Peadar Tóibín (Meath West, Sinn Fein)
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745. To ask the Minister for Communications, Energy and Natural Resources the way the private ownership model would require an additional €500 million to €600 million in capital spending under the national broadband strategy; the way it would impact on the capital plan and the Government balance sheet in terms of the overall spend on the project; and if he will make a statement on the matter. [21272/16]

Peadar Tóibín (Meath West, Sinn Fein)
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746. To ask the Minister for Communications, Energy and Natural Resources the reason the private ownership model would cost an additional €500 million in capital spending when it has been explicitly stated that its cost is €270 million, €70 million of which will be European Union funding, regarding the national broadband strategy; and if he will make a statement on the matter. [21273/16]

Denis Naughten (Roscommon-Galway, Independent)
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I propose to take Questions Nos. 745 and 746 together.

The National Broadband Plan (NBP) represents a very significant capital investment project for the State and aims to deliver high speed services to every city, town, village and individual premises in Ireland.  The Programme for a Partnership Government commits to the delivery of the NBP as a matter of priority. 

On 5 July the Government selected the Commercial Stimulus Model as the optimum ownership model for the network that will be part-funded by the Exchequer.  The Government considered two ownership models, having narrowed the options down last December, from five models. The two models are:

- Commercial Stimulus (or ‘Gap Funding’) – the private sector finances, designs, builds, owns and operates the network, with contractual obligations to the Department.

- Full Concession – the private sector finances, designs, builds and operates the network with contractual obligations to the Department.  Those assets funded by the State are handed back to the State after 25 years. Commercial assets that support the NBP infrastructure would however remain in private ownership.

Both Models will deliver the same network, with the same service specifications and controls, for 25 years. In both models, the winning bidder(s) will be subject to stringent contract provisions to ensure that the network delivers quality, affordable high speed broadband to all parts of Ireland that cannot access services.

The Department has completed detailed costings, down to every individual premise in the Intervention Area and, on that basis, has modelled the likely cost of each ownership model. It would not be appropriate to publish the expected cost of building the network or the likely cost to the State while a major public procurement process is underway. I do not intend therefore to indicate the overall estimated Exchequer funding parameters. Ultimately, the costs will depend on the price that bidder(s) quote in the tender process. I can however confirm the following based on the cost modelling completed to date:

- The Full Concession Model is estimated to cost 50 – 70% more in nominal terms that the Commercial Stimulus Funding model;

- In the Full Concession Model, the full cost of the project would be likely to go on the Government’s Balance Sheet, and the commercial sector input would likely be regarded as Government debt;

- Having the entire project on the Government’s Balance sheet would impact the general Government deficit by approximately €1bn more than the Commercial Stimulus Model. This would also reduce the available capital spend for other key investment projects by up to €600m over the next six years.

In addition to the funding implications of the Full Concession Model, I am advised that this model could take at least 6 months longer to negotiate a contract, than with the Gap funding model.

On 29 September 2015, the Government's 6 year Capital Plan, Building on Recovery, was published. It includes an allocation of €275m for the National Broadband Plan (NBP). This allocation provides the initialstimulus required to deliver the Government's intervention and it is expected that further funding will be available over the lifetime of any contract(s). Funding of €75m is committed through the European Regional Development Fund (ERDF).

The current procurement schedule aims to have a contract(s) in place by June 2017. There are numerous stages in the procurement process and each stage is dependent on a number of factors, including the complexities that may be encountered during the process.

The Government’s priority is to deliver this network as quickly as possible. Given that both ownership models will deliver the same product and services for the next 25 years, and that regulation can be strengthened to provide safeguards for consumers from year 26 onwards, the Government has chosen the Commercial Stimulus model as the optimum approach for the National Broadband Plan intervention.  The decision on ownership has allowed the procurement phase to move to the next stage, where three bidders have qualified and been invited to participate in formal dialogue with the Department. The Dialogue process with bidders will commence next week.