator Paul Coghlan asked some questions.
Mr. Liam Sloyan:
One question was about whether I had given any commitment that the operator could not expect fines. I have not given any such commitment. I would never give such a commitment to a regulated entity.
There was a question about our role in checking technical systems. In both the licence and the legislation there is a range of powers for the regulator to demand reports, information and records and to approve the internal processes for the way the operator operates and the people it has to audit its systems. I also have access to all of the systems and I am in a position to send people to look at them. In this context, it must be remembered that I cannot actually operate the lottery and it would not be right for me to do so. I must be independent of the operator. It is the operator's responsibility to achieve all of these things. There are powers in the legislation and the licence whereby I can effectively monitor the operator, but ultimately it is its responsibility and I must be independent of it.
I welcome the delegates. If anybody at home is watching this meeting, he or she will, unfortunately, have a very negative perception of the lottery. However, I will give the delegates an opportunity to explain some of the things that are going right with the lottery.
My first question is to Mr. Griffin. People argue that the transition from An Post to PLI has not been seamless. Will he elaborate a little on the strategic implementation of the takeover? For me and many others, the national lottery worked very well for all concerned - for members in this room, the customer, the retailer, An Post and the organisations that benefited from it, which was the reason it was started. Why was it so fundamentally changed technically when PLI took it over from An Post?
Mr. Dermot Griffin:
On the licence competition - it is the same in other jurisdictions - and in allowing a level playing field, if the incumbent is allowed to keep its equipment and just proceed, it has an unfair advantage in the competition.
As in other jurisdictions, all existing gaming technology, terminals, telecommunications and core systems must be replaced in order that everyone will have the same opportunity to bid for the licence.
Mr. Dermot Griffin:
No. The existing licence was over 13 years old. As all of the gaming systems we had in place were 13 years old, they were coming to the end of their lives. The equipment was functional, but if one was to look at a 13 year old laptop or PC now, one would see that technology had moved on to a great extent. What was sought was a refresh of the technology possessed by everyone bidding for the licence, which would cover the next 20 years.
Many of us could have done with that point being clarified today. When PLI's bid was being evaluated, was a technical weighting given to its proposed systems or was the consideration driven purely by the €405 million offer?
Was the suite of technology PLI is now using known at the time of the bid? Was the bid assessed using a points or weighting system that compared it with other bids or was the decision made on a purely monetary basis, that is, the top bid wins?
Mr. Griffin has not had an easy time at this meeting. The retailers and their organisations pointed to a problem with perception. As politicians, we suffer such problems more than anyone else. There is a belief the process is not working as well as could be for PLI, the retailers and customers. Does PLI have plans to address this perception?
Mr. Dermot Griffin:
We are using this meeting as an opportunity to give the correct facts. I have referred to systems availability of more than 99%, with 72 million transactions completed and everything balanced at this end. There is much that is positive in the changeover. Business is ahead of target after just three months. In February when we had a number of outages sales were 4% higher than they were last year.
How will PLI overcome the problems with perception? It is doing something about it today, but the retailers are unhappy. PLI stated the self-check system would be in place by the end of April. Is a diplomatic offensive necessary if retailers are to come back on board?
Mr. Dermot Griffin:
We will continue to work with the Agent Council. This is not a new process. I have been with the lottery for eight years and we have worked with our retailers all along. There are always decisions and choices to be made and we welcome input from our retail council and retailers. I often spend a day travelling with one of the field sales representatives around the country, visiting retailers and listening to them and their staff to hear what they have to say.
I am happy to hear it. It gives Mr. Griffin tacit knowledge and lets him know what is happening. I am glad that he understands that if the customer and the retailer are not happy, PLI will not make money and the groups that usually benefit from the lottery will not benefit.
I have a question for the regulator. In the event that consumer confidence is eroded to the point where there is a decline in lottery sales and contributions to worthy causes, the latter being the goal in the lottery's establishment, at what point will the regulator step in and tell PLI that he is not happy with its performance and that it should shape up or ship out? What is the doomsday scenario?
What is the level of auditing? PLI has a licence, but anyone who is awarded a licence needs to be under scrutiny. For example, the committee scrutinises banks. When one has a licence, the onerous position bestowed by the State means that he or she must do the right thing by the State in order that it can benefit. In the event that someone does the wrong thing, the State can suffer negative effects.
Mr. Liam Sloyan:
The key point is that there are many contractual obligations on the licence holder. The operator has committed to meeting the terms of the licence and the legislation. It will be brought up on any failure to comply with either. Performance is judged by the operator meeting the commitments into which it entered.
Mr. Liam Sloyan:
My objectives are player protection, having processes in place to ensure the lottery is operated properly and sustainability, that is, protecting the lottery's reputation. Subject to these is maximising the funds to good causes. These are my objectives and I have functions aimed at meeting them, for example, issuing directions if I consider the operator's activities are not meeting my objectives.
Mr. Liam Sloyan:
I have required that the operator submit reports to me on the outages that have taken place and I will go through them to ensure any solution proposed is appropriate. I will direct that further measures be taken, if I consider it to be necessary, after reviewing the reports. In my reviews-----
I am sorry that I missed the presentations. I had another meeting to attend. I have read Mr. Griffin's statement and apologise if I repeat any question or point that has been gone through.
In his last answer Mr. Griffin stated there was a requirement in all bids to replace the technology used. Is it the case that nobody could have put in a bid utilising the previous technology? Was replacement of the technology used a requirement of the licence process?
Even though they could have factored in the cost of it and everything else. It seems bizarre. I am not saying anyone has the right to say, "We already have it and will keep using it," but surely someone could have put in a bid based on GTech technology.
Mr. Dermot Griffin:
It had to be new technology; one could not have said, "We will utilise that technology." It was 13 years old. Otherwise, one would not have had a level playing field. The position is the same in other jurisdictions where licences are offered. It would not have been a fair playing field, if one had given someone an advantage in continuing to use the existing technology.
Mr. Dermot Griffin:
I do not know who the other bidders were or what they were. The process was confidential. The bid Premier Lotteries Ireland made was based on the terms of the licence and a positive view of Ireland in the next 20 years. We have shareholders who take a long-term view of investment here. I do not know what other bids were made.
It has been reported that the technology aspect was between €15 million and €18 million cheaper than in the previous GTech deal. Even if the GTech technology is not in operation, presumably it is possible that the other bids were based on a similar pricing model.
Mr. Dermot Griffin:
Again, I do not know who the other bidders were or what they bid. What I can say is that the previous licence, in terms of the contract with GTech, was based on revenue share; therefore, it was not based on the cost of the equipment used. That makes sense at the start of a lottery as one is building it up and one is paying for the equipment from a share of the revenues. As the lottery grows and there is more revenue, it makes financial sense - certainly, it made financial sense to us - to buy the equipment outright rather than have an ongoing revenue share for the following ten or 20 years.
Taking all of that into account, in terms of the total cost of the technology, how much less will Premier Lotteries Ireland pay on a yearly basis to Intralot compared to what was paid to GTech?
Mr. Dermot Griffin:
It is a commercial agreement between us and Intralot. When one thinks about it, we are buying the gaming software. Therefore, it concerns the cost of the software, the terminals in stores which one should think of as computers, and the cost of repairs should the machines break down. They are the cost components. We buy the mainframe computers separately from IMB and run the software on them. That is how we built our cost model on the technology side.
Mr. Dermot Griffin:
We have a business plan which we submitted and that was part of our bid. Naturally, it has to remain confidential. One of our shareholders, An Post, has always been involved. Its pension funds are involved, with Teachers' Pension Plan. They are long-term investors that are looking for reasonable returns, nothing more.
They are investors that are investing in it because they expect to make a profit. To recoup the €405 million, is it fair to say one is talking about profits of €20 million plus a year, as otherwise PLI would not even get its bid money back?
Previously, An Post was paid an administration fee of over €2 million a year for operating the lottery. It seems that figure, for PLI to even get back its investment, must increase to €20 million plus. From where exactly is that money coming? What is its source? Is it the money for good causes? Is it the money for retailers? Who will lose out to enable PLI to make a profit?
Mr. Dermot Griffin:
In the model under which we operate the new licence, the figure for good causes is set at 65% of sales minus prizes. The remaining 35% of gross gaming revenue, GGR, has to cover agents' commission. It covers the running costs of the national lottery. Whatever one has left over is profit.
Mr. Dermot Griffin:
As in any other sector, the online channel is important and players expect to have it. They expect to be able, if they want to do so, to go into their local shop to buy, but they also expect, on a rainy Wednesday night, to see an advertisement on television at 7.30 p.m. and know what the lotto jackpot is, for example, as is the case tonight, €6.5 million, and that they do not have to get into their car to drive down to their local shop to play. They want to have the ability to be able to play on their desktop, laptop or phone and we have to give them this. What we have found with players who move online is they tend to become multichannel players.
That is where I am leading. I do not play in the lottery, but one sees the advertisements. It is online focused. One can play on one's smartphone at the top of Mount Everest. I get the message in PLI's advertisements, but what about the dangers posed by gambling? The problems are significantly larger in online rather than offline gaming? Is PLI funding anything to combat them? Obviously, a little message on the bottom of the screen does not have an impact.
Mr. Dermot Griffin:
We take the issue of responsible gaming really seriously. We always and will continue to do so. Our sister company, Camelot, does the same, as do our shareholders, An Post and Teachers' Pension Plan. It is one of the issues that brought the group together because we are all very strong on responsible gaming.
As part of the European Lotteries and Toto Association and the World Lottery Association, there is a responsible gaming standard which is expert advice on how to ensure that players, regardless of whether they are in retail or online, are dealt with properly in terms of underage play and if someone has a problem with gaming. Getting that accreditation incorporates things like training our retailers and providing leaflets and information on the website for people who have a problem and how to deal with issues if they arise. Luckily, we do not have too many issues on this front. Certain controls are recommended by the European Lotteries and Toto Association and the World Lottery Association in respect of online gaming. They include self-exclude limits on play, lower limits and putting advice in terms of gaming-----
I differ from the views of Deputy Fleming who said earlier that he felt that PLI was going backwards. I think the initiatives are technologically advanced and I wish PLI well. There have been outages, not just those of 3 and 4 February. Is there any common thread between the three outages? Did PLI learn from the first outage and did it affect how it dealt with the second and third? I am more concerned about its relationships and I am even more concerned now that Mr. Griffin explained to me that all of the staff are exactly the same. The continuity of the relationship that existed with the retailers for the past 20-odd years should be the same or better yet it is considerably worse. The previous delegation that appeared before the committee earlier today made some extremely strong statements which were very serious but ill-founded. When the speakers were pressed on why they made those statements, they suggested that they did not mean what the statements said they meant but that they had a gut feeling in their bellies. Something serious has happened and the relationship has deteriorated in the past 12 months, notwithstanding the long list of events and initiatives Mr. Griffin said PLI organised.
To cut a long story short, PLI has organised all these great events to try to smooth the transition yet we heard from witnesses earlier who have real concerns about PLI shaving and saving in order to make money. They needed to state that the franchise is not to be squeezed by a private operator for maximum return. They have genuine concerns. What will PLI do to address the relationship deficit and their concerns?
PLI has changed "Winning Streak" and there has been some rejection of it because we do not like change in Ireland. Has Mr. Griffin seen a dramatic decrease in "Winning Streak" lotto scratch card sales? If so, will PLI address it and the game issue?
Mr. Dermot Griffin:
I will start with "Winning Streak" and "The Million Euro Challenge". "Winning Streak" is a game we have successfully run in association with RTE. It is a very successful programme that has stood the test of time. The game show is an important property for us and will remain so but we need to look at new games as well. Working in conjunction with RTE, we devised "The Million Euro Challenge". It is a different type of game and is probably targeted at a slightly different audience level. In terms of the excitement of TV, it is built around producing a millionaire and features slightly more complicated games than simplistic games. It has a new presenter and a new set. We decided with RTE that we would start the year with "The Million Euro Challenge". For a programme that is just starting off, it has audiences of over 264,000 on a Saturday night. It is certainly the top programme in its slot compared to other programmes on at that time. We will run that for a series and bring back "Winning Streak" in the summer. "Winning Streak" will come back afresh and we will then be able to offer a new combination of game shows. We have done that in the past. We have had "Fame and Fortune", "Trump Card" and "Big Money". One just mixes it around a bit and refreshes things as one goes along. Rest assured that "Winning Streak" will be back with Marty Whelan.
In respect of the relationship with our agents and retailers, the Deputy put her finger on it when she mentioned change. It is a period of change for the national lottery. Things are different, particularly over the past three months. We have flagged and communicated this. It is a period during which they must operate two systems. They must run down the old An Post system and run the new system. There have been some teething problems which we will get over. I think the business demonstrates that the systems work 99% of the time and we will improve on that. The relationship will more forward quite quickly, as it has done in the past, because we will sit down with our retailers and work through any outstanding issues they may have. The ticket checkers will be out in early April and I think it will get back to business as usual for the national lottery quite quickly, which is what we want to do.
The delegation is very welcome. There is a perception that cash winnings are down and some people feel there is a policy of increasing prices and reducing prizes. The genesis of this belief lies somewhere and needs to be dealt with. Has the ratio of profits to sales changed? The State has a valuable asset here and PLI has a lease on it for 20 years. There is a concern that its value should not diminish and that it be dealt with in a way that retains its value for the State because 20 years in the lifetime of the State is nothing. I do not want to see the national lottery becoming worthless. While we have heard a lot of comforting words, there have been outages. People paid a lot of money to get this right and it is not good enough. I hate to sound over-critical but it should not happen. Could Mr. Griffin tell me about the ratio of profit to sales?
According to PLI's figures, the national lottery has given €4.5 billion to good causes over 28 years.
This works out at €160 million a year, 65%, that goes to good causes. Roughly speaking, that then brings it down to €86 million. Taking account of the cost of servicing the purchase price of roughly €25 million a year, PLI, Premier Lotteries Ireland, is down to €50 million a year for operating expenses and profit.
Is the money that is being projected in these figures being leveraged by PLI and others against different businesses and borrowings? Is there pressure to ensure this fund is kept in place? We have a responsibility to the State to make sure this asset is returned to us in several years and will be of value to the people.
Mr. Dermot Griffin:
The model is sales less prizes gives the gross gain of revenue. Two thirds of that goes to good causes and one third to the operator. Is this leveraged against other businesses? This is an Irish incorporated company and is a stand-alone business. It has shareholders such as An Post, An Post’s pension fund and Ontario Teachers' Pension Plan.
I am wondering where the pressure is coming from to make these savings. National lottery retailers were adamant to this committee of how concerned they are about the service they receive. I am concerned about the asset value.
Mr. Dermot Griffin:
The agents have said different things at different stages in their presentations. Mr. Joe Tierney, Convenience Stores and Newsagents Association, is on the ground and feels there are urban myths about some of these issues. We have the facts about system availability. I accept there have been some unfortunate events that have been given media coverage. In general, one does not complete 72 million transactions, have everything balanced and sales ahead of expectations if there are problems of such a fundamental nature with the system. There are no such problems. We have a system that is fully tested as outlined earlier. We always said there would be transition bedding-in period which would last the first quarter of 2015. There are issues we need to address to complete the service like the ticket checkers.
Mr. Griffin cannot say four outages is ahead of expectations. Has the regulator a responsibility in this? PLI paid big money to get all these systems put in place. I am sure it was not delighted to see them collapse.
The agents’ commission is 6% which means PLI has 8% of the overall revenue that would have been, heretofore, used by the national lottery as a State agency.
Deputy Regina Doherty referred to the programmes "Winning Streak” and the new game, "The Million Euro Challenge". I have watched the new game several times and it is clear to me that PLI has made significant cost savings to it. It has one presenter, three competitors as opposed to five previously and the money paid out has been dramatically reduced. I understand from contacts in RTE that the programme is recorded on a Wednesday, meaning overtime costs are gone. I understand there are challenges getting a studio audience for the programme and, compared to “Winning streak”, its television viewing audiences have dropped dramatically.
Mr. Dermot Griffin:
I do not think one can compare “Winning Streak” to “The Million Euro Challenge” as they are two different programmes. People were getting used to the games on “Winning Streak” while “The Million Euro Challenge” is a new concept. One needs to go through a series to see how it plays out before one can judge a new game like that. For a game that has just been introduced to have over 250,000 viewers on a Saturday evening is a good result.
Mr. Dermot Griffin:
It was about 300,000 viewers. After 20 years, it had built up a good following. We are not trying to compare “Winning Streak” to “The Million Euro Challenge”. We will bring back “Winning Streak” in the summer, which will give us a strong game show at a time when sales of scratch cards tend to dip.
There is also an issue with accessibility to some of the lottery products for older people. One of the components of this new TV game is that one has to go online. The numbers on the results sheets given out in the agents’ shops are not in sequence. It is a simple thing and I cannot understand why PLI has not rectified it yet.
Mr. Dermot Griffin:
We have changed the results sheets to show them in sequence. That is one of the changes we implemented since we took over the national lottery, based on feedback from our retailers and our players.
A component of “The Million Euro Challenge” gameshow requires input into an online system. Entering the show is the normal way of collecting three stars and posting them to us to be selected for the following show. The show is recorded on a Wednesday to facilitate RTE in editing the programme. “Winning Streak” was recorded on a Saturday afternoon.
The difficulty is that by the time the show finishes, there is not much time to edit the programme before it goes on air. However, if it is recorded on a Wednesday there are several days available for editing.
During the course of the meeting, no substantive figures were presented to support some of the charges being made. There was a certain degree of upheaval in the introduction of this new system, which was essentially built from a brand new platform. There have been three outages of the national lottery system, which suggests a technological problem. Some people argue that broadband is vastly superior to wireless but it is not. Wireless broadband operates all over the country and it is 100% reliable. As a system, wireless works. An issue clearly arises in regard to what is going on but we have not managed to get to the nub of the technology problems. When there are three failures in a short space of time, there is clearly a problem. It was not just a fall of snow in Spain; something else must also have happened.
My questions are for the regulator as much as for Premier Lotteries Ireland. Is there a problem with the system itself or somewhere else that we should know about? I will not get into the other arguments that have been made because I am sure if I gave the witnesses sufficient time to respond they could debunk all of them but nobody has yet explained to me why we had three outages and what has gone wrong. What are we going to do about it in the future?
Mr. Dermot Griffin:
We have put together a technical summary of the outages which outlines the causes. Some were related in terms of telecommunications issues but others were not. We also outlined the actions we have taken and the preventative steps we intend to take to ensure it will not happen again. The issue pertaining to Telefónica in Spain, which received extensive coverage and which required us to defer the draw, was a highly unusual event affecting 1,500 corporate customers around the world. It is highly unlikely to recur. Having said that, measures have already been put in place by Telefónica to build resilience against such problems. This system has been available 99.1% of the time.
There was a Meteor outage arising from a problem on the Meteor network. Approximately 800 sites were on the Meteor network at that stage. The roaming solution allowed us to move these sites from the Meteor network to other networks. We were successful in doing that but there are lessons from the outage in the sense that we can improve the time it takes us to move from a network that has gone down to a new network. We have put in an additional feature whereby the lottery terminal will send a signal every three minutes to confirm that it is connected to the host system. If it finds it is not connected it will automatically switch to another network. This means that if one network goes down we can switch quickly to other mobile networks to reestablish the service. Even under the old system we needed to continually test back-up facilities and resilience. We will continue to do that.
Mr. Liam Sloyan:
I am, of course, limited by issues of confidentiality but I expect to finish my initial review of the reports shortly. However, I also expect a number of questions to arise from my review. In order to be satisfied that the measures taken are appropriate I will be raising further questions. It will therefore be several months before I can conclude my work in this regard.
I congratulate Mr. Sloyan on his new job. I know him from a previous role. He stated in his submission that he required the company to provide full reports on the outages. Has he received all the information he required?
Mr. Liam Sloyan:
My objectives are to ensure propriety, maximisation of funds to good causes, player protection and sustainability. My deputy, who is also head of finance and audit, is responsible for areas including maximising funds for good causes, audit of the operator. There is also a head of player protection and a head of compliance with legislation and the licence. An accountant is responsible for administration and management of the national lottery fund and a head of corporate affairs deals with running the organisation in line with the code of practice for State agencies. We also have four support staff.
Mr. Sloyan stated that a safe lottery is a lottery in which the interests of participants are protected. I suggest to Mr. Griffin that player protection and confidence in his company's endeavours are still matters that he must strive to achieve. I do not think his organisation has made a good start and it made a ham fisted transition from "Winning Streak". It is a question of protecting the players and preserving their familiarity with games. Senator Conway raised issues that many of us have encountered in regard to the cohort of people who are not familiar with online operations. I hope Mr. Griffin can bring people with him but I have been disappointed that we have had three outages. That does not sit well with people. He has provided an explanation for some of these outages but the person who looks forward to the draw on Saturday night must also be brought along on the journey. I wish him well in his endeavours.
When will Mr. Sloyan be publishing performance details of the national lottery by specific game?
When will a website be available? What controls are being introduced to ensure online and over the counter lottery sales are not contributing to problem gambling and do not involve sales to under-age players? How can commitments given by the lottery during the bidding process be enforced?