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Sunday 19 January, 2020
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Newly released documents show Donohoe's department 'strongly' recommended against broadband plan

The broadband plan will cost €3 billion.

Updated May 8th 2019, 4:20 PM

A MEMO FROM the Department of Public Expenditure (DPER) released this afternoon shows it strongly recommended to government that it not proceed with the preferred bidder for the National Broadband Plan (NBP).

The document shows that as recently as last week, the Secretary General of the department Robert Watt and other civil servants advised Cabinet there were five grounds under which they still could not justify sanctioning the €2.97bn for the NBP and “strongly recommended against” the decision.

It is just one of over 20 pieces of departmental correspondence released by government today, the day after it announced that it plans to proceed with the final and only remaining bidder for the NBP.

Screenshot 2019-05-08 at 13.47.50 Source: Department of Public Expenditure

Yesterday, the Cabinet approved the €3 billion NBP, which aims to bring high-speed internet to more than 540,000 homes, farms and businesses across rural Ireland.

The first customers will be connected next year, though some may not get internet connection for up to seven years, depending on the roll out plan. 

The documents released today show that Cabinet was also warned that a number of projects could be delayed as a result of extra capital money being spent on broadband.

These include the delivery of over 2,000 social housing units, as well as 18 primary schools and nine to 10 primary health care centres.

Screenshot 2019-05-08 at 13.57.29

The document also mentions the recent overspend of the National Children’s Hospital and the experience of cutting back on other projects to find extra money.

Correspondence from March 2019, which was raised in discussions with Taoiseach Leo Varadkar, also highlights the detrimental impact moving ahead with the project will have on areas such as housing and health. It flags that further money will have to be found in the next five years. 

Screenshot 2019-05-08 at 14.55.44

The documents state that the department is concerned that €3 billion is to be spent on the roll out of broadband to just 20% of the country, adding that many of these premises are “holiday homes”. 

It highlights that the “lack of a competitive process” in reaching a final bidder is a matter of concern to the department.

‘Overstatement of benefits’

The memo adds that it was concerned as recently as February that there has been an “overstatement” of the benefits and an “over reliance” on the Eir network. (The fibre cables for the NBP are to be installed using Eir poles).

DPER’s submission also takes issue with the bidder being allowed to retain ownership of the broadband network, stating that the bidder is investing little of its own money.

The memo goes on to suggest that a number of more “affordable” approaches should be considered, including exploring the option of the ESB handling the rollout, as well as investigating wireless 5G technology.

In February, DEPR floated an alternative to the NBP, if the government decided to scrap the plan. It states that a more cost-effective scheme could be established in the short-term while an alternative NBP is drawn up.

A more “budget-led approach” dubbed Plan Z puts forward the idea of setting up 900 Strategic Community Points around the country, where Wifi would be rolled out in schools and community centres. Taking all costs on board, the department said this plan would cost about €6 million over five years. 

A map of the where the community hubs could have been located  (the yellow dots) is also included in the February documents.

Screenshot 2019-05-08 at 15.25.58 Source: DEPR

In April of this year, Watt also wrote to his counterpart in the Department of Communications and said that proceeding with the project would be a “leap of faith” by the government. 

He added that he had massive reservations about balance of risk between the government and the private operator.

Screenshot 2019-05-08 at 14.38.28

Secretary General of the Department of Communications Mark Griffin issued a strong rebuttal, and denied that it was a “leap of faith” to proceed. 

He said the project was consistent with government’s policy on Ireland being a “digital leader” in the EU.

Screenshot 2019-05-08 at 18.53.54

He went on to defend his department’s position, and questioned DEPR’s methodology in ascertaining the NBP is not good value for money. In his conclusion, he that can only be determined when the scheme is operational.

Screenshot 2019-05-08 at 18.55.52

 

 

 

The correspondence also shows that KPMG undertook a report in December 2018 on whether the final tender would be an acceptable outcome for the government.

It states:

“The technical solution proposed by the bidder is projected to be capable of delivering the benefits sought under this project however this comes at a higher cost than expected.

“It is important to recognise that for a gap funding project of this nature, whilst interim comparisons of actual and forecast costs and benefits can be made as the network is deployed and operated, value for money can only be assessed with certainty at the end of the contract period, when the final outturn costs and benefits, net of clawback, are known.”

However, PwC did a cost-benefit analysis on the project, and was a bit more positive. 

PwC said despite costing €2.9 billion there will be a net benefit of €858 million over the next 25 years. It stated the “total residential and enterprise benefits contribute to approximately €3.75bn of the total NBP benefits… costs to the state have also increased as the subsidy is now more front loaded and the contingency has also been updated. This results in total costs of €2.9bn”.

Cost-benefit

Another document shows the Secretary General of the Department of Communications wrote to Watt stating that his department doesn’t think the way the Department of Public Expenditure and Reform analyse the cost-benefit of these projects works for something like the broadband plan.

The Department of Communications is adamant that approving the preferred bidder is the right route to take.  

The National Broadband Plan, first announced in 2012, aims to bring high-speed internet to parts of the country – smaller towns and one-off homes – that are unlikely to be viable business prospects for commercial providers.

The plan has since been beset by delays and setbacks, including the withdrawal of Eir and rival broadband infrastructure giant Siro, a joint venture between Vodafone and ESB, from the bidding process.

US-based investment firm Granahan McCourt is the only firm still vying for the contract for the project, which it plans to build with a group of subcontractors. SSE had been part of its consortium, however the energy giant pulled out of the group in July.

A contract had been expected to be awarded last year, with then communications minister Denis Naughten – who eventually quit his ministerial post over a series of controversial meetings with Granahan McCourt chief David McCourt.

Criticism has been levelled at the government over pressing ahead with the bid, with some in the opposition stating that the State will not own the network.

Speaking on RTE’s News at One, Finance and Public Expenditure Paschal Donohoe said he wrestled “deeply” with the decision to approve the plan. 

He said “on balance” he believes it is right to proceed with the roll out of national broadband plan as he didn’t want a million citizens to be left behind.

The minister added that this was not a “straightforward decision”, but added that he believes it is the right decision to make. He also said he did not ignore advice from his officials.

Pressure in the Dáil

This afternoon, opposition TDs expressed outrage that these documents were released just a few minutes before Leaders’ Questions was due to get under way in the Dáil.

Fianna Fáil’s Micheál Martin asked for an adjournment to give the politicians time to read over what had just been released.

When the Dáil returned before 4pm, both he and Sinn Féin leader Mary Lou McDonald attacked the government over the plan.

Martin said there are “unprecedented risks to the Exchequer” in the National Broadband Plan, and asked: “Why is the State taking all of the risk?”

McDonald said that the government had engaged in a “cynical, political stunt” and added that, because of the projects that are at risk of losing funding over the plan, the government will “give with one hand to rural Ireland and take away with the other”. 

Minister for Communications Richard Bruton has said that the government carefully considered the advice it received on the broadband plan, and said it had made a “major decision” that will “transform our lives”.

He told the Dáil that alternatives to the plan could not be delivered any cheaper or any quicker. 

With reporting from Seán Murray

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