Thursday, 9 May 2019
National Broadband Plan: Statements
I will share my time with the Minister of State, Deputy Canney.
Before speaking to the substance of the matter, I take this opportunity to thank my predecessors and, in particular, Deputy Naughten, who put great effort into developing the national broadband plan, NBP. I also thank my officials who have worked tirelessly over a long period. They have done the State a great service, regardless of what one believes about the decision we are taking. A massive effort has gone into teasing this matter out and putting us in a position to make this decision.
I make no apology for stating that we have made a very important decision. In every office I have held as a Minister in recent years I have seen the powerful transformation that digital technology is delivering in business, enterprise, education and every walk of life. The reality for rural Ireland is that 1.1 million people would be left behind if we did not make this commitment to intervention by the State to deliver this technology. We would be cutting them off. Worse, rural Ireland would be hollowed out as opportunities go elsewhere. I cannot countenance that, and that has been the motivation of the Government in making this decision.
Since we decided to sell off Telecom Éireann the reality is that we have depended exclusively on the commercial sector to decide the state of our telecommunications network. That has worked very well for 75% of our population. That 75% will have access to a largely fibre-based system within the next five years. The process has worked very efficiently. However, from the State point of view, it is clear what has happened. The State has not intervened apart from the €400 million investment in metropolitan area networks, MANs, which was an important decision. There has been no other investment in telecommunications. The contrast is there for all to see. The investment the State has made in telecommunications has been that €400 million, compared to €10 billion in water and €40 billion on roads. Between 1985 and 1996, some €2 billion was invested by the State in telecommunication infrastructure in just one decade. The reliance on the private sector has, unfortunately, left almost a quarter of our population behind in terms of access to the sort of broadband service that is now being universally adopted by the European Union as the standard we have to reach. It is important that we make this decision.
There has been considerable questioning as to why we chose a model that involves subsidisation and not ownership. The reason is that we have been very strongly advised that the best and most cost-effective way of dealing with this is to use the existing infrastructure, including the MANs network, as the base, and the existing Eircom and ESB lines and poles as a platform from which to roll out 146,000 km of fibre. We are piggybacking on that existing infrastructure, which keeps down the cost. By leaving it as something that will be owned and managed by the successful bidder, we ensure that continuous investment occurs so that in 25 years or 35 years a system simply consisting of fibre on rented poles that requires substantial reinvestment is not handed back to the State. This ensures that we will have a stand-alone service, standing on its own two feet and delivering a high-quality service to 1.1 million people in the country.
There has been much comment on the sceptical scrutiny of the Department of Public Expenditure and Reform. As I have said, that is exactly what that the Department is there to do. Any healthy system has sceptical scrutiny within government, and, at the end of the day, politicians and governments must make decisions. I assure the House, and I will be happy to repeat this next week before the committee, that every one of those concerns has been carefully scrutinised. We looked at all the costs and all of the possible alternatives, which amounted to 12 or 14 alternatives all together. We looked at how best to manage risk and worked out a way to do it. We ensured that the cost is spread over a significant period. We carried out the detailed scrutiny and due diligence necessary when only one bidder was left in the process. We have ensured that the State is protected by clawbacks, rigorous performance clauses and governance requirements, which will ensure that this company will deliver in the State in a way which protects the taxpayer.
There has been criticism, too, of the benefit to cost ratio, and that the ratio is relatively low, at 1:3. The reality is that this is based on a very conservative assessment of what can be included as potential benefits. It cannot look at the future potential that e-health, e-government services, digital learning, the use of the cloud or an increase in the uptake of remote working. None of those can be taken into account in this. Those reasons, not taken into account, have provided much of the impetus for committing to providing high-speed broadband. I also assure the House that the only cheaper alternative to doing this is to leave some of our people in rural Ireland behind. That is something that the Government is not willing to countenance.
I strongly recommend this proposal to the House as being the best way of delivering equality of opportunity for 1.1 million people in rural Ireland. I also assure the House that no other capital projects will be postponed, delayed or in any way affected by the decision the Government has taken. Part of that decision is that this will be funded from future revenues.
I am proud to talk about the major investment decision we have taken this week. As chairman of the Atlantic economic corridor task force, I am very proud to be able to go to its next meeting to tell members that in the nine counties, from Donegal to Kerry, we are going to invest a sum of €938 million. We are going to empower 238,000 premises and homes along the Atlantic economic corridor route. The Atlantic economic corridor has been set up as a basis for transforming our economy so that there is balanced development across this country. We have been working over the past number of years on the basis that we need to provide new infrastructure. One of the main infrastructure items we require is connectivity and telecommunications. We have been left devoid of this for a long time, starved of opportunity, and now is the time to release people from this. We will release 1.1 million homes, 56,000 farms, 44,000 businesses and 630 primary schools to ensure they can join the digital age.
I am very proud that we have made this decision. It has been made because we want to make sure that Ireland can be the leader in the digitalisation of the world. We are here, and we can do it. We have the confidence to do it and the population to take on the challenge. Some €152 million is being invested in Galway, along with €151 million in Mayo. We are going to empower thousands of people to make ensure that they can join the digital age. Our students cannot live at home at the moment, having instead to live in Galway, Athlone or Sligo because they cannot do their dissertations and projects due to a lack of access to broadband. Farmers cannot fulfil their obligations in terms of online payments because they do not have the infrastructure in their homes. We talk about the smart economy and smart farming, but if one does not have the tools to do it, one is lost.
I am a rural TD, and I am delighted that we are doing this on the basis that we cannot leave anyone behind. Everyone will be included. It has been accepted that fibre to the home is the only technology available that will guarantee a proper service to every house which is compatible with every urban area. It is important to remember that. I was canvassing for the local elections, and one of the main issues arising on the doorsteps in my constituency was the lack of broadband in large areas such as Clarinbridge, Headford, Tuam and Ballinakill. Many of these areas have been spoken about in this House over the past two to three years and the question of what the Government is doing about it has been asked. The day of reckoning has come. We are going to deliver it, and I am very proud that we are going to deliver it.
I ask the indulgence of the House in sharing my time with Deputy Cowen, our spokesperson on public expenditure. He is detained at another meeting, but should be here well before the conclusion. I ask that I be allowed to take five minutes and that the other five minutes be retained for him on his arrival.
There is no difference between us in terms of the necessity to rapidly roll out high-speed broadband to those rural and semi-rural areas that have been promised it for the past seven years. It is imperative that we do that. I agree and recognise the impact of the digital divide on those communities. However, the announcement made in the past number of days is anything but a rapid roll-out. It is an absolute confirmation that there will be continuing delays. It is dressed up as a good news story to assist the Government's candidates in the local elections, but the reality is that it is an announcement of delay. What was expected to be delivered in a three-year period will now be delivered under this particular plan in seven to ten years. The Minister of State may believe it is good news and may be able to provide the figures to the people of Headford and other places.
When the people there mine into the detail and it becomes apparent to them that they will not have broadband anytime soon, then they will react differently. A period of seven years to some families will see children go through school and college without access to high-speed broadband at home. Moreover, it will see an entire life cycle on their farms and in their businesses. This is not rapid roll-out.
The Minister has suggested that this is not electioneering, but it is electioneering of the worst kind. The Government produced a pack for each of us the day after the decision setting out the details for our constituencies, but this has been done before the contract is signed. My understanding is that the decision taken by the Government should have been taken when a contract was agreed. Will the Minister tell us whether the Government will again have to decide on the conclusion of negotiations around the contract? Will the process need another Government decision? Has the Government ceded some of its negotiating capacity by taking the decision the other day? Has the Government created a further legitimate expectation on the part of Granahan McCourt that will make it more difficult for the Minister to negotiate on behalf of the State as he reaches a conclusion to contract negotiations?
The reality is that in recent days the Minister and the Taoiseach as well as several other Ministers have sought to downplay the value of the asset. The Minister has done it again today. He has downplayed the value of the asset after 25 years, suggesting that it is only fibre strung across poles that the Government is renting from others. He has also suggested that the Government would not have invested in it otherwise. The contractor seems to see the value in it. The assertion put forward by the Minister is entirely disingenuous. The comments have centred around the value of the key infrastructure. Will the Minister confirm that the real value at the end of the intervention period is the monopoly access to a customer base that will be, by the Minister's projections, 400,000 or 80% of the 540,000 figure by the end of the contract period? These people will have no alternative but to use the infrastructure for which they will pay a monthly fee. It is the access to that customer base that will be the real value.
There is nothing to suggest that if the State owned the network, just as the ESB owns its network, it would not upgrade the infrastructure under the normal amortisation process that goes on in all companies. Of course that is the case, and of course those responsible would do that. There would be plenty of money to upgrade the infrastructure.
Let us go through in detail the document or memorandum provided by the Secretary General, Mr. Watt. He asserts that Granahan McCourt will have all its money back after year eight of the 25-year period. The company will go on to gain additional resources and revenues for the following 17 or 18 years and it will own the network at the end. Of course the company will be writing down some of its profits against upgrading the network, as the State would have done had it operated under a commercial semi-State mandate.
From every particular aspect and every way we look at this project it is not fit for purpose and does not meet the objective we all signed up to and want to see realised, which is rapid roll-out of high-speed broadband. With the greatest of respect, there is nothing rapid in a period of seven to ten years. It is bad value for money for the State. There will be no ownership at the end of the period. All in all, it is a rather bad deal.
I welcome the opportunity to address the issue. There is no doubt about whether rural broadband is needed. I represent a rural constituency and I see the urgency of it. We have been banging this drum for several years since 2012 and especially since I took over this brief three years ago. We are all in agreement in that sense. The issue is whether the taxpayer is getting value for money, whether the State will have ownership of the infrastructure, and whether it would have been given full transparency.
Some light was shone on these matters yesterday. The document released yesterday by the Department outlined how flawed the procurement process has been from the beginning and why the Government must have a plan B, something I have called for many times. The Government has been told repeatedly by the Department of Public Expenditure and Reform that this project, under the current model, is doomed. The Government has completely dismissed the evidence-based advice from high-ranking senior civil servants in that Department. The Fine Gael Government is acting in a completely reckless way and is leaving the taxpayer open to unprecedented financial risk while major question marks remain over the credibility of the private operator to deliver the project. This is nothing short of being fiscally irresponsible.
This comes only a short time after the revelations around the national children's hospital and the waste of €500 million on water meters that are not now being used. Some of those meters are being pulled up out of the ground. The Department of Public Expenditure and Reform has warned the Government about its major concerns in respect of the credibility of the cost-benefit analysis of the national broadband plan, under which the taxpayer is putting in almost €2 billion or €1.95 billion up to 2026. In fact, Mr. Robert Watt, the most senior person and the Secretary General of that Department, went so far as to say that the vast majority of the risk of this project would be retained by the State, that is, the taxpayer, while the private operator is insulated from risk since the company is putting up a fraction of the equity and will recoup its full investment by 2028. In reality, the taxpayer is putting up the bulk of the money but it will not own one metre of cable or one pole at the end of the project, by which time we will have a valuable network in place. The private operator will get the full benefits of the profit and will pick up a nice network. It will have landed into the company's hands.
Is it any wonder the Department has called so clearly for this to be stopped? Mr. Brendan Ellison, a principal officer in the Department of Public Expenditure and Reform, has strongly recommended that this plan does not go ahead on the grounds that it does not reflect value for money. In fact, both Mr. Ellison and Mr. Watt have called for the cancellation of the procurement process.
As far back as 2012, Sinn Féin argued that we should proceed with a model of ownership based on the ESB network. There can be no doubt about what the Department has said. I have before me a document from 2018 in which the Department of Communications, Climate Action and Environment sets out clearly that the most likely way of achieving the results needed in terms of the Government objective of providing high-speed broadband would be to mandate an existing or new semi-State or State agency to build high-speed broadband. The 2019 contingency plan states that the creation of a dedicated broadband agency in State control would most likely result in advancing Government ambitions of providing high-speed broadband. This year, Mr. Robert Watt went further. He said that the alternative course of action should be pursued and that the procurement process should be cancelled. That is what he said.
We have the infrastructure to do it a different way. I have been constantly highlighting the point in the Chamber and outside during the past three years. The State-owned metropolitan area networks, MANs, infrastructure covers 94 regional towns and the backhaul system criss-crosses the State. The Government has completely ignored the possibility of using this.
It is interesting to note that the Department of Communications, Climate Action and Environment and the Department of Public Expenditure and Reform have proposed that in the event of the procurement process collapsing, we should not retender to the private market but move instead to an alternative State ownership model. In 2019, the Department of Communications, Climate Action and Environment contingency planning report concluded that the best model to proceed with to deliver high-speed broadband to every home in Ireland would be the State model. Under that process a mandate would be given to an existing or new semi-State or State agency to build the network and provide the service. The Department also estimated that the capital and operating costs would be similar to that of the current contract. Furthermore, both reports argue that a new broadband State agency to deliver the service would comply with state aid rules. That is something the Minister has turned his face against. He has told us that it would not, but our research has told us differently. The Department is agreeing with what I have been saying about this. Mr. Brendan Ellison in the Department of Public Expenditure and Reform has gone further and called for the immediate cancellation of the current process in order for an alternative State-owned model to proceed within the Department of Communications, Climate Action and Environment. The Minister needs to explain comprehensively to the House why the Government has chosen not to consider this model of ownership as an alternative, given that both the Department of Public Expenditure and Reform and the Department of Communications, Climate Action and Environment have pushed this as a viable and affordable alternative.
Sinn Féin is of the view that it is essential for the State to retain control of this large project and vital infrastructure. This is no tiddlywinks project. It is a major project. The Minister outlined the problems with the privatisation of Telecom Éireann in 1999 by Fianna Fáil and the difficulties that caused for us, and we can all see that. Here we go again with another major telecommunications infrastructure project.
Mr. Ellison suggested that there is a high risk that the private operator may not even have the capacity to deliver the project. Rural Ireland needs to know whether this plan is even feasible. These memorandums from the Department suggest that the plan is already doomed. In the contract, the State has the opportunity in year 4 and year 6 to either halt or take back control of the project in the event of the private operator not being able to deliver. I have heard the Minister trumpet this but by that stage, the taxpayer, after four years, has put in €1.2 billion. After six years, the taxpayer has put in €1.95 billion. That is what it states in the documents. The taxpayer is taking all the risk. How much will Granahan McCourt have put in by then? Is it damn all? That is what I believe it will have put in by year 6. One has to ask why the taxpayer is front-loading the project and taking all the risk.
How much is the private operator putting in? By 2026, the taxpayer will have contributed €2.2 billion to this project. We were made aware yesterday that the private company will have all its money back by 2028. The taxpayer is essentially bankrolling the project to the tune of €3 billion and in eight years' time, when it has made its money back, this company can just flip the project, sell it on for a profit and abandon rural Ireland. We have been asked to put much in and the documents yesterday clearly indicated that the private operator has been asked to contribute far less than the taxpayer.
Will rural Ireland be left stranded with no control, and with this House having no control, despite having put in €3 billion and being left at the mercy of one private monopoly? The whole network could be stripped of assets as we have seen in the past, or parts of it could be obsolete. What about the standard connection fee? Much has been of this €100. I learned in the briefing with departmental officials yesterday that some households in rural areas will have to pay several thousand, or even tens of thousands for hard-to-reach households, as a connection fee. That issue has been glossed over and needs to be addressed. The Minister is asking the taxpayer and householders to support this project when we still do not know what the private operator is contributing. Every key figure relating to this deal was redacted in the documents that we received yesterday.
The Government is hiding behind commercial sensitivity when there is only one bidder left for a once-off deal. It does not make sense. The fact is that the Minister has agreed to go ahead with it. The figure was agreed with Granahan McCourt months ago. The Minister should now clear up whether the State or the private operator will invest the bulk of the money. It jumps out off the pages of yesterday's documents that the taxpayer will invest more. Could it be the case that the private investor is putting in damn all in the crucial first six years? There are another six or seven months, according to yesterday's information, until the contract will be signed. We said back in 2012 and again last October or November, when the pause button was pressed on this, that there was an opportunity to stop and look at this project. There is no doubt that we all want it. I have not heard anybody say that we should not go ahead with it. There is an opportunity during these extra seven months to test this matter. It should be tested before the Committee of Public Accounts and the Joint Committee on Communications, Climate Action and Environment. We need another plan. Is this project fatally flawed? Are there alternatives such as suggested by officials in the Minister's Department? We now know from the contingency documents produced by the Departments that there are viable options. These options include State ownership. We need to tease these out and come up with the best one for rural Ireland to deliver broadband where it is badly needed.
I am sharing two minutes with Deputy Breathnach. The question of rural broadband is not about whether or not we should deliver it. Everyone agrees that we should have comprehensive broadband for everyone in this country. Everyone wants the benefits for regional employment, e-health services and new opportunities to access education. Labour wants equality of access to high-speed broadband across the country. Access to the Internet is now essential for social inclusion as well as for economic opportunities. Our European manifesto seeks the formal recognition of digital rights. In our view, everyone should have a legal right to access to the Internet. As part of digital rights, everyone should also have legal protection of their personal privacy online and protection from online bullying and harassment.
Labour has a very different vision of how access to the Internet should be achieved, in a way that is better and safer for the Irish people. This week's announcements can only be understood as being political. They were clearly designed to influence the local and European elections in two weeks' time. The Government is proposing to spend €3 billion of the people's money on a private monopoly which will own the network forever. The proposed contract will last for 25 years. What happens then? The private monopoly will then be in a strategic position to charge significantly more. We also understand that the current private venture capital company involved in the Government's plan will be able to sell its shares in nine years' time, which means that the Government has no idea who will ultimately own this network. The proposed contract will only allow the Minister to block the sale of shares in the first nine years.
We know the sole bidder in the national broadband plan is a venture capital firm, not a telecommunications company. It seems obvious that it sought, and was given, the option of selling Ireland’s rural broadband network at some point in the future. Our biggest concern comes down to the question of ownership of the national broadband network. In the current plan, it is possible that vulture funds could buy up the body to be called National Broadband Ireland to squeeze more money out of the quarter of our people who will be reliant on it. It would be an entirely different matter if the public was to own the network rather than a private monopoly, even if the final cost needs to be €3 billion. There is no reason why we cannot set up a national broadband company as a commercial semi-State company. That is how we delivered electrification and the national gas network. Fianna Fáil should never have privatised the national telecommunications network because the current situation shows that the public keeps on paying more for that grievous mistake. In this case, Eir has positioned itself as the gatekeeper for broadband outside of the towns. Fine Gael's National Broadband Ireland will have to pay Eir for the use of its ducts and poles. If we had kept telecommunications in public ownership, we would not face hundreds of millions of additional costs as part of rolling out rural broadband.
We need to be clearer with people about the scale of this project's costs. Some €3 billion is an extremely large sum of money. It was only a few years ago that we were desperately trying to find a few million here or there to protect vital health services and other public services from the 2008 economic collapse. If we divide the €3 billion over every household in Ireland, it represents a cost of more than €1,750 for each family or individual householder. We will recoup some of that cost through VAT and other taxation, but we could have reduced the cost and recouped more if we cut out the profit-making part of the project. A significant portion of the cost of this project is to give the venture capitalists a large profit on their investment. The Secretary General of the Department of Public Expenditure and Reform has described the level of profit to the investors as "very high" for the level of risk they are taking with this investment.
What exactly are these venture capitalists bringing to the project that could not be provided by a publicly-owned broadband company? It is hardly expertise, as they have only 20 or 30 employees engaged on this project at present. They are yet to employ the bulk of the projected 265 staff for National Broadband Ireland. We do not need them for access to money. We rescued the public finances in order that Ireland can borrow once again on the international market and interest rates are at an all-time low. Is there something the Government has not told us about this project being on or off the State's balance sheet? If the private investor is paying significantly less than 50% of the cost, as seems to be the case from the figures we have received, and the State is paying more than 50%, I understand that the project will be on the State books regardless of who owns the network at the end.
Why on Earth will the people not own the network after the 25 year contract? Almost all previous public-private contracts involved the public ownership of the asset at the end of the period. That is the norm. Why is this project different? According to the papers released yesterday, this was a Fine Gael Government decision taken in July 2016. That date is significant. Labour left Government on 6 May 2016. At that point, the Government had made no decision on the future ownership of the broadband network.
A few weeks later, the new Fine Gael Government made the most unusual decision that, rather than the network reverting to the State after 25 years, it should be owned entirely by the minority investor. Every PPP we contracted ended with the project, be it a road, a school, or a health centre, being owned by the public. Why was this policy not applied to the broadband network? That is the nub of the issue.
Not only has the estimated cost of the project gone up even as the number of homes to be served has gone down but it is incredible for the public to pay so much money and still not own the network. It is not just the Labour Party saying this represents poor value for money. Senior officials in the Department of Public Expenditure and Reform have said so. We established that Department to safeguard the public's money and we thought that we had moved into an area of greater political responsibility with the public's money. Instead, what we have seen in recent weeks is not one but three major cost overruns in capital spending under Fine Gael. The national children's hospital will be the most expensive in the world. The Dublin metro may now cost €4-5 billion, according to the Taoiseach and €3 billion is to be given to a profit-making private monopoly for a broadband network that the public will never own.
The Labour Party wants to see high-speed rural broadband delivered as soon as possible, and we are committed to covering the necessary cost as long as the network remains in public ownership. We must have public ownership so that we control costs more effectively in future years. In 25 years, access to broadband will be even more essential than it is now. People will be routinely accessing healthcare advice and consultations from their homes, and conducting business from their homes and farms using broadband and a private monopoly will own the network. Potentially, vulture funds will own the network. Fine Gael has failed to explain what added value a venture capitalist brings to this whole consortium at a time where the State can easily borrow the money.
When we delivered rural electrification, it was through a public enterprise that has served this country well and faithfully for generations, as a quality employer and as a profitable company that paid €1.5 billion in dividends to the State following the 2008 crash. Modelled on rural electrification, we should have an ESB-style national broadband company to retain control over prices into perpetuity and to eliminate the possibility of ruthless investors taking over rural broadband. Twenty-five years might seem like a long time, but learning the lessons from 2008, which is now 11 years ago, it should be clear that there are too many risks involved in letting a private monopoly run our broadband network. The public was rightly determined, as was the Labour Party, that Irish Water should never be privatised. Why does Fine Gael think that the public would accept that a utility as important as broadband would be privatised from the outset?
The delivery of modern instant communication, be it mobile phone coverage or high-speed broadband, is a necessity in this day and age, not a luxury as some people seem to think, particularly for people in the countryside. Whether for a farmer, for a schoolchild, for someone who does not want to have to commute to the city, or for a rural school, it is essential. The announcement yesterday reminded me of the old colloquialism about buying a pig in a poke. It is a phrase used around the world, or it may be called a cat in a bag, to describe looking at the face of the object, not the quality of what is in the bag. When we hear the Department of Public Expenditure and Reform say that it is not credible, that it is concerned about the level of risk, and that clarity is needed, I have no doubt that we will be back here within three weeks of the European and local elections, still procrastinating on this issue. I agree with many of my colleagues that this is an election stunt to pacify or attempt to pacify rural communities in particular.
Where will we get the €1.4 billion to bring us up to the €3 billion when we have allocated only €1.6 billion in the national development plan? The Minister for Public Expenditure and Reform can say what he likes about not cutting projects but the Department and others have been saying that Dundalk Institute of Technology will lose its €19 million. That worries and concerns me greatly. We all want to see rural broadband delivered to every house. Anyone from across the House looking at a map of my county can see the areas not covered, and we are living on the east coast.
This Government is completely incapable of delivering major infrastructural projects of huge importance to the people, our economy and society. That is the inescapable conclusion to be drawn from the shambles that continues to unfold around rural broadband. For our part, People Before Profit from the beginning opposed the model for delivering this vitally important project which we all want to see happen and which rural Ireland desperately needs. We said all along that the privatised, outsourced, tendering out model simply could not deliver the infrastructure that we need, that it would cost us a fortune and land us in the sort of mess we are in now. We have been thoroughly vindicated in that. The inability of the State to deliver vital infrastructure goes back further, but the common thread in our failure in this regard is privatisation, going right back to Fianna Fáil's disastrous decision to privatise Bord Telecom, the asset stripping of that company by mostly Irish vulture capitalists, which denuded us and the State of its capacity to deliver vital communications infrastructure. If the left-wing concern and criticism of this process was not taken seriously, and it rarely is, it seems today that those concerns have been absolutely vindicated by the letter from Robert Watt outlining his concerns about this project where effectively a single consortium in what is supposed to be a competitive process has the State over a barrel. When the most senior civil servant in the area of public expenditure says we should not go ahead with this, that we cannot trust that the tenderer has the interest in carrying it through, and that there is a massive risk that it will not be delivered, it is quite astonishing that the Government perseveres. The only explanation for this announcement is that it is a pre-election stunt to make people in rural Ireland, who are rightly desperate to have infrastructure and services, believe that this Government is championing their interests. It is deeply ironic that the Government would present itself as the champion of rural Ireland given the way it has denuded rural Ireland of post offices and public transport services. It cannot be trusted to deliver broadband.
There are many other concerns about this, not just those that Robert Watt outlines. Is there, for example, the potential for legal action to be taken by other bidders in the market against the way this is proceeding? What about the cases that are pending against Actavo and Denis O'Brien and so on in respect of Siteserv? There are many serious questions about the capacity of this consortium, one which, by the way, bears absolutely no relationship, apart from the presence of Granahan McCourt, to the original consortium that put forward the bid. This process is fatally flawed. We should stop it now. We have said this several times already. What we need is for rural broadband to be delivered directly via a State company, either through the ESB or through a State telecommunications company. As Deputy Bríd Smith has said, if we had relied on this model to deliver rural electrification, we would still be operating by candlelight. We should not take that risk with something as important as this.
We must break from the privatisation, outsourcing, for-profit model. The State must deliver this vital infrastructure directly and own it at the end of the process.
I want to clarify what this debate is about and what it is not about. It is not about making an argument against providing rural areas with broadband. Broadband is essential and it is scandalous that people have had to wait so long for what is now vital communications technology. The question we are debating is why the Government is striking such a rotten deal for the taxpayer and such a good deal for private companies. Yesterday we asked why it is not possible for the State to invest in and provide this service. The Minister acted as if these companies were doing the Irish population a really big favour and intimated that the State is not capable of doing this.
These companies will have the potential to price gouge in the future. The media coverage of this issue makes it clear that the bidder will have recouped by 2028 all of the cash it invested. The money that it invested will have to be recouped when it is operating the network. How will it do that? It will sell off the network to others who will price gouge people in rural areas in the future.
If one looks back at Eircom and Telecom Éireann, one sees a common thread. The Minister acted yesterday as if we got a great deal out of the privatisation of Telecom Éireann. I am very proud to say that in 1999, the only Deputy in this Dáil who stood up and spoke against that deal was Mr. Joe Higgins of the Socialist Party. I looked back at the transcript of a debate, during which former Deputy Higgins said:
It is a sad reflection that I am the only Deputy who stands in this Dáil in opposition to what will turn out to be a robbery of a vital State asset. The Minister and the Government are masterminding this robbery.
Now we are seeing a repetition of that. Another common thread is the involvement of companies connected with Mr. Denis O'Brien, including Actavo, as major investors. We warned in 1999 that privatisation would lead to a terrible underinvestment in infrastructure, and here we are now. We cannot provide a broadband service to people in rural areas for another seven years, potentially, because of underinvestment in this infrastructure over the years.
The ICTU report entitled Learning from the Eircom Debacle is so instructive. It outlines exactly what happened after Telecom Éireann was asset stripped in a deal done by Fianna Fáil, which cannot be relied upon today to provide this service either. In May 2001, the asset stripping commenced. In September 2001 the Government announced that it would fund 90% of any investment by the private sector in telecoms infrastructure. In November 2001, Eircom was bought by Valentia and was floated on the Stock Exchange. More debt was loaded onto its balance sheet and the mast network was sold off. In 2010, Eircom was sold to a state-owned company, Singapore Technologies. As the ICTU report points out, Eircom returned to state ownership, but unfortunately it was the state of Singapore. That is the reality of what happened. That company could have been owned by the State and could have been very profitable. It could have generated significant revenue and provided services at a very reasonable cost to ordinary consumers. Instead, vultures, millionaires and billionaires were allowed to benefit. The role of the Labour Party in this has not been exemplary, despite what Deputy Jan O'Sullivan said earlier. Mr. Dick Spring was appointed to the privatised Eircom board. Deputy Eamon Ryan said it was wonderful as well and some trade union leaders connected with the Labour Party were also big backers of privatisation, which is shameful.
What people in rural Ireland want is a broadband service, but this Government's ideological affinity with full-blown neoliberal capitalism underpins its belief that nothing can be provided directly by the State. Obviously housing cannot be provided thus and has been handed over, in the main, to private developers and landlords. Housing assistance payment is being paid to landlords and the State will not build public housing. Hence we have the suffering and misery that is taking place today. The same thing is being done with broadband. A tiny number of people are being enriched at the expense of the State. This deal has to stop but I have no faith that Fianna Fáil will stop it. That party needs to outline its position clearly. Is this an issue over which it will pull out of government?
Tá mé ag roinnt mo chuid ama le mo chomhghleacaí, an Teachta Broughan.
I have only six minutes so I will get straight to the point. I ask for sense to prevail here. I do not think the Minister will listen to me but it is important, for the sake of the people who elected me and for the public record, that I ask for sense to prevail. The Minister and his Government are being disingenuous on every level in trying to frame this in the context of saving rural communities. I represent the Galway West constituency which includes three Aran islands, Inishbofin, all of Connemara, rural areas of south Mayo, along with Galway city. I am more than familiar with rural constituencies. I have been knocking on doors and can assure the Minister that broadband is not the issue that is coming up, although I acknowledge that I have received many representations relating to difficulties with broadband. What is coming up is that rural areas have been left behind by successive governments. That is why I was elected along with several other like-minded Deputies. We said that we would stand up in the Dáil on behalf of rural communities and argue for regional balance. Let us stop the cur i gcéill and the pretence. I am here speaking with a strong, loud voice on behalf of my rural constituency. Yesterday I raised the issue of the absence of physiotherapy services in Connemara and the lack of social workers on the ground. Only two or three weeks ago there was a protest in Connemara about the lack of roads. Rural areas have been left behind. Kilmaine, Shrule and south Mayo, along with the islands are struggling. Over the past three years we have tried to hold the Government to account and to roll out a policy for rural areas to provide regional balance.
Various telecommunications providers have appeared before the Committee of Public Accounts. I have read a considerable amount of documentation on this issue, apart from the documentation that was published yesterday. Some of the documentation from the Department of Public Expenditure and Reform dates from 1 April, which is April Fool's Day. That would be funny were it not so serious. On 1 April, the Department strongly recommended against this plan on grounds of "cost, affordability, value for money and risk". That is repeated throughout all of the other documents. In May, the Department went into detail on the questions of cost and affordability, the impact on the national development plan and on projects forgone as a result. In the context of value for money it refers to "uncertain benefits" and points to "unprecedented risk" for the Exchequer. It calls into question compatibility with the spatial objectives of Project Ireland 2040. On the cost-benefit analysis, which comes up repeatedly at meetings of the Committee of Public Accounts, the Department argues that it is simply "not credible". The Department of Public Expenditure and Reform is telling us that the cost-benefit analysis is not credible. This is against the background of a report by Mr. Peter Smyth which told us that the meetings between the former Minister for Communications, Climate Action and Environment, Deputy Naughten, and Mr. McCourt gave "cause for concern".
I ask again for sense to prevail. There are alternatives. We need broadband in rural areas in a reasonable time and at a reasonable cost. There are other ways of doing this. The Department itself has pointed out other ways. Údarás na Gaeltachta is in the process of rolling out gteic centres on the ground and is crying out for money. In stark contrast to Enterprise Ireland and the IDA, Údarás na Gaeltachta has had its budget significantly reduced. I ask the Government to stop the spin. I thought that we had got rid of the spin unit, but clearly the Government has internalised the spin and actually believes it, which is even more frightening than the €3 billion cost of rolling out broadband to areas where the take-up will be very low. We know this from our discussions on the report on the metropolitan area networks, MANs, at the Committee of Public Accounts. The record of the Government in this regard is disgraceful. A review of MANs was commissioned and a report produced. Has the Minister or the Minister of State read that report? Have they read the Analysys Mason report? Is the Minister aware that the Department did not publish the report until just before the Committee of Public Accounts meeting? There was a significant drop in prices on the very day that the aforementioned committee extracted this report. That is the Government's history in relation to these projects. The Minister spoke about trust and the rural-urban divide, but this Government has stood over and increased the rural-urban divide and intensified it. The Government produced a national development plan which has sustainability written through it, but it is doing the complete opposite.
I ask the Minister to go back and to look at Údarás na Gaeltachta and at the alternatives for delivering this broadband. Ba chóir dó deireadh a chur leis an gcur i gcéill. Tá daoine na tíre i bhfad níos meabhraí ná mar atá an Rialtas. Ba chóir ceist a chur ar dhaoine sna ceantair tuaithe: cad atá ag teastáil uathu? Tá seirbhís shláinte, seirbhísí tithíochta, córas iompair taistil agus leathanbhanda ar leibhéal agus costas réasúnta ar bharr liosta na rudaí atá ag teastáil. Sin iad na rudaí atá ag teastáil seachas an cur i gcéill agus na bréaga.
I believe all citizens of our republic, whatever their location, should have access to the same level of public services, and that includes broadband facilities. As we heard earlier, it is clear that if the Fianna Fáil Government under Bertie Ahern and Mary Harney had not privatised Eircom 20 years ago in 1999, a State-wide roll-out of Internet infrastructure would probably have been complete by now and reasonable speeds, at least, would be available. We have to remember that the national electricity grid was only completed around 1964, although the ESB was founded in 1929. Fianna Fáil with the strong support of the then Ministers, Mary Harney and Michael McDowell, and of Fine Gael got us into the current mess. Some 13 years after the Eircom debacle, the then Minister, Pat Rabbitte, launched a national broadband plan but, by 2017, Eir was able to leave 542,000 Irish homes and businesses without up-to-date telecommunications and broadband. From listening to earlier discussion, an equally conceivable plan might be to simply renationalise Eir and to take back the national infrastructure which this House should not have allocated to a private company 20 years ago.
We have also seen the further debacle of the resignation of Deputy Denis Naughten as Minister, which we discussed in this House last year. I strongly believe that on the basis of the circumstances surrounding the forced resignation of the Minister alone, we should not proceed with the Granahan McCourt consortium. In fact, it is outrageous that the Minister proposes that we should.
We learned today that the expected cost should we proceed is now €5 billion, with the implication that the State itself is committing at least 60% of this cost, although we do not know that as the Minister has not told us. We will be paying €400 million per annum all the way through the 2020s. This cost will rise year after year. The incredible result is that in 2028, or perhaps 2043, the Irish people whom we represent will not own a single pole or fibre optic line of that network.
The Department of Public Expenditure and Reform's observations on the NBP, which we have all read, are truly shocking and unprecedented. The Minister referred to second level education yesterday but it is not a comparable situation. We were going to move on to second level at some stage. We should have moved on to it in the late 1940s, as England and Northern Ireland did, but we did not because of the influence of Fine Gael on government at that particular time.
Many of us have been very critical of the Department of Public Expenditure and Reform, its management meetings, and so on with regard to the national children's hospital, but the Secretary General, Mr. Watt, and his officials, whose job it is to critically evaluate all budgetary expenditure proposals, are now discharging their responsibilities and clearly recommending against proceeding with this plan, which they say totally lacks credibility. We were very critical of officials in the national children’s hospital debates and how they missed the flashing warning signs. The Minister would not tell us about these signs because the Government was going to hold a general election last October and did not want to give us bad news about the children's hospital. The Department has stated: "We strongly recommend against approval of the appointment of the preferred bidder to the current NBP procurement process". It goes on to list all the grounds for this recommendation, including cost and affordability and the cost-benefit analysis.
Given his academic history, the Minister will know a good bit about cost-benefit analyses, as do many of us on this side. It is quite clear that the cost-benefit analysis does not add up. Why is he proceeding when this is the case? The officials outlined their "major concerns" about the cost-benefit analysis. They said it "is not credible and it is questionable whether it is consistent with the Public Spending Code". Is this decision legal? Is the Government acting legally in attempting to proceed with this half-baked proposal?
Deputy Sean Fleming, whose past work I respect, outlined in an article in The Irish Timesthis morning - an article which I support - the reasons he, as Chairman of the Committee of Public Accounts, believes we should not proceed. He gives additional alternatives to the very good alternative which the Department of Public Expenditure and Reform has proposed.
There is now a heavy responsibility on Deputy Brophy and all the other members of the Committee on Budgetary Oversight, including myself and Deputy Boyd Barrett, to ensure value for money in the final roll-out of broadband. Deputy Brophy must urgently call a meeting of the committee. As the Leas-Cheann Comhairle will know, we are supposed to be responsible for future spending. The Parliamentary Budget Office should also immediately proceed to examine the details of this proposed contract.
I am one of those who believes there should be a separate Minister for Public Expenditure and Reform. One of the few proposals on which I agreed with the previous Government was having a Minister for Finance and a Minister for Public Expenditure and Reform. The Minister for Public Expenditure and Reform, however, cannot stand over this and nor should he. He and the Minister for Communications, Climate Action and Environment must come before the Committee on Budgetary Oversight and explain the situation to us. This process should immediately be halted and then done again differently in one of the ways which has been suggested from this side of the House.
I will share time with Deputy Eamon Ryan.
We have been told on several occasions that Fine Gael is the only party which can be trusted with the economy and fiscal prudence has been preached constantly. This makes it all the more astonishing that the Government is ignoring the quite robust advice of the Secretary General of the Department of Public Expenditure and Reform.
I have listened very carefully to Fianna Fáil on this issue and I have not found anything to disagree with in what its Deputies have said, but this has to be a make or break moment. It is one thing for Fianna Fáil to talk about this issue, but what it does about it is quite another. That will be watched very closely. I do not play those political kinds of games. I rarely say that kind of thing about Fianna Fáil, but this is a significant issue.
The timing of this announcement is quite cynical. We knew there was only one bidder, which is one part of this very flawed process, and so it was not going to be a surprise who the preferred bidder was. That preferred bidder has now been announced but the reality is that a contract will have to be gone through in some considerable detail. There are significant issues in that respect. We will spend up to €3 billion and own nothing at the end of it and we will leave people in rural Ireland to fend for themselves in dealing with this particular entity.
We have seen an example of this when the same company, Granahan McCourt, was involved in a contract for MANs. Under this contract we were delivered the most expensive broadband in Europe. The Analysys Mason report was helpful from that point of view and there have been some changes recently, although we are not sure if they completely translate. We have seen what this forerunner did. The lack of transparency with respect to wholesale to retail sales is a serious issue because not only could this cost a State a fortune, but we will own nothing at the end of it and people in rural Ireland could have expensive broadband if the same circumstances that arose in respect of the MANs contracts occur again.
There is also the issue of National Broadband Ireland. We were told at the briefing yesterday that there would be one nominee to the board, but we do not know to whom that person will be responsible. That has not been worked out yet. In the past some such nominees have been responsible to the company rather than to the State, even in cases where they have been public interest directors. We should also consider the contractors who are going to build this.
We need to know more about KN Network Services and Kelly Comms Limited. We know something about Actavo Ireland Limited because it is the company formerly known as Siteserv. We need to know more about 4site and other subcontractors. We do not really know. We are told there are 1,500 contractors engaged by the subcontractors, but they would be the primary contractors.
People in rural Ireland, including in the parts of my constituency that are included in the intervention area, require broadband. I do not think I heard anybody in this Chamber say otherwise. The big objection is to spending €3 billion by giving it to a private company and owning nothing in the end. That could be very precarious in terms of the cost, take-up and delivery of broadband. The process was flawed throughout. The Smith report was a facade. We were astonished when we saw the results of that report, which looked into the issues prior to the resignation of the previous Minister. Nobody disputes that high-quality broadband is required but the way in which this is happening is just plain wrong. We will look back on this and ask who made the decision.
That is the real difficulty here. We are faced with difficult choices. Everyone recognises the imperative of providing rural broadband. We need our young people to return to live in rural areas. They need to be able to work remotely. We need to create opportunity for new businesses. We need to make sure that all the benefits of this digital revolution are delivered everywhere in the State. Delaying, abandoning or not proceeding present massive difficulties in that regard. However, the process has been highly unsatisfactory to say the least. The fact that it has taken seven years to get to the end of the design phase is a failing. I have heard commentators say the European Union forced us to hive off the 300,000 more attractive customers from the original mapped area. I do not believe that. I believe it was a political decision at Government level to tell Eir to go ahead with that. My recollection of the debate is that it was clear that the Minister had effectively signed off on it. In doing so, he fundamentally undermined the process.
In effect, this process is creating a monopoly and turning it into a private monopoly. That is not just in terms of the national broadband Ireland company. It is also giving Eir an ongoing monopoly on the delivery of the service in the last mile provision and the backhaul, which is how the data is taken from these broadband connections and connected back to the Internet. I have concerns with all of that. The fact that this is being done two weeks before an election rightly raises questions about whether political timing rather than anything else is triggering this debate at this time. As I understand from the briefing we had yesterday, at least we have several months before any contract is signed. It is critical in those few months that we try to address concerns and reduce the downside risks to the State, which are very large.
On the last mile issue, from listening to the officials yesterday I understand they are still open and would still wish to see that the options are considered regarding how we get to the final house, which I believe would be very healthy. I have been saying for a year or two that I would like to see the use of ESB electricity poles and wrapping fibre around electricity wires as an effective option within this project. It would not undermine the process because the bidder would have the capability to negotiate with the ESB as well as Eir. The State needs to act, though. We need to give a clear and immediate signal to the Commission for the Regulation of Utilities to set up the pricing and other regulatory mechanisms that would have to be in place to be able to sign contracts in respect of the ESB delivering the last mile service rather than the Eir pole network. One of the mistakes the Government has made is not to look at the option of reducing it to a single network of poles delivering services to every house in the country. We do not need two. That is the big missed efficiency that has been the result of this process.
With regard to the backhaul network, the officials were saying yesterday that as a percentage of the overall cost of the scheme, it is relatively low. Success will be achieved here not by creating a private monopoly but by incentivising development of the backhaul network and using a variety of backhaul operators. Certainly the MANs should be there but it should go beyond that. I hope and believe there is still flexibility in the contract process to undo some of the damage from a badly handled political system. It is not easy. I have been there myself in the past, negotiating a broadband plan. We did it in two years while this has taken seven. We still have some months to improve what has been a flawed process. The Government should use that time well.
After the debacle of the national children’s hospital, here we are discussing another capital project that has been mired in controversy from day one. What happened on Tuesday was yet another in a series of announcements on the rolling out of broadband in Ireland. The first such iteration was as far back as 2012 and that promised high-speed broadband to 100% of homes and businesses by 2020. In 2016, Fine Gael made yet another commitment to roll out broadband to every home and business within three to five years. Last year the national development plan was published and these commitments were yet again reiterated.
Again this week we have seen the latest announcement. The common thread is that the Minister and Taoiseach have been at the heart of all those announcements. However, no contract has been signed. Here we are in 2019 and not one metre of fibre optic cable has been rolled out. I have serious concerns, as does the Department of Public Expenditure and Reform, with the risk and exposure the Irish taxpayer is being asked to take. We learned this morning in The Irish Timesthat, despite the commitment given by the Taoiseach some months ago when he said the Dáil would be involved in the decision, the full cost of rolling out broadband could be as much as €5 billion. Is this true? How much will the Granahan McCourt consortium be coughing up? Is it the case that it will have recouped the initial expense of the roll-out by 2028 as raised by the Department of Public Expenditure and Reform? How much private equity is being provided and how much by way of debt is being put on the table? If the taxpayer is going to have to foot this bill, the Government needs to be upfront with the people on what exactly it is committing to. The Minister says he that he cannot divulge this information because it confidential and commercially sensitive. When there is only one bidder remaining, this argument does not stack up. Simply put, the Minister cannot divulge this information because it is not certain. It is not certain because there is no contract. There is no contract because the Government is not ready. The reason it announced this before it was ready is simple and obvious. It is as plain as the nose on my face: 24 May, election day.
At the end of it all, the State will own nothing. Presumably after 25 years the State will have to negotiate a new contract with the private consortium, whoever that may be. It appears that this infrastructure could be sold to anyone from anywhere and at any time. After 25 years, if the Government’s take-up estimate is correct, the consortium will have a wholesale revenue stream of about 400,000 customers. We have no idea of the risks that may be ahead and nothing in this week’s announcement has allayed my fears. This week we have seen the same old spin machine in full action.
We are told that Fine Gael is doing this for rural Ireland and that it is the saviour of rural Ireland but this is nothing more than political guff. If Fine Gael was serious about rural Ireland, it would have provided more than just eight houses in eight years in Offaly and would have established a transition fund to help the region I am from to deal with the debacle that is the loss of Bord na Móna and the peat briquette and harvesting business. If Fine Gael had the back of rural Ireland, it would have insisted that the Department of Education and Skills adhere to pupil-teacher ratios in small three-teacher schools and would have reinstated Midoc facilities considering it tells us it has a new GP contract that heralds the saviour for rural Ireland. This happened on our watch up to last year because of Brexit as but for that, we would be well out of here. Fine Gael has failed rural Ireland and this week's announcement has in no way convinced me that it can deliver this plan on time.
If we speak about the deluge of documents released yesterday at 1.55 p.m., it emerged that over the life of the national development plan, an extra €1.5 billion will be required to pay for this plan. Yesterday, the Minister for Public Expenditure and Reform said that no projects will be impacted because of this decision. His Department has outlined the possible implications of spending an extra €1.5 billion on broadband. I could go through it but it is on the public record and involves the loss of 2,000 social housing units, the Tralee wastewater network, the Kilkenny regional water supply scheme, the Sligo western distributor road, the KillaIoe bypass, the Dunkettle interchange, the Moycullen bypass, 18 primary schools serving 8,600 pupils, new ambulance bases and deployment points and nine to ten primary care centres. It also involves significant reductions in allocations from remaining programmes, including flood relief works, prisons etc. This is unprecedented. Given this advice from the Minister's own Department, the Minister insists that no capital project will be impacted. Who is he trying to cod? Clearly, there will be an impact. The Minister will pay for this out of the capital envelope outlined in the national development plan or he will raise taxes or he will pay for it out of current expenditure. Will we see less spending in mental health, education and housing? Will there be fewer resources for nurses, doctors and consultants? Will there be sufficient funds to pay for social welfare reforms?
The bottom line is that we will not get those answers in the limited time here today. I have asked that the Minister and the Secretary General come before the Committee on Budgetary Oversight. Then we may get to the root cause of this and get some idea or conception of what is contained here because at the moment, it is ludicrous that we could be told that one bidder remains and that the Government now has a preferred bidder. Is a split personality involved? It does not make any sense.
That completes the ten minutes allotted for statements. Each party or group has six minutes in total for questions and answers. It is a matter for each group or party. They can take three minutes and ask their questions and there will be three minutes for answers. The Minister will not get any extra time either.
The position regarding the investment of equity by Granahan McCourt is that it must make an initial investment, fund the working capital and may be called upon to invest additional equity in certain eventualities. In other words, it is taking all the risk in respect of how this project might unfold. As the Deputy is aware, many commentators have said that the take up might be much lower. That would obviously call on the company to put in additional equity. There will be initial equity - working capital equity - in the contract, which is confidential at the moment but nobody knows. The company is taking the risk regarding what the full cost will be. The Deputy asked about the statement in The Irish Timesthat the cost over the 25 years of designing, building and operating would be €5 billion, excluding VAT. That is a true estimate at this stage of what is expected. The State has a capped amount, which is €2.6 billion if we take out VAT. Of that, close to €0.5 billion is contingency and will be only be drawn upon in very specific circumstances. The Deputy will see from Mark Griffin's letter that the State's contribution to the overall cost of design, build and operate will be less than 50%
If the overall cost is €5 billion, the State is contributing in or about €3 billion and the capacity of the company that will be established to borrow significantly against that and against the asset that will be the contract, it is fair to assume that when one takes in debt and equity, the equity being put in by Granahan McCourt is probably somewhere in the ballpark of €300 million to €400 million. Can the Minister confirm that?
I do not want to confirm anything ahead of the finalising of contracts. That is a process that we are undertaking. To deal with Deputy Cowen's point, from the start of this process the appointment of a preferred bidder has been a very important milestone and stage in this. It is not the case that because we are not ready to sign a contract, we are picking out a preferred bidder. A preferred bidder stage was always intended from the outset, and Members can see it in the documentation. We would then proceed to a finalisation of contracts, which will be a 1,500-page document.
Given that the Minister is neither denying nor confirming it, I take it that €300 million to €400 million is in the ballpark in respect of the equity that Granahan McCourt will contribute to this. My assumption is that thereafter, the rest will be by way of debt or syndicated debt. We are also conscious that the project will generate somewhere in the region of €1.5 billion to €2 billion over the life cycle of the contract. Will the Minister confirm that in respect of the information contained in the document from the Secretary General, Mr. Watt, all of the investment by Granahan McCourt will have been paid back to that company by year eight, that the company will go on to make significant profits over the remaining period of the intervention period and that, as I pointed out earlier, the very considerable benefit of the asset, namely, access to the 400,000 people who will receive the service, is the residual value that will reside with this contract?
I am looking for more information. A lot of peculiar carry-on happened here over a long period of time. I do not know how many people remember the changing of the goal posts and Enet being involved and then pulling out. A major announcement was made in Ballinasloe that broadband would be put into Ballinasloe, Roscommon and Manorhamilton as part of an overall plan for broadband. After a few months, that was taken away. Number two, the Taoiseach told us and the Minister at the time, Deputy Naughten, that he had no confidence in him. Much has gone on behind the scenes. Given what has happened, does the Minister not think that rather that continue in the way we are going, it is time to have an inquiry into all that has happened in this debacle? We all want this broadband and we want it as quickly as possible. The way this has been handled along the way leaves serious questions to be answered.
First of all, it is not possible to predict how this company will recover equity and whether it will recover it in year one, two, three, four, five, six, seven, eight, nine, ten or 25. That depends on the success of this proposal. The company is taking on risk here. It is taking on risk with regard to the roll-out and take-up. Obviously, it is coming in here in the hope it will make a return on its investment but there is no way I can say when it will recover its equity.
Obviously, it will depend on its success in managing the project. For example, if it fails to reach some of the roll-out, and some Deputies expressed scepticism about its capacity to deliver, it certainly will not get its equity because it will be paying penalties for failing to deliver. In response to Deputy Eugene Murphy, I will make myself available to the committee next to answer questions. I am happy to answer questions. I have gone through this as rigorously as I can.
I have looked at 13 or 14 options and, although the Deputies from the People before Profit group are not here, that process included looking at buying back Eir, for example. There were no holds barred. The change in the make-up at every point had to go through a pre-qualification test and show that they were compliant with the pre-qualification test that applied to all applicants in the bidding process.
Once Granahan McCourt was left as the only bidder, the process was flawed. The Deputy, having been a Minister for a long time, understands that and he has seen commercial activity going on over the years. The Cabinet decided to go ahead with this plan this week. It made a statement that it was committed to proceeding with it. Granahan McCourt has held nearly all the cards up to now. Since the Government made this decision, will the Minister agree that if the process was flawed, it is now banjaxed for the simple reason that the Granahan McCourt consortium has a full grip on the whole process and over what the final figures will be? Does he agree with that assertion?
No, I certainly do not. They way we approached this was by way of a competitive dialogue. The State did not have a firm view as to what the best technology or best approach would be, so a competitive dialogue was held. State companies, including the ESB, entered into that competitive dialogue, but two bidders, as the Deputy indicated, dropped out at a certain stage. Five started, three got to the bidding stage, two dropped out and one remained. Because there was only one bidder left, we applied a much more rigorous due diligence. We went through every element of its costing and model and we brought in experts to assist us to evaluate those. We applied the strictest terms to doing that. In the UK, virtually all the roll-out of broadband has been with just one bidder at the end of the procurement process. This has not been unusual and we have applied vigorous due diligence to deal with it.
Regarding the infrastructure being sold on, Robert Watt in his letter stated, "a decision by the private operator to abandon the project, for whatever reason, [the selling on of it or whatever] could result in a 'stranded' obsolete asset, despite Exchequer investment of ... €2.275 billion by 2026 - in an asset that we will not even own". Does that line alone in the documentation that was made available yesterday, which I have looked over in as much as I could overnight and again this morning, not raise a major concern for the Minister?
Under the contract, if the bidder abandons or is unable to complete the project, the asset reverts to the State, so the State will own the asset in that situation. At that point should that happen, the State will have only paid for the fibre that has been rolled out at that point. We pay in arrears only on performance. At that point, should that occur we will have the value of the fibre and the connections that have been made. That will be an asset that can be used for any retail supplier to supply to those who will have been connected at that point.
We had detailed briefing from the Minister's officials yesterday morning and we spent nearly two hours with them. They gave us some documentation. I have looked at the structure set out in that documentation. I am not an expert on company law but I have served as a chairperson of a small company and I can tell the Minister that this process and structure will not work. It cannot because that structure is dependent on too many agreements. If any part of it goes, one leg will be pulled from under the stool. Furthermore, the Minister is in a position where he has agreed that eight of the nine members of the board of National Broadband Ireland, NBI, will be representing the entity that is putting in the least amount of money. The taxpayer, as we know and as confirmed in the documentation made available yesterday, is putting in the bulk of the cash but he who is paying the piper is not calling the tune. The board of NBI is controlled. I probed this yesterday with the Minister's senior officials and with the Secretary Department of the Department. Those who will be appointed to the board will be put on it by David McCourt and the investors. Those are the people who will be appointed to it, not the Minister and not a representative of this House or of any future Government. We will have only one vote at the board table where the key decisions will be made. The Minister has tied the hands of future Governments behind their backs with this decision. That process cannot work. There are too many complications in it and it depends on too many factors and moving parts. Worse than that, in terms of the board, which is supposed to hold the middle of the structure together, the private investors have the Minister's arm twisted up his back. Those are the facts. Is the Minister not concerned about that?
The position is that this company will operate under the very strictest governance. We will have an office overseeing it with financial, technical and full reporting capability. Every element of the roll-out of this will be reported. There are very strict reporting requirements. In terms of the pricing, this will be a single wholesale provider but there will be multiple retailers operating on that network. The price it charges to those retailers is strictly governed by the contract and will be regulated. The contract, which cannot be drilled down to a one-page illustration, extends to 1,500 pages. The obligation of this company set up especially for the purpose is to fulfil the obligations of that contract. It will have a legal obligation to do so. My representative on the board will be seeing that that company, in everything it does, meets it obligation to fulfil the contract into which it has entered. We have a very strong governance structure with strong performance tests, strong clawbacks being applied to protect the taxpayer, and rigorous oversight and reporting of the activities of the company.
If we look back 15 years ago, and I was a communications spokesperson at the time, we were examining exemplar projects abroad. I recall one involved the state of Alberta in Canada, which has a population similar to ours but is three or four times the physical size of the Republic. The Minister said there were 16 exemplars he can give where this roll-out took place. I would like to know more about those in terms of how successful they were and the cost of them. Were other states left holding the baby as we are fearful this State may be in 2023 or 2024 after the roll-out by this company?
We have all had to upskill in terms of IT, our offices and so on. We are familiar with the fast-changing nature of broadband and website developments. One of the key points the Secretary General, Robert Watt, and his colleagues made in the redacted letter is that technology is changing rapidly and we do not know what new and cheaper technological advances will be made in the coming decades that could make this particular model outdated or even obsolete. Is that not a major risk this country is taking and putting €2.5 billion beside the risk? A number of us heard President Trump talk about rolling out a 5G network for the whole of the continent of the United States, and the Minister would probably advise that this would require 400,000 masts at least to make that happen. Given the point Robert Watt made about the technology is so prescient and important, is there not a fundamental case for proceeding with the plan the Department of Public Expenditure and Reform has, which is the immediate procurement by the Department of Communications, Climate Acton and Environment for the 300 broadband connections and the 1,000 locations after that? The Minister said an office is being set up but why would the Department not deal with this directly? The staff in the Department of Public Expenditure and Reform seem to be indicating this would be a better plan and that we could watch developments as time proceeds, particularly after 2021 or 2022, to ensure we get the best value for money.
Is this not something the Minister is totally pre-empting, given the way technology is changing so dramatically? We are just beginning to get used to 4G and 5G is coming down the track, and we do not know what other parts of the spectrum the wireless companies are going to utilise. That is the second point. I will leave it at that for now.
On the second point, officials in the Department of Public Expenditure and Reform proposed to recommend that €1 billion be spent. That would have reached 127,000 premises, which would have left 420,000 premises abandoned under their project. Rural Ireland would be waiting not only for the roll-out of that project but those 420,000 premises would have no prospect of getting service in the roll-out.
Look at what they said. This is the option they preferred. They also expressed the view that we should go back to what was rejected in 2014, which was to deliver fibre to just 1,100 village points, again relying on the commercial sector to go beyond that. We did not accept that this would meet the requirements for rural Ireland.
On the issue of technology, we have had detailed evaluations both by ComReg and by our own Analysys Mason analyst, who came in to look at what was the best technology. Every one of the bidders came in with fibre to the premises as being the preferred and optimal technology. That is what is happening in urban Ireland; Eir is rolling out fibre to the premises, as are the others in urban Ireland. Fibre is the most future-proofed and the proof of the pudding is that we provided a minimum 300 Mbps as the delivery speed. When this is rolled out, by year ten it will have 500 Mbps. Fibre is the best at building capacity to meet new needs in the years ahead. By contrast, 5G and wireless depend on line of sight, so if one cannot reach the area, one has to keep building additional masts to get the penetration. Given that masts are shared, if more people come on, the capacity is shared and the service to each one is diluted. These options were analysed in great depth and that is why we have confidence in the choice that was made by the three bidders but also in terms of evaluating international experience to decide the best option for rural Ireland.
I can provide the Deputy with that detail. It has very long experience. It has senior executives drawn from both Irish companies in telecommunications and from international companies. If anyone looks at the names of the people, including the new CEO and the new CTO, whose names are published, they will see they have very strong CVs.
The Government has made a decision that it is a preferred bidder. It is up to the House. I have offered to go to the committee next week and I hope to convince members of the committee that this is the right decision. Of course, it is up to the House what-----
The gap funding model was chosen after a very detailed evaluation which was originally carried out on behalf of the State by KPMG. It went through a financial test and also went through a number of non-financial tests, and it was found to be cheaper to go this way. The biggest reason is because we are using rented poles and ducts that are already in the core service. We are not building from scratch; we are not setting up a new company to build fibre on new poles that we erect. It is the lowest cost it can be in terms of rolling this out. More importantly, it minimises the risk to the State of having to come back at the end of 25 years and having to invest again. It provides an incentive for the owner of the fibre to get on board a lot of business and make this viable in order that it can continue to fund the replacement costs and the impact of weather, and make sure it can operate this profitably into the long-term future.
By contrast, if this was coming back to the State in year 25, the risk is that the asset would not be future-proofed and we would not see the new capacity. It would be managed with a rundown date to the point where the company had to hand it back.
Yes. A certain contract model was chosen. The model is that the State does not own the asset. The State provides a subsidy and it piggy-backs, to the maximum extent, off the existing network. It seeks to have it integrated into that network to maximise the overall business system that the whole system delivers. It stands on its own two feet, so the State does not get involved.
Other Deputies have said it would have been much better if we had hung on to Telecom Éireann and we would now be building off a State-owned asset. However, that is not where we stand. This was clearly the most advantageous option for the taxpayer and the quickest to deliver.
The €500 million estimate was for the project Deputy Broughan was advocating, which was just bringing fibre to the 1,100 villages, and that was as far as it would go. In terms of getting to 540,000 premises, or, as it then was, 750,000 premises, it would be for commercial interests to bring it from the village out to all of those individual premises. That was rejected as an inadequate approach. The next big escalation in cost was, of course, the decision that had to be taken when Eir said it would commercially deliver 300,000 of these premises, which meant that had to be carved out of the intervention area, which had been 750,000 premises. Some Deputies expressed scepticism as to why that had to be done. It had to be done because, under state aid rules, if a commercial entity is offering to deliver it, one cannot offer state aid to someone else to do it. That is an obligation of state aid rules. It was communicated to us by the EU but also confirmed by the legal experts at the time that decision was taken.
Those were among the decisions but there is also the risk assessment of the market. It is only when the competitive dialogue was complete that one would get an understanding of how risk was assessed of lower than expected take-up, of more difficult terrain and all the things that we know are involved in reaching out to 100% of the population. As the last quarter occupies 96% of the territory, this service has to go through 96% of the land area to reach just a quarter of the population. That is a significant challenge.
On that point, there were originally three bidders and now there is only one bidder, otherwise called the preferred bidder. Is the Minister happy that Granahan McCourt, or National Broadband Ireland as it now is, has the capacity to deliver this?
Yes. There were three bidders but at the time draft bids were made, two companies made draft bids and they were both of the same order of magnitude. It was not that some of the others were coming in with very different scales of bids. We then entered into the very detailed due diligence process that I described to Deputy Stanley, where we went through international benchmarks for the cost of each component of what was being proposed, such as how we would deal with clawback, the management of risk and performance tests. This was to ensure that, with international advice, we got the best value and that the deal we would bring forward to the preferred bidder stage would be robust from the taxpayers' point of view.
That exercise was carried out. That is what took the very considerable time between the lodgement of the preferred bid in September and the point when the Government was able to take a decision.
What has been announced is the preferred bidder. The Minister tells us that there will be a draft contract which will run to about 1,500 pages. Can he confirm that this will be debated by the Dáil and the committee? Can he tell us who will ultimately make a decision on this?
Obviously the Government will have to sign the contract at the end of the day. Our legal, financial and technical experts will sit down with the company that has been appointed as the preferred bidder and go through those arrangements. A lot of work will then have to be done in setting up the contracts. We will set up a governance structure to make sure we can oversee and execute every element of the contract. At the end of the day, the Government will sign off on the contract along with the bidder.
I am absolutely free to make myself available. That is what I have said throughout this. I am happy to sit down with anyone and answer questions. Of course, this is a contract between the State and a private operator.
I am here to convince people that this is the right approach, as I believe it is. I will go to any committee and to every highway and byway in the House to convince Deputy Murphy and others that this is the right thing to do. Of course, I only act on the permission of the Dáil. If the Dáil fails to support what is being done, that is its prerogative, as the Deputy knows. I believe we have done the work. When the House sees details of the work we have done, the alternatives and options we have evaluated and the way we have looked at technology and management, I think Members will be convinced we are doing the right thing.
Given that the figure is multiples of what was expected and there were not supposed to be any big surprises, did the Minister notify Fianna Fáil, the Government's partners in the confidence and supply arrangement? Was that discussed?
I was not at the recent discussions between the parties but I know that my officials briefed the other parties and Fianna Fáil. The final price could only have been clear to the House or any party much more recently. A lot of the work has been in creating a structure through which we are committing €3 billion at one level, while providing for a number of contingencies that can bring that down. Some €545 million may not have to be paid. We have structured the agreement in such a way that this money will only be payable in certain circumstances. The final price is only emerging following a Government-----
Fianna Fáil was not aware. The Minister said that the gap funding model involving a single bidder was used in the UK. Scotland broke coverage up into three or four parts to allow the maximum possible competition. We were told at the briefing yesterday that costs would be €28 million this year and somewhere around €100 million next year. We were advised that depending on uptake, the bulk of the money will be front-loaded. Costs could certainly be in the region of €2 billion over ten years. Between that and the national children's hospital there is a very significant difference with the available funding envisaged under the national development plan, NDP. Has the Government reconsidered that plan in light of this spending? What is likely to be removed from the national development plan as a consequence of those two infrastructure projects?
We considered the option of breaking this up into smaller contracts or smaller areas. That was among the alternatives that were assessed. The detailed analysis of that option has been published. It was found that a single contract that treated the country as a unit was more cost-effective and that greater economies of scale would emerge in delivering it that way. That alternative was very carefully considered.
Regarding the assumptions under which the NDP was drawn up, I note that the NDP contained no figure for the national broadband plan, as the Deputy knows. That was because a procurement process was underway and a figure was not known.
As part of a public expenditure code there is a requirement for a Department to provide a notional figure. However, we were very clear that we needed a competitive dialogue to ascertain exactly what the figure would be. No figure was included in the NDP. As I said, the Minister for Public Expenditure and Reform has indicated that no capital project in the NDP will be affected and that this will be funded from revenues.
I thank the Deputies. I have no problem with scrutiny from the Department of Public Expenditure and Reform. That is its job, just as it is the job of the Oireachtas to ask challenging questions. I do not know if they set any store by the assurances of Ministers, but I can assure Members that long before I was part of this process my officials did voluminous amounts of work to evaluate the alternatives. We examined whether we could do this more cheaply, unbundle the work, carry it out through State agencies or use the ESB. All of these alternatives were assessed. In every case it was objectively found that the alternatives would create greater costs, impose a longer delay or cause the State greater uncertainties and risk. We have chosen what I believe is the most cost-effective approach. I do not dispute that it is expensive, but it is a cost that will be incurred over 25 years. We are designing something to be operated for 25 years with some level of State support and to continue on its own two feet for the following ten years and well beyond.
People did not like me drawing parallels with free education. However, I am absolutely convinced that although it is right to ask all these hard questions, when we reflect on this decision we will see it as the correct one. By providing fibre to premises in rural Ireland we will underpin our ambitions for rural Ireland with connectivity. Its citizens will be able to live a lifestyle that is fully participative in the transformation that digital technology provides. This will allow them to lead a more resilient and better-adjusted life, with more working from home, more connectivity and more access to e-health and digital public services. People will regard this as the correct decision. However, we are right to scrutinise this now. There is no doubt that people scrutinised free education, though now we might ask how we could fail to commit to free education for our people. I have no problem with the Department of Public Expenditure and Reform taking a sceptical approach to this. That is its job and it is for Departments like my own to look at the challenges and set out the vision.
The Government has to make that decision. If it were to be made by experts, we would not have this Chamber, as decisions would be made by them and they would not be accountable to us. We value democracy. We value a process whereby people like me sit around with 15 colleagues to make such decisions and are accountable to the House. Tomorrow, one of the Members opposite might be in my seat and I will be asking the questions. I assure Members that I spent most of my political life over there asking the questions. The process we have is robust and the project is robust. I look forward to meeting with Deputies in whatever format is chosen to try to win the argument among my peers.