Dr. Dónal Palcic:

I will take the Deputy's first question about other projects that use the gap-funding approach. KPMG's ownership report looked at other countries and the only other gap-funding model that was used as a case study was the Broadband Delivery UK programme. One of the central criticisms in the KPMG report relates to the lack of competitive tension in that programme in the early stages. It was just down to one bidder every time in terms of lots, and BT won it. The report effectively states that one has to ensure competition in order for the gap-funding model to work. Just last night, Indecon's review of the national broadband scheme, which was carried out in November 2017, was published on the Department's website. The national broadband scheme involved 3, which won the contract to roll out mobile broadband 3G technology to rural areas that otherwise could not get broadband. That scheme used the gap-funding model but on a much smaller scale. The amount involved was approximately €200 million, of which the State provided €80 million through capital expenditure and it received €36 million back from the European Regional Development Fund.

Indecon's recommendations on the gap-funding model are instructive in this regard. Indecon indicates that the calculation of strategic value is central to all of this in terms of the subsidy that is required. One would hope to have the revenues and costs estimated somewhat accurately, and then there is the strategic value that the bidders will attach to the fact that, because of the gap-funding model, the network remains in private ownership at the end of the process. Indecon has stated that it is extremely difficult for Government to come up with a figure when estimating this strategic value and that the only way to ensure that the figure is more accurate is to have strong, competitive tension in the whole process. This review has only been published now. It took a bit of pushing; I submitted a freedom of information request for it last March and there was a delay in the report coming out. Part of this is probably due to that recommendation. Indecon zeroed in on the strategic value and pretty much stated that coming up with the figure in that regard was dubious. The KPMG ownership report assumes the strategic value in its financial appraisal, which has not been published. That drives the recommendation of the gap-funding model. This is the major difference between it and all the other ownership options. KPMG has assumed similar costs and revenues for the public ownership model but states that the difference, along with some of the start-up costs, is the strategic value and the estimate on that. The gap funding model has already been used in the national broadband scheme. The recommendation is that it is all about competition and especially in a telecoms sector where there is a lot of uncertainty regarding market developments, potential competition and technological developments. When all of that complexity is in the mix, one wants a very carefully designed mechanism, which is the recommendation coming from Indecon.