Eir broadband deal leaves rural customers facing rollout lottery

Did the government achieve a major milestone in rural broadband rollout this week? Or has it caved to pressure from Eir, putting the wider project at risk?

There are considered views on both sides of the argument.

For those who missed it, the Government agreed a ‘contract’ with Eir to remove 300,000 rural homes and businesses from the list of 840,000 targeted for the state-subsidised National Broadband Plan. Instead of getting broadband from the State-subsidised process, these 300,000 homes are now to get it on a normal commercial basis. The agreement between the Government and Eir requires Eir to have this completed by the end of next year. If it isn’t, the government says that it reserves the right to re-enter the districts concerned into the National Broadband Plan footprint and make Eir pay any costs.

Communications Minister Denis Naughten is presenting this as a milestone reached in its wider rural broadband goal. Some critics, though, are sceptical of Eir’s ability to deliver such an ambitious target, citing the company’s mixed record to date.

The big unanswered question, though, is what this means for the remaining 540,000 rural homes and business left in the National Broadband Plan map. What is the timetable for that rollout? When will construction on the network begin? Is there a date by which the Government hopes to award a contract for it?

Unfortunately, the Minister now has no answer for these basic questions. The Eir deal may have skewed the whole process.

Mr Naughten’s problem is that taking 300,000 homes out of the intervention area footprint leaves bidders for the scheme with the more difficult, harder-to-reach rump of 540,000 homes. That means they’re a lot less attractive to bid for, even if there is a subsidy involved. And that means that the Government may face further delays in teeing up the tender contract as the three bidders (Eir, Siro and eNet) reassess how they would go about connecting these premises, the cost and complexity.

Indeed, this is exactly what they are now saying.

“We will now take time to review whether this changed scope impacts the viability of Siro’s participation,” said a spokesman for Siro, the joint venture between the ESB and Vodafone which is one of two rival short-listed bidders.

Mr Naughten believes that Siro and eNet will stay in the bidding race and he is probably right. But to keep them involved, the Government may now have to increase the effective subsidy on offer for each rural home. This may even result in a larger overall taxpayer bill than serving a greater number of homes, as bidders may have been willing to risk more themselves for access to scale.

It looks increasingly unlikely that a winning bidder will now be announced this year. That would mean construction is delayed until next year and connections put off until late 2018.

So it looks like we’re in for another bout of delays and another wave of disillusionment.

It is, of course, possible that the Government didn’t have much of a choice but to do its deal with Eir. If the telecoms company really was about to start building its broadband rollout into a third of the Government’s stated intervention area, the Government would risk breaking EU state aid rules. That could have halted the entire initiative which, ironically, would not have hurt Eir anywhere near as much as other telecoms firms or the Government’s credibility.

To be fair, this deal with Eir may indeed mean that there are 300,000 rural homes which will now get broadband on an accelerated time frame. Indeed, a cynic might pick Eir over the Government’s rollout timetable at this point.

One of the criticisms of the contract the Government has signed with Eir is that it has been taken on by an entity with a poor track record of delivery. While there is some justification for that view, the company can be fairly said to have responded to market and industry pressure in rolling out a much larger broadband network now than its fiercest critics would have allowed for, and most evidence points to it being somewhat serious about rolling out fibre, too. It is undoubtedly true that much of its motivation for doing so has been drawn by a combination of initiatives from UPC (now Virgin Media), Siro (Vodafone and the ESB) and Government intervention plans. But it does now have a genuine broadband footprint, even if a large portion still falls short of fibre-era standards. In this context, it may be unduly harsh to charge that the Government has been sold a bag of magic beans.

One can’t blame Minister Naughten for spinning the Eir announcement of 300,000 homes as a sort of adjunct to the National Broadband Plan. In a fog of delays and ongoing contract “complications”, it’s a sizeable chunk of rural Ireland that otherwise might have been mired for years waiting for a tender to be issued.

But it’s the remainder of the homes and businesses to be connected – 540,000 of them – that now face an even more uncertain future.

 Catch the full article here on the Irish Independent