COMMITTEE of PUBLIC ACCOUNTS debate -
Tuesday, 6 Nov 2001

Vol. 3 No. 23

2000 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Vote 32 - Public Enterprise

Mr. B. Tuohy (Secretary General, Department of Public Enterprise) called and examined.

Chairman

I wish to advise witnesses that they do not enjoy absolute privilege. The attention of members and witnesses is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privilege and Immunities of Witnesses) Act, 1997, grants certain rights to persons identified in the course of the committee's proceedings. Notwithstanding this provision, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, either by name or in such a way as to make him or her identifiable.

I ask Mr. Tuohy to introduce his officials.

Mr. Tuohy

I am accompanied by Mr. Derek McConnon, Ms Theresa Donohue, Mr. Dan Commane and Ms Claire Nevin.

Chairman

Mr. Paul Byrne and Mr. Michael Errity from the Department of Finance are also present.

Paragraph 29 of the Report of the Comptroller and Auditor General reads:

29. International Telecommunications Connectivity - Background

In July 1999, the State, represented by the Department of Public Enterprise (the Department) and IDA Ireland, entered into a 25 year contract with Global Crossing Ireland Ltd. (Global Crossing) for the provision of large capacity bandwidth with global connectivity. The availability of such high capacity bandwidth at competitive rates was one of the recommendations of the Advisory Committee on Communications, which had been established by the Minister for Public Enterprise to advise on a strategy to position Ireland as a key global centre in advanced telecommunications, the Internet and electronic commerce.

Following a call for proposals to suppliers and a subsequent negotiated process, Global Crossing was selected as connectivity supplier on the recommendation of an Inter-Departmental/Agency Task Force, led by the Department and advised by a multi-disciplinary team of consultants. The contract with Global Crossing provided for the connecting of Ireland to European and American networks through two submarine telecommunications cables landed in Wexford and terminating at an international high-speed bandwidth exchange (telehouse) at CityWest Digital Park in Dublin.

The capacity acquired, 160 STM-1s, costing £60,752,875, represented a fifteen fold increase in existing levels of international capacity out of Ireland. It was considered that this new level would greatly enhance Ireland's position as a preferred location for new digital industries serving the European electronic commerce market of over 300 million consumers. The contract also provided options for the State to purchase further capacity.

The Government Decision approving the project, provided, in principle, for the State to transfer to third parties its rights and obligations under the agreement with Global Crossing on an investment-recoupment basis. The Department invited bids from telecommunications operators to ensure compliance with the policy that the increased capacity should be made available to the Irish market at a competitive rate. As a result of this process, contracts were agreed with 6 companies for the sale of 154 STM-1s. Payment was to be made in stages up to December 2002.

The Government also agreed that a proportion of the available bandwidth could be made available for public interest and strategic initiatives in areas such as education and research. One proposal was for the transfer of 7 units of capacity and options on a further 9 units to HEAnet to facilitate the upgrading of the national broadband research network.

Objectives and Scope of Audit

The objectives of the audit were to assess:

The systems and procedures in operation for the managing and monitoring of the interconnectivity project

Total costs and revenues, both actual and projected, and to consider the State's exposure on the project

Whether contracts entered into were adequate to protect the State's interest

The procedures adopted in the selection of the interconnectivity supplier and the telehouse provider

The procedures employed for the onward sale of capacity to telecommunications operators

What action has been taken in relation to options acquired by the State for the purchase of further capacity

The procedures adopted in the management of the project were reviewed. The Department's files relating to the selection of a connectivity supplier, the sell-on of capacity to telecommunications operators and the appointment of professional advisers were reviewed. Minutes of Task Force and Steering Group meetings, correspondence with other Government Departments and Agencies, Government Decisions and Memoranda, and legal agreements were also examined.

Audit Findings

Management and Administration of Project

The Department has primary responsibility for the project. Following the publication of the Report of the Advisory Committee on Communications, it established and led an inter-Departmental/Agency Task Force representative of the Department of Enterprise, Trade and Employment, the Department of Finance, IDA Ireland and Forfás. The Task Force met regularly and proceedings and decisions were recorded. It appointed a team of professional advisers to assist in the project assessment and to negotiate with interested connectivity suppliers. The Task Force and its advisers selected the connectivity supplier. Completion of a contract with Global Crossing was recommended to Government in June 1999. The necessary funding was channelled through the Vote for Enterprise, Trade and Employment and IDA Ireland. The Task Force also oversaw the process leading to the sale of capacity by the State to telecommunications operators. IDA Ireland is responsible for making payments under the supply contract to Global Crossing and for the collection of revenues due in respect of the onward sale of capacity. These transactions, together with the asset acquired by the State, are accounted for in the financial statements of IDA Ireland.

Selection of Connectivity Supplier

Based on the advice received from its consultants, the Task Force issued a call for supply proposals in early 1999. Thirteen suppliers pre-qualified and were invited to submit detailed commercial bids. Four suppliers submitted bids which were evaluated. The Department then entered negotiations with two companies. Global Crossing made a signed final offer in mid-June 1999 and this was recommended for acceptance. Key factors in the selection were cost and the short timescale within which completion was guaranteed. The ready for commercial supply (RFCS) date outlined in the agreement was 30 June 2000. Because of some difficulty in finalising and testing the system, however, it did not go fully live until 26 August 2000. The Department indicated that unit costs negotiated were between 10% and 15% of existing market rates, depending on the route in question.

At about the time of the approval of the Global Crossing contract, another company announced plans to link Ireland, the United Kingdom, Canada and the United States by transatlantic cable. This company opted not to submit a formal tender in respect of the project under review as it wished to have commercial freedom to operate in the Irish market. Details of the cost, funding and timescale envisaged were unclear. The Department considered that the two projects were not mutually exclusive but that the terms of the Global Crossing proposal were known, manageable and best suited to the objectives of the initiative. The Government was aware of this alternative project in making its decision.

Contractual Arrangements with Supplier

Key elements of the proposed contract with Global Crossing formed part of the Memorandum considered by Government at its meeting of 22 June 1999. The agreement covers the provision by Global Crossing of seamless access to a high capacity telecommunications network spanning Ireland, 24 European cities and New York. Two submarine cables linking Ireland and Great Britain were constructed and the network was completed in August 2000. The cost of the contract was £60,752,875, payable on a phased basis to the end of 2002. At 31 July 2001, £42,412,383 had been paid.

The Department has since re-negotiated elements of the contract which has resulted in a number of enhancements at no extra cost. It now covers connectivity to 40 European cities, 7 in the US and 2 in Asia. Operation and maintenance charges have also been significantly reduced.

In addition, the State acquired an open-ended option to purchase a further 80 STM-1s and an option to purchase or lease the use of a number of "dark fibre" pairs on each of the submarine cables. The Department considers "dark fibre" to be extremely valuable due to the high speeds at which it can transmit large amounts of data.

Sale of capacity

Eight of the larger telecommunications companies were invited, at a cost of £50,000 each, to pre-qualify as bidders for capacity on the inter-connector. The Department also circulated a bid package outlining sale terms to another 67 companies. Initially the offer was over-subscribed. Bids were received for 179 STM-1s, but this was reduced to 154 STM-1s through the withdrawal of 2 bids. The Department fixed the unit sale price on an investment-recoupment basis.

Contracts to a total value of £63,622,668 were agreed with six companies for the 154 STM-1s. However, there have been difficulties in relation to three of the companies with the result that, at the end of July 2001, contracts were only active in respect of 73 STM-1s to a value of £30,270,354.

In relation to the unallocated capacity arising from the difficulties, the Department informed me that it is currently in negotiation with a number of companies who had previously sought to acquire capacity.

In regard to HEAnet, 5 STM-1s have been transferred, 2 STM-1s have been reserved and an option has been granted on the use of a further 9 STM-1s.

Payments under the sale of capacity contracts were to be made in instalments in accordance with an agreed schedule of payments. At the end of July 2001, £8,898,193 had been received on foot of these contracts but the December 2000 and April 2001 instalments to a total value of £7,764,036 are overdue.

Telehousing

Under the terms of the contract with Global Crossing, the Government Agent was obliged to provide the physical location for the two points of interconnection to the Global Crossing network in Ireland. The Department advertised a competition, under which the successful bidder would take on the commercial risk of building and fitting out a world-class telehouse facility in return for being designated as the first connection point. Government funding was not to be made available in respect of the contract. The Department and IDA Ireland are currently in discussion with Global Crossing regarding the second point of interconnection.

Eleven companies responded to the advertisement and a short list of four was drawn up. Detailed negotiations were entered into with TeleCity and another company. One of the deciding issues in awarding the contract to TeleCity was their ability to meet the deadline of June 2000. The contract was signed in Spring 2000. It stipulated that TeleCity make available 2000 square feet to Global Crossing to locate their bandwidth manager and electronic equipment.

The telehouse, located at CityWest Digital Park and with an area of 60,000 square feet, was completed on time. Differences between the landlords of the digital park and the telecommunications companies over access pricing on the local ducting delayed full implementation until they were resolved in March 2001.

Appointment of Professional Advisers

Following the issue of a notice in the Official Journal of the European Communities by the Department, a multi-disciplinary team of advisers and consultants was appointed. None of the original tenders received constituted the full set of skills and expertise required by the Task Force to implement the project. Contracts were awarded by way of negotiated procedure to entities that were deemed to have presented the most economically advantageous tenders in the fields of technical, legal, regulatory, project management, financial and market expertise.

The Department received sanction from the Department of Finance and the Government Contracts Committee to cover contracts valued at £632,337. However, costs incurred totalled £1,230,271, as a result of overruns on project management and legal services. The Department contend that it made every effort to maintain costs at a reasonable level and cite unforeseen circumstances such as amendments to the original contract with Global Crossing and the conclusion of further contracts in relation to maintenance and operation of dark fibre, access to and co-location at 4 cable stations, a telehouse agreement and a re-sale process. In that context, the Department maintain that, in a very specialised market, it was prudent to retain the advisers to ensure there was no loss of continuity and expertise. The Department of Finance, in giving retrospective sanction, pointed out that an overrun of this magnitude was unacceptable.

The costs of services provided from 1998 to 2001 are shown in Table 1.

Table 1 Costs of Services 1998-2001

	£
Legal	542,523
Project Management	466,000
Market Intelligence and Analysis	106,055
Financial	71,057
Technical	28,984
Other	15,652
Total	1,230,271

Conclusions

The project was recommended to and approved by Government on the basis that it was essential to increase, as a matter of urgency, the bandwidth available for international telecommunications between Ireland and the rest of the world. While projects of this kind have long time horizons and are difficult to assess in the short-term, the following early observations can be made:

The primary objective of providing large capacity bandwidth with low cost connectivity was achieved.

Structures put in place were adequate to enable the project to be monitored by the Task Force in a satisfactory manner.

The choice of Global Crossing as connectivity supplier and TeleCity as telehouse provider were made after fair and thorough selection processes.

While the arrangements for obtaining the supply of bandwidth were satisfactory, the contractual arrangements as implemented for on-selling the capacity were less successful.

Specific performance of contractual obligations on the purchasers of capacity, particularly in regard to bonding and guarantees, should have been required.

Outstanding instalments from purchasers should be vigorously pursued.

The delay in resolving the access pricing issue resulted in the purchasers not drawing down STM-1s and consequently may have been a factor in the lack of timeliness of payments due from the purchasers under the contracts.

Any reduction in the demand by telecommunications operators for services provided or further difficulties in the execution of contracts would have serious adverse implications for the State recouping its £60m investment.

While the Department's explanation for the overrun on the costs of advisers is accepted, the necessity for such an increase in the level of project management and legal services should have been anticipated.

Observations of the Department of Public Enterprise

The project has a 25 year life span and its economic and commercial value to the country must be viewed over that time-scale

The relative success of the project and the difficulties of late in recouping investment from the market should be viewed against the backdrop of the very considerable downturn in the technology and telecommunications markets globally. The scale and depth of the downturn could not have been foreseen at the time of contract conclusion.

The project was managed very tightly from start to finish. The contracts were negotiated in an extremely narrow window of opportunity and the project went live within 14 months of those contracts being signed.

The project has been instrumental in attracting and retaining a number of prestigious international investment opportunities in Ireland.

The access pricing issue at City West Digital Park was outside the control of the Department and the Steering Committee.

The Department will shortly undertake a value for money review of the project to date.

STM (Synchronous Transport Module). STM-1 is a unit of capacity equivalent to the transfer of data at 155 Megabits per second.

The Network operated by the Higher Education Authority.

Mr. Purcell

Paragraph 29 records the results of an examination by my staff of a major telecommunications infrastructural investment by the State. A number of high powered committees identified a lack of large capacity bandwidth as a serious drawback to our efforts to become a key player in the developing world of advanced telecommunications and electronic commerce. In order to address this deficiency, the Government decided that the State should directly intervene to obtain the capacity and make it available to telecommunications companies in Ireland at competitive rates.

To this end, the Department, through the IDA, entered into a contract after a competition with a connectivity supplier to provide the extra capacity and link into the American and European networks. The cost of the contract, which is for 25 years, was £60.7 million, to be paid on a phased basis to the end of 2002. Some £48 million or so has been paid to date.

Stage two of the project was to sell on the increased interconnector capacity at rates that would recover the £60 million investment. Although the initial response was good in that bids were received covering all the extra capacity, which would have fully recouped the investment over time, difficulties soon emerged with some companies with the result that currently contracts are only active in respect of little short of half the available capacity to a value of £30 million. Payments under the sale of capacity contract were to be made in instalments in accordance with agreed schedules, but most of the companies have fallen into arrears. The Department is renegotiating repayment schedules for the £19 million or so still to be paid. At the same time, it is also trying to sell the balance of the available capacity. It must be said that the current downturn in the technology and telecommunications markets globally is not helping the Department's cause.

Undoubtedly, the provision of the increased connectivity and capacity was much needed and will help in the further fostering of competition in this vital sector for the economy. As I state in the report, it is too early to form an opinion on the overall value for money achieved by the project, bearing in mind current difficulties in the sector and also the long-term nature of the initiative. Nevertheless, one might legitimately query if the method of delivering the project minimised the risk to the taxpayer. For example, should the project perhaps have been undertaken as a public-private partnership in the light of the fact that it is the telecommunications companies which are the primary potential beneficiaries and, therefore, should assume the bulk of the financial risk? I am aware that there were timing concerns, which I am sure the Accounting Officer will outline for the committee.

Under the existing arrangements, the Department could be left with expensive spare capacity, arguably because of a failure to ensure specific performance on sale of capacity contracts. Moreover, as I said, it is having to renegotiate payment schedules on those that did go through. I appreciate that it must tread warily in this area and I am not for one moment underestimating its difficulties. However, there are valuable lessons to be learned for any future ventures of this kind.

Deputy M. Ahern

The Comptroller and Auditor General has raised questions with regard to the renegotiations on overdue instalments and the problems regarding capacity. What is Mr. Tuohy's response to the queries raised?

Mr. Tuohy

If I can take the committee back to 1998-99, at the time, as people are aware, the technology sector here was a hugely important part of the economy and will be an even more important part going forward. The commitment of successive Governments has been to move us up the value chain, building on our educational background and the technology sector that exists. If one looks at developments since the early 1970s, we picked certain areas such as pharmaceuticals before moving onto electronics and into financial services and software and more recently e-commerce. Part of the essential requirements for that type of industry - the basic tenet - is a telecoms infrastructure.

We found ourselves in a situation where, as Deputies are aware, Ireland is the biggest exporter of software in the world. This does not mean we are the biggest manufacturer - the United States does not export much of it - but outside the US, Ireland is a very big player. Part of the reason we are successful is that we built up the companies which have been here since the 1980s and early 1990s. These companies are in a hugely competitive environment with other companies internationally. For the IDA and the Government, the challenge is to attract the right players.

We have all found in relation to globalisation that if a job can be done or a business run from anywhere, the location in some ways becomes irrelevant, but in other ways becomes hugely important. If we have the right infrastructure in place, we can continue to attract and retain these industries. There was a serious danger in 1998 that if we did not take action, not only would we not continue to attract future industries, but we would lose some of the existing players. I would prefer not to go into the names of the companies, but one would not need to be a genius to work out their names.

The situation was that these companies were competing against their sister sites around the world and we had to be in a position to do a number of things. One of these was to offer bandwidth, which is effectively Telecom's capacity, to them at a most keen and competitive price and to offer unlimited availability of that because the demand for bandwidth was growing exponentially. All of the new technologies and all the new industries make huge demands for bandwidth. If one cares to look at the new PCs and how they are developed, it is clear they are moving much more into video and multi-media. All of these require bandwidth. We had to be able to provide unlimited bandwidth at a competitive price. Under Internet pairing arrangements, where Internet companies worldwide share and exchange information, we had no top level Internet access in the Irish economy. This meant we had to go through the UK to get the type of pairing needed. That was not a plus for us when competing internationally so the Government decided we needed to take specific action quickly. Anyone who knows the technology sector and the Internet, in particular, will be aware that the speed at which it can happen is dramatic either in the uptake or, as we have learned to our detriment, on the downtake. We were in a situation where capacity had to be increased rapidly. In 1998-99, there was enough capacity in the country to do the ordinary things we were doing but that was not the issue. The issue was about sending a signal that we are around and will be available to provide adequate capacity at the right price in moving forward.

The Global Crossing deal, as the Comptroller and Auditor General said in his report, went out to tender and a number of companies expressed interest. We narrowed down the process and, in the end, we opted for Global Crossing. Thankfully Global Crossing is still very much in existence and its cash balance is very good. Some of the others players in this business do not exist today. One of the problems in this industry is choosing the right people. We opted for a deal with it at the time worth about £60 million or $100 million dollars. Our aim was to increase capacity into the country rapidly and set up which we call "a telehousing facility" - this is like an hotel where all the operators can gain access at a competitive price. We think we achieved that up front, even though the Comptroller and Auditor General says it is a 20 year investment. We are phasing in the payment at present. We did the deal with Global Crossing and managed to get capacity to London. I will use the term "STM-1" which is 145 megabytes per second. Without wishing to confuse members of the committee, one's normal telephone line from home is about 28 kilobytes per second. This is 145 megabytes and a megabyte is 1,000 times a kilobyte. In one fell swoop we increased the capacity out of the country quite dramatically at about 10% to 15% of the price. This reduced the prices internationally. Our companies and particularly the work of the IDA were massively supplemented by this.

Some companies such as the Microsofts of this world and some of the other big operators require somebody to do their business. Effectively, Microsoft does the software development for Ireland but it out-sources much of the distribution side, much of which is going over the Internet. We had to attract in the big players who would host for Microsoft and so on and luckily that happened. The Government has about 850,000 square feet of web hosting available for this facility whereas three years ago it had nothing. At one level it could be said that is probably more than we need today because it is not all being used either by the Government or the private sector. The problem with this industry is the speed at which developments take place and, hopefully, the demands will pick up again in the next 12 to 18 months. We expect an exponential growth in that area. The problem is that if the infrastructure is not in place one will be bypassed from a decision point of view.

I wish to refer to a few points raised by the Comptroller and Auditor General. We looked at different methods of doing this and in the circumstances found that the quickest way was for the Government to purchase and sell on to the private sector. We had to pull the different players together, some of whom did not even exist when we started because we were not on the radar screen. We did not exist for some of the players that were here today because they were not interested in promises. This was a hugely competitive global market. We have 3.8 million people here and we are not at the top of the agenda for many of these players. Therefore, we had to get to the top of the agenda and the way to do that was to provide the basic infrastructure at the right price. That was the strategy. Broadly speaking, we are pleased with the response. Since then there has been a downturn in the market as the Comptroller and Auditor General said. None of us could have predicted the speed at which this happened. This week alone, vast numbers of jobs have been lost in some of the technology sectors. The telecom sector was the first to be hit. Investment by the banks dropped dramatically out of the telecom sector. Some people would argue this was due to the 3G licences sold in the UK and Germany for over £20 billion. This took a great deal of the money available for development out of it and began the slowdown.

It is expected that when the uptake starts, there will be a tremendous demand for bandwidth going forward. With requirements expected to increase dramatically into the future, it is just a matter of timing. We have sold on some of the investment we have made. Initially there was more demand from the telecom companies than we had available. This was an unusual position to be in and we thought it would have to be rationed from day one. We wanted to introduce new players into the market, introduce competition and drive down the prices. We now have many more players in that business. The cost of an STM-1 to London which previously was £3.5 million is now £500,000 and declining. The total cost of managing the whole project, including consultancy costs, was just over £1.2 million; on a project of £60 million, that is less than 2% of the total cost. Anyone who is familiar with project management costs and consultancy costs will realise this is low.

The legal and project management costs were more than originally bargained for, the reason being that when we examined the matter we found we needed to do other things because the market was changing. Ordinary fibre is very small but it has the capacity to carry tremendous amounts of data and light is transferred through it. The data is transferred on the wavelengths. Dark fibre is unlit fibre through which light has not been passed. One of the benefits of unlit fibre is that going forward one can decide how much capacity one wants to put into it by changing the computing at both ends of it. When software is put at both sides, capacity is increased. The dark fibre in the deal offers tremendous opportunities to increase the capacity to phenomenal amounts.

It is worth mentioning that the Government agreed from day one to give a percentage to the Higher Education Authority, Higher Education Authority net. The capacity out of Ireland for research purposes was poor both to the United States and into Europe. We did a deal with the US Government that we would get access to the next generation Internet research. To do that, we had to ensure we had capacity into the US. We increased capacity dramatically and will continue to increase it into the United States and into Europe. Already we have seen the benefits of that in the third level sector. In the past, people in the universities here could not collaborate because they did not have the necessary bandwidth. Now they have the bandwidth and can collaborate as if they were next door to people in the United States or anywhere else in the world.

When we started out on the project, we were looking for access to 26 cities in Europe and into New York and the states. Since then we have amended the deal because of demands from users here and have increased capacity at the same price into Boston, Los Angeles, Dallas, Washington DC and San Francisco in addition to New York, Tokyo and Hong Kong as well as over 40 cities in Europe. A problem in the past was that companies wanting to sell products in Europe or the United States had to go into a country and use the local operator, which was expensive. We give them direct access city to city from Dublin. We envisaged this as the first part of an ongoing project to roll out broadband throughout the country. The global crossing deal connects the country to a world-wide network. We want to bring that connectivity around the country, which is part of the national development plan. Our ultimate objective is to enable any company operating out of any major place in the country to access a global network by connecting into the backbone network, making geography irrelevant.

Deputy M. Ahern

Mr. Tuohy gave a good explanation of what is happening. I have some questions in relation to report of the Comptroller and Auditor General. Without necessarily naming them, what is the position regarding the three companies, of the six that received the contracts, which are in difficulty? Has Mr. Tuohy had discussions with the others which applied for capacity and is there any progress there? What is happening regarding the overdue sum of £7.764 million to April 2001? Is it envisaged that the countrywide broadband connectivity will be carried out by a private company and, if so, is any company being considered? Will there be a decision on this soon as it is very important for us who live outside the Pale?

Mr. Tuohy

Some of the companies referred to have financial problems, as the Deputy stated. There are five active contracts and four companies involved, Eircom, WorldPort, MetroMedia Fibre Networks and Corus. The amount involved was around £30 million. The amount received was £8.3 million when the report came out in July 2001 and since then £2.6 million was received with £9 million, in different amounts for different companies, owing. I can supply the figures per company if required. With the IDA, we renegotiated agreements to ensure that we get paid monthly by these companies.

The initial demand on them for the band width was not as dramatic as they wanted and so we felt it was unreasonable to expect up front payment for everything as it might mean that companies would not be here in two or three years. Also, we wanted to ensure that we got paid for what we sold on, which is being done on a monthly basis rather in a lump sum next year. The third element is that we still have a lot of capacity to sell and our objective is to sell everything. This will be more than cost neutral. We will just break even plus. The objective remains the same but the timing is a problem.

Overdue amounts, as I referred to, are covered in renegotiated agreements with individual companies in which we are involved with the IDA, where they pay on a monthly basis. We have a legal agreement with them to pay. The issue is how we restructure it. We do not want to chase companies which, as the Deputies know, are in a difficult position, but they have agreed to pay monthly.

We have proposals under the national development plan for rolling out broadband throughout the country. Unfortunately, we had a problem with a second call on projects because some companies could not take up the offers resulting in an underspend. We are disappointed but accept the reality of the marketplace. The State itself is not rolling out broadband but goes to tender and the companies come in on this basis. We concluded the call for the Atlantic broadband corridor, running from Donegal to Cork, for which we received many good submissions. It was independently evaluated against the criteria and the results will be available in the new year.

On a second one under the NDP, we allowed local authorities to enter also since many of them, the good ones in particular, want to do something which they see as important. We want to stimulate that by funding up to the 90% possible under the EU funding for local authorities. The local authorities will develop the ducting systems and roll out the cables and so be in a position to encourage operators to come in. They will not operate themselves but work with operators. Like the Deputy, we want to see the broadband rolled out. We have a list of projects, which we can make available, and they are spread over the country.

Chairman

Mr. Tuohy mentioned broadband nationally and that the State will not take the initiative. Is there a time frame for this? I am concerned about the impact of the recent economic downturn and the consequent problems for companies. One big company is concerned about this and what is happening in the marketplace. We could lose out because of that with global companies. If we leave it to private companies to take the initiative, how long can we wait as the technology is urgently required throughout the country?

Mr. Tuohy

It is not that the State is not taking the initiative but that it will not actually be rolling it out.

Chairman

I accept that.

Mr. Tuohy

We are taking the initiative by providing funding and support to the local authorities and other operators. We go to tender and find who will do it at the best price, which we part support. We link areas with the IDA and Enterprise Ireland so that their strategies are in line with ours. Everyone likes to set up in Dublin as that is the major market, but the broadband infrastructure is an essential prerequisite to the spatial strategy and development outside Dublin. We are biasing the roll out of broadband by providing additional support for the BMW region and other areas outside Dublin. As stated, we have just completed two calls, one on the Atlantic broadband corridor and the other under the NDP, both of which have had good responses. I do not have the figures as they were concluded in the last few days but I think there are 19 or 20 which have come in on the second set of projects and they are being evaluated against the criteria we are discussing.

We have also funded since 1995-96 many projects to roll out broadband throughout the country. A problem was that it was available, with the fibre in the ground, but operators were not lighting the fibre until there was competition in the market. That is, they were charging local companies £100,000 to light it, but found that no company would act alone and only took up the offer if a competitor did. We are part funding a proposal from the ESB to piggy back on the wires of its transmission network, offering the 48 fibre pairs available in small packets to other operators so that they can compete with existing operators. This is to stimulate a liberalised market but not for the Government to get involved.

Chairman

My most important question was about the time frame for the roll out of broadband technology nationally. My concern is that we will lose multinationals if it does not happen in time. One multinational publicly expressed concern about this.

Mr. Tuohy

It is happening. Some of the 1995-99 projects are coming on stream and others which we are funding, such as the ESB one, are being built at present. It is happening as we are talking.

Chairman

I am talking about the overall position. When will the roll-out on a national basis be concluded? The mid-west, BMW, Dublin and Cork regions are of equal esteem with regard to broadband technology. A multinational cannot use it as a reason to state that it does not want to set up in a particular place because it does not have the telecommunications infrastructure it requires. How long will the roll-out of the technology take?

Mr. Tuohy

We envisage that it will take three to four years. We were talking about 2005 to get the type of coverage we are discussing. However, much of this depends on the take-up by the market. We cannot physically go out and do it. Even if the Government wanted to do it, one would end up with state aid issues. If the Government decided to push broadband out into an area, one would have claims in against one. We have to work with the market in this area. Part of the debate in much of this is whether one provides advance infrastructure or waits for the demand. Part of what we are doing is providing the infrastructure upfront. That is the reason we have been funding it since 1995.

What happened in the last two years has been the telecoms industry did not have the money to co-match what we were putting forward. We ended up with a situation where a number of projects collapsed because the companies could not match it. The Chairman's point is correct, that the industry and end users are looking for the broadband and the Government wants it to happen. The intermediary is the industry which must find some funding. Some of them are doing it. That is the reason we have got the responses. Part of the reason we have moved to broaden this out to local authorities this year is because we could provide 90% funding. Part of this is much more attractive than just providing 40% as we were doing in some cases.

Chairman

I am aware that concern has already been expressed. I am based in the mid-west region where there are many multinationals. There is an economic downturn and it may be international. However, the point is that if the roll-out will take three to four years, I can envisage companies using it as a reason for phasing out operations in Ireland. If companies have equivalent plants in other parts of the world which have use of this technology, they will state that Ireland has a deficiency in this area. I accept the State will not undertake the roll-out - the Department will do it - but three to four years may be too late for many of the companies.

Mr. Tuohy said some local authorities have shown an initiative in this direction. Some of us are members of local authorities and there has not been a broad based discussion at local authority level on whether our county council is interested in this roll-out, etc. I am interested to know the local authorities which have taken up the initiative, whether local authorities are fully apprised of it and what it would mean to them. It may have been taken up at another level.

Mr. Tuohy

There is no problem in that regard because we have a list. I do not have it with me, but can get it to the Chairman within 24 hours.

Chairman

The other members and I would be interested in it because this is a vital issue for the country in general.

Mr. Tuohy

Absolutely. As I said, part of the roll-out that we have and part of the programmes we are supporting include the mid-west. In the previous set, we supported a project, the western digital corridor, which works right down the west towards Limerick. Part of the other proposals we have, the ESB proposal in particular, goes down to Limerick and onto Shannon. Another version goes up, in a figure of eight, towards County Donegal. Ultimately, that will link around the country. Some of the projects we are doing refer to exactly what the Chairman mentioned.

In terms of how long it will be before the whole country is covered, the figures I have given are a best estimate. As members can imagine, urban areas where industries are located will be the first that will be attractive outside Dublin. However, we do not want to stop it at that. Our objective is to provide the infrastructure, to make it attractive for people to locate in other areas. We want to get the private sector to take an interest in that side of it and part of what we have been doing is making it attractive financially for them to get involved outside the traditional bigger urban areas. That is the challenge.

Deputy Durkan

How much interest has the private sector shown so far in the project given the need to bring the most advanced technology to the greatest number of regions? I note the point raised by the Chairman regarding the urgency of having leading technology at the cutting edge, particularly at this time. We should be in a position to compete effectively with most players in the marketplace if and when an upturn arrives. How is the private sector dealing with the issue? How attractive is the project to it?

Mr. Tuohy

It is attractive in the sense that it is providing funding. I will explain what has happened in the sector in recent years. We have a very high percentage - over 80% - of cable penetration in Dublin. The Government decided that Cablelink, as it was at the time, should be sold because we felt it was not delivering the type of new advanced services of which it was capable. It was owned by RTE and Eircom and effectively would have been in competition with Eircom. It was sold as part of the lead-up to the IPO in Eircom and taken over by NTL for £535 million.

The problem then was that it suffered, in common with many of the other telecoms companies, a shortage of cash to deliver it. It recently renegotiated its package with the regulator to allow it to decrease its five year exclusivity clause to two. It will roll out its broadband within that period. It needs to roll it out to get the return on the capital it has invested. At the same time, we want competition broadly in the market.

There was huge penetration of cable involving over one million people in the Dublin area. Outside Dublin, there is cable in some of the urban areas of Cork, Limerick, Waterford, Dungarvan and some other places in Galway. The idea was to roll out services in that regard. We are funding Chorus and some other projects. We are specifically funding some of the roll-out of the broadband and have done so in recent years regarding some of the predecessors to Chorus. The multipoint distribution system, MMDS, covers many areas outside urban areas.

Deputy Durkan

Is that cable?

Mr. Tuohy

No. It is a wireless system. The idea was to get them onto broadband and get digital services. The final element was the Government's strategy with regard to digital terrestrial television. That would cover other areas also. The Department of Arts, Heritage, Gaeltacht and the Islands was responsible for getting RTE to split its operation and part sell off its transmission network in an effort to bring in digital distribution and digital services to which the competitor is Sky Digital onto which many services are being provided in Ireland. There is a huge take-up of Sky Digital in competition.

We are not just talking about traditional telecoms fibre in the ground. It is the cable systems and network that will compete, not only domestically, but for the SMEs in particular. It is the wireless technologies that we are using and some of what we are proposing are the traditional wireless technologies, microwave systems and MMDS.

Deputy Durkan

How do the wireless transmission systems compare in terms of cost with the cable systems in relation to installation, operation and success thereafter?

Mr. Tuohy

There are different types of wireless system.

Deputy Durkan

What about MMDS?

Mr. Tuohy

As I am not an electronic engineer, off the top of my head, when one is dealing with wireless, one is dealing with masts and aerials and certain capabilities. Fibre will give unlimited expansion capability. One can keep putting stuff down it. In that sense, fibre is probably the best overall. The benefit of wireless, particularly in rural areas, is that one could not cost-effectively wire up houses in a rural area in the same way as cable.

Deputy Durkan

That is my point.

Mr. Tuohy

We have different types of wireless technology of which one is MMDS which is being used mainly for television distribution and television services. While the 3G has been discussed, it has not been rolled out. While there are problems with it, it will give huge capacity compared to what is available. The licence has not been issued here yet, but even where it has been offered in other countries, it has not been issued because the technology has not been developed by various companies as a result of the cutbacks in technology. Fibre and cable, the traditional telecoms, wireless and the local loop technologies, narrow band and broad band are available. One of the companies that came in here and set up in competition to Eircom and others was Formus Ireland. Unfortunately, its parent company in the United States had financial problems and it lost out and withdrew from the Irish market. That company had come in to do——

Deputy Durkan

Which is the most futuristic in terms of long-term satisfaction, the cable system or the wireless system?

Mr. Tuohy

If I knew that, I probably would be a stockbroker. The problem is that much depends on who puts the money in to invest in them. You will see parallel developments between these, cable modems that will give ten megabytes per second.

Deputy Durkan

There are simple differences and swings and roundabouts. I live in an MMDS area and I would have an interest from that point of view. If one is into cabling, it involves serious maintenance and excavations and so on. If one is into the wireless system, the initial cost is not as high. The question that has to be answered concerns the effectiveness of the technology and its operation thereafter. From my limited knowledge, it would appear that the wireless system is seen by some commentators as extremely futuristic and the logical link up to satellite is more realistic through that form. Is that true? Has the Department got that information and, if not, why not?

Mr. Tuohy

We have on trial a number of very small aperture satellite terminals in some rural communities as suitable projects. We did this last year to see how broadband could be brought from satellites to VSATs into local communities, island communities and some communities that would not gain access. Wireless technology will only be useful at two levels. There is what is called "bluetooth" technology which is technology that would be used around a room or in a building. Bluetooth technology means one can have one's piece of equipment here and it is not hardwired into anything but is connected to other pieces of equipment. Research is taking place at that important level for technology within buildings. Then there is wireless local area networks, or wireless LANs, where wireless physically connects up every PC in an area. There is also MMDS technology, but that is a broadcasting technology. What one should try to do is to introduce into that a back channel that would allow one to communicate and to have interactive services.

Some of the big companies - Nokia, Ericsson and Siemens - are making huge investments in the development of wireless because of the opportunities. We are keen to do a pilot testing on a 3G. We are doing one on the VSATs and people have to get familiar with the technologies. There are areas in which we can moveforward.

Deputy Durkan

Without wishing to delay the meeting, I would like further information on this, by way of a written reply if necessary. How do we compete with our competitors worldwide in this area? Are we satisfactorily engaged in terms of being able to provide to the international market the kind of up market and leading edge facilities that will be necessary if there is an upturn in the economy because those who are most competitive and effective will get the business? If I can be given that information now that is fine, but I would like fairly extensive information on the issue.

I wish to turn to the selection process. I note in the report of the Comptroller and Auditor General under the heading Selection of Connectivity Supplier that 13 suppliers pre-qualified and were invited to submit detailed commercial bids. Four suppliers submitted bids. I presume that only four of the 13 responded. The Department then entered negotiations with two companies. I presume the Department decided on the two companies with whom it would negotiate.

Mr. Tuohy

It was a committee.

Deputy Durkan

On what basis were those two decided?

Mr. Tuohy

We had several criteria. In hindsight, the criteria were right because some of the companies about which we were worried did not get through.

Deputy Durkan

At about the time of the approval of the Global Crossing contract, another company announced plans to link Ireland, the United Kingdom, Canada and the United States by transatlantic cable. This company opted not to submit a formal tender in respect of the project under review as it wished to have commercial freedom to operate in the Irish market. Have you monitored what happened? Was the cable dug? Did it produce anything? Is it still at sea?

Mr. Tuohy

It put in the cable but, unfortunately, it went into liquidation. I think it had a problem with 360 networks.

Deputy Durkan

The cable is laid.

Mr. Tuohy

The cable is laid and discussions are taking place with other operators to take it over. The problem in this business was that it was so attractive at the time for companies. Everybody believed that the demands were such that the more that was built, the more people would take. Unfortunately, not every company survived. Thankfully, the one we chose still exists.

Deputy Durkan

To what extent can the Department get involved in availing of capacity that might be available through that source? Are you in that business?

Mr. Tuohy

No. We have our own capacity to sell on at this point in time. The fact that that capacity is into the country is an important element because any of the predictions on the demand requirements for the economy in the future are very high.

Deputy Durkan

Table 35, Costs of Services 1998-2001, in the report of the Comptroller and Auditor General states that the initial outlay for setting up was: legal, £0.5 million; project management, £0.5 million; market intelligence and analysis, £106,000; etc. It amounted to £1,230 million. Will any further costs arise?

Mr. Tuohy

No. Any of the recent negotiations have been done in-house with legal advice from the Attorney General's office. Having done the work, our staff who dealt with it are familiar with the details.

Deputy Durkan

The report also states: "While the arrangements for obtaining the supply of bandwidth were satisfactory, the contractual arrangements as implemented for on-selling the capacity were less successful." We have dealt with that issue already. At this stage I presume action is being taken to improve the market penetration and to make the process more attractive.

Mr. Tuohy

There are two things. We are working closely with the IDA and we are in discussions with a number of companies. I cannot give the names of the companies as it would not be fair to them. Our objective is to sell on all the capacity. As we predicted, this would be cost neutral.

Deputy Durkan

What is happening to make that facility attractive to industry?

Mr. Tuohy

Part of it is that we have got to attract in more users so that the demand for bandwidth continues to increase here. Part of this is not just the strategy of dealing with the telecoms element. It is about getting the end users who are, in the main, the type of software people we are talking about. Another initiative is that the Government is moving into the whole multi-media scene. That is a huge element going forward. The whole idea of a development of a multi-media centre and a digital——

Deputy Durkan

How does one accelerate the involvement of more users?

Mr. Tuohy

Part of it is that one grows the demand. The way to grow the demand is to make the country an attractive place for companies to come. A downturn in the industry does not mean that companies are not still investing.

Deputy Durkan

Can any specific measures be taken which are selective to that type of operation apart from waiting for the rising tide to lift all boats?

Mr. Tuohy

The Deputy will be aware of the digital media hub in the Guinness hops store with MediaLab Europe and the area around it. Part of that is to attract in the type of industries we are talking about, which will be futuristic industries. These are the multi-media type industries and they are huge users of bandwidth. Those and some others continue to invest in the technology sector but we can only make it attractive and facilitate. We cannot set up the companies. We are dependent on the market. The one lesson everyone has learned is that once this takes off again, which it will, demand will grow exponentially and the countries with the infrastructure will succeed.

Deputy Durkan

The access price at City West Digital Park was outside the control of the Department and the steering committee. Is that a fact?

Mr. Tuohy

That is a fact.

Deputy Durkan

To what extent and why?

Mr. Tuohy

We do not own the park at City West. The IDA owns some acres there and it acts as an arbitrator or facilitator to sort out access issues.

Deputy Durkan

That means the access price could be a deterrent to its use.

Mr. Tuohy

If we consider the barriers to entry, access pricing may be one. I did not respond to the Deputy's point about Ireland's positioning. If we distinguish between the wireless technologies and the fibre and cable in the ground, about 70% to 80% of the cost of laying cable is in the reinstatement of the road which is a huge expense. On the access side in this case, there was a disagreement between the operators, who wanted access into the City West hub, and the owners of the estate, but it was eventually sorted out satisfactorily. That will always be an issue.

A problem we will have with wireless access countrywide, which the Deputy raised earlier, is that people do not want masts in their areas. If we want the wireless infrastructure, we must face the fact that the only way to provide it is to use masts. An usual element is that as we move up the spectrum in frequency - 900 megahertz to 1,800 and with the new 3G into the thousands - we need more masts closer to each other. The positive side is the transmission from the masts is less.

Some local authorities want to ban masts, but the problem then is that they will be without mobile phone or new wireless services. Local authorities must realise that wireless technology infrastructure needs masts. Our committee has done a lot work and the Oireachtas Joint Committee on Enterprise and Small Business commissioned a study on the hazards of masts about two years ago. Therefore, we have a lot of information on this. The telecoms regulator monitors the masts to ensure that outputs are within acceptable limits. Local authorities have a role in providing infrastructure for telecoms and electricity transmission networks.

Deputy Durkan

We know the problem of locating masts because no one wants a mast near them. As it happens, the nearer you are to a mast, the healthier it is, provided that it is the correct signal. Is a satellite system not the obvious replacement for a mast system?

Mr. Tuohy

Yes and no. Yes, in the sense that satellites are effective. However, the time lag because of the distance increases the more data is sent to a satellite. Signals are sent up and then bounced back down.

Deputy Durkan

Anyone watching television in recent times is aware of the time lag there. On video phone from Afghanistan, for example, there is about a two seconds lag.

Mr. Tuohy

With some of the technology we use today, we are talking about milliseconds which is what is needed. My point is that there is a difference if signals are sent like that. Also, the cost of using satellites is not necessarily cheaper than of using the ground. We are testing the VSAT, which is aimed at rural communities, at the moment and that information is available to anyone. I understand what the Deputy says about the benefits of wireless technologies and we support it. However, we would not put our eggs into one basket but seek to develop across all technologies.

Deputy Durkan

Make sure that the eggs in the basket remain intact.

Deputy M. Ahern

The 3G licence was to be launched last March but nothing has happened. Is it the Department's view that the licence should be sold at a low price with a royalty system rather than a lump sum payment? Also, what is the view of the Department of Finance on this?

Mr. Tuohy

I am not allowed to comment on that.

Chairman

The Department of Finance might be allowed to do so.

Mr. Tuohy

The telecoms regulator is legally responsible for the licence arrangements but she must consult with the Minister for Finance about it. There may be a disagreement because the regulator has decided on a beauty contest in the traditional sense, but the Department of Finance thinks there should be a minimum amount that should come in.

Chairman

Is there a disagreement between the regulator and the Department of Finance?

Mr. Tuohy

I said that there could be a disagreement.

Chairman

Is there a disagreement?

Mr. Tuohy

The licence has not been issued yet.

Chairman

Is there a disagreement? Perhaps the Department of Finance might comment.

Mr. Byrne

In answer to the last question, there is continuing discussion. The Department of Finance seeks to be positive about it and not to make it more difficult than needs be. We have had extensive discussions with the Office of the Director of Telecommunications Regulation. We are trying to strike a balance between two interests. On the one hand, the desire to ensure that there is an effective roll out and, on the other, to ensure that a valuable resource is not sold for a lower price than necessary. We try to protect the interests of the taxpayer and the Exchequer, but we are not unreasonable in our approach. I do not want to discuss figures because there is a process going on. I can only say that we are having ongoing discussions and it is unfortunate that it has taken so long, but it is not for want of good will on either side.

Chairman

When do you anticipate that these cordial discussions will be finalised?

Mr. Byrne

It is always dangerous to say when because it requires two to sign off. I can only say that we are anxious to wrap it up as soon as possible. I do not want to give a date as there is no agreement yet.

Deputy M. Ahern

Can Mr. Byrne tell us whether his Department favours a lump sum or a royalty type deal?

Mr. Byrne

I am reluctant to get drawn into details because we are discussing the various ways that the licence might be paid. There are arguments in favour of both an up front payment and of spreading it out on a discounted basis. Our primary concern is to ensure that we get a reasonable price. We are reasonably flexible on the methodology, but, clearly, a balance must be struck. I understand the Deputy's point in terms of an ongoing as against an up frontpayment, but all these issues are on the table and being considered.

Deputy Ardagh

I wish to declare an interest. My children are associated with the company, Formus, which was mentioned earlier. However, none of my questions is related to it.

If a PPP had been involved in the Global Crossing project, what type of time delay would have arisen? Global Crossing involved early starter thinking and the views of a private investor along those lines might be more conservative. What type of signal did the project give to companies around the world regarding Ireland's place in the e-commerce arena? Did Ireland having a substantial link to London and New York change the perception of the country in any way?

Mr. Tuohy

Regarding the PPP issue, we were competing to get the people concerned interested in Ireland. We were always seen as a small market. Many of them would not even bother because the demand at the time was to put in bandwidth from the bigger countries, to which they were all driving; we were not on the radar screen. This was the first aspect. A number of companies here stated if we did not get our act together, they would leave because they would not be able to compete. We had the dual pressures.

To do a normal PPP, one must spec what one wants first. We would have had to do much of the work. The question then is getting private sector investors prepared to take a risk in the long-term. At the time we evaluated the different options. We did not want just one operator. The key point was to get a number of global operators in the Irish market. Eircom was originally interested in taking over half the capacity available. That would not have done anything for competition in the Irish market. We had a number of different requirements to meet at the time, part of which was to make it attractive for some of the big global players. One must remember the way that companies, such as Microsoft and others, operate on a global basis. They have global deals with big companies. They do stuff in one country and do it in another country with them as well. We had to be aware of that sort of dynamic.

We succeeded in bringing some of the biggest players in the business into Ireland, including Worldport and MetroMedia, which were not here at the time. As the Deputy said, this sent a huge signal to the market that we were a serious player in the business. For a £60 million phased investment by the Government, the signal alone was enough to get us on the agenda for many companies. Previously, they would not even consider us. I was with the IDA in the United States on a number of occasions at meetings, but they were not interested. They said Ireland only had two players and they would not figure on the world stage. They wanted availability of unlimited bandwidth at the right price. They also wanted some of the global players here. In that sense, we have succeeded.

It is a 20 year project. Once the investment was upfront, the benefits and what is being built and rolled out will stand us in good stead as the industry picks up again. That is our belief and anybody looking at it would probably agree.

Deputy Ardagh

It is most important that the roll-out of broadband is as expeditious as possible in places such as Cahirciveen, Dungloe and Kilkenny. Regarding the ESB, unless the State had invested in rolling out the lamp posts and wires throughout the country, Achill Island would be in the dark now. In the 1970s and 1980s there was a political brouhaha regarding telephone links to the remotest parts of County Clare and other areas on the western seaboard. Mr. Tuohy mentioned that local authorities are being brought on board and getting a 90% grant towards ducting, etc. County Leitrim would need 90% funding, but County Kildare is a totally different conurbation. It has different companies and more multinationals than County Leitrim.

I do not know County Leitrim's exact position with regard to multinationals, but certain areas are more deserving of higher grants than others. This is an area in which PPPs could come into play on a local basis. It could involve the chamber of commerce developing an economic development unit by bringing in some money under a business expansion scheme in an effort to bring broadband to the area. It is important that broadband is developed throughout the country without waiting for the telecoms companies to do it. We are depending on some of the telecom companies carrying out their licence obligations in many areas. There is a reluctance on the part of telecoms companies because of a lack of financial benefits in terms of carrying out their licence obligations. A number of companies are at loggerheads with the ODTR in relation to rolling out their licence responsibilities and obligations.

As the State did in relation to electricity and telephone services, it is incumbent on it to roll out broadband services in whatever imaginative way it can to every part of the country as quickly and effectively as possible. Does Mr. Tuohy agree?

Deputy Durkan

If one changed the reference from County Kildare to Dublin, the position might be different.

Mr. Tuohy

Broadly, I could not disagree with Deputy Ardagh's points. Regarding the call we issued in August this year, which has just concluded, we are talking about commercial broadband projects. Almost £16 million is available. Under digital subscriber line services - DSL, ADSL or XDSL roll-out - the existing copper wire is upgraded to make it available to handle much higher speed. Almost £12 million is available in that regard. Some £15.75 million is available for public body projects. We split it into three areas in the call this year.

Commercial entities in the south and east regions can receive up to 30% funding. In the BMW region, up to 40% is available while up to 90% is available for public bodies. The Deputy's point about public bodies getting together and working with the private sector is what will happen. As I said, much of the cost of rolling out broadband or other telecoms relates to the ducting and putting the cable in the ground. It is generally not the cost of the cable itself. That is a problem. The local authorities have a major role in this area. Perhaps 70% of the cost relates to reinstating the road. Getting them involved in the process is the first step.

The second aspect is getting the local authorities to see - some of them still have a difficulty with it - that if they charge people the earth to dig a road in their area and put in a telecoms cable, the companies will not set up there. They will not roll out the system. Local authorities must understand that telecoms are as essential to business and development as any of the other major parts of infrastructure. Some local authorities think that if they charge a high price, they will get a good return very quickly in terms of the companies setting up there. This creates a huge barrier to entry and the companies go elsewhere. There is competition in that sense between local authorities also.

The third element is that good local authorities see this as an opportunity to work closely with the business community and the social arena. It is not just a business matter; it involves social and community aspects working with them. They encourage the demand side too. If one brings in the type of industry we are discussing, it involves working with the local authorities and bringing in some of the telecoms operators. Local authorities are not telecoms operators which is where the PPP model comes in. They would twin up with some of the operators to provide the services. This is happening already, some of the local authorities are leading in this area and have not been slow in pushing different initiatives. They see this as part of their evolving role since the changes in local government legislation; they see themselves as developmental corporations.

Eircom issued proposals for digital subscriber line, DSL, to upgrade the existing high-speed connectivity by upgrading the existing copper wire. They were pricing that for onward sale, they would sell it not just to consumers but to wholesalers as well. The regulator was not happy with the prices they were offering. Under the law, they must give the regulator 21 days' notice. She has said that she is not happy with their proposals and that they are looking for too much money. They are in discussions with the regulator on this issue so I cannot comment on the detail of that.

Everyone wants to see the roll-out of broadband, be it DSL, fibre or any other wireless technology. There have been a lot of problems, from the third mobile phone licence and the long time it spent in the courts to the current debate about unbundling the local loop and ADSL roll-out. Everything that is happening in this area seems to run into legal problems or debate. Ireland is not unique in this; it is a world-wide phenomenon. If shareholders have an asset which they want to sell, they do not want to do it under cost. On the other hand, the regulator is trying to drive costs down. There is a need to keep a balance between keeping costs to a minimum while at the same time giving a fair return to the investor.

We have a list of the proposals on the roll-out of broadband. The committee can take it that a number of local authorities are talking about collaborating with each other or with operators to provide these things. The Government, through the Department, is funding and stimulating some of the developments by providing financial incentives. We have also agreed a national specification for ducting.

Deputy Ardagh

Eircom is currently testing their I-stream product. Fortunately, I am involved in a partnership that is testing the system. It is fabulous, very fast, and the real benefit is immediate e-mail. That is the benefit and advantages of broadband generally rather than the Internet. Instantaneous communication will be the great benefit of this. We used to spend £300 per month on Eircom charges for dialling an Internet service provider. Eircom is now charging us £175 per month and is losing £125 on our business, yet is looking for £75 per month from Esat or any other wholesaler. I can understand why it is looking for that much money. The problem for the regulator, particularly in regard to licences, is that a lot of this was going to be addressed in the communications legislation. That Bill is needed immediately, not in 2003. Is there any way that the Department can bring pressure to bear to bring the Bill forward at an earlier stage?

Mr. Tuohy

I spoke to the Minister about it only last week and she is of the same view. We have had drafts from the parliamentary draftsman and are very keen to have it published in the next month or so. The Department has a lot of legislation at different stages and the problem for some of these will be finding parliamentary time. I agree with Deputy Ardagh about the importance of this Bill.

Deputy C. Lenihan

I wish to declare an interest in this area. I formerly worked with Esat Digifone and currently advise the company. Does the Department have a view on the harmonising of efforts? The electorate complains about the repeated ripping up of pavements. Given the local authority involvement, is it now the intention to have them put the ducting in place and then have the operators use that for their wiring? There was talk some time ago about consumers in Dublin being used as a network to distribute fibre-optic cable around the city in a very cheap and efficient manner without having to tear up too many streets. Is that still an option? Has the Department looked at the option of distributing fibre-optic cable throughout the country using the existing sewerage network?

Mr. Tuohy

The communications Bill has provisions regarding the sharing of infrastructure and allowing for specific requirements. The committee will recall that we published a Bill dealing with infrastructure which was presented to the Seanad but was withdrawn. There were issues in that to which people objected such as rights of access to property. The other issues have been subsumed into the forthcoming communications Bill.

A number of local authorities are following the Scandinavian model. In Scandinavia, providing this infrastructure is as integral a part of their role as providing roads and water. It means providing the ducting rather than providing the cables. One of the barriers to entry for any new operator is digging streets. The cost is a factor but there is a limit to how many cables can be laid in a street. For any new work going on, the specifications will applied up front. There is always the conflict of digging roads to lay telecoms infrastructure and the costs of that to the travelling public. What tends to happen is that any new ducting being laid should have spare capacity; a number of the local authorities have insisted on this. The next operator can simply lay the cable. Some of this will be included in the legislation we are talking about.

We have had discussions and agreed proposals with the National Roads Authority for specifications for new roads which will have ducting running with them. The ducting will be to the new standard. Companies like BGE who are laying their new gas pipes will have ducting running in parallel with that. The construction of the Luas lines has allowed for some ducting to be laid. In the past, it was Eircom's prerogative to lay the ducting but that has changed dramatically since the liberalisation of the market.

The use of sewers was a proposal by a specific company, there were also proposals about using the gas pipelines. These relate mainly to urban areas and would, therefore, lead to duplication with other systems. That is not a problem but we would see that move being taken by the private sector company in question as nobody is preventing it doing this. It makes sense to use the existing infrastructure. More and more technologies, in the United States and elsewhere, are very much about getting more use out of existing infrastructure.

Chairman

The contracts provided the Department with £632,337 for the appointment of professional advisors, but the cost doubled to £1.2 million. The Department of Finance, in giving retrospective sanction, pointed out that an overrun of this magnitude was unacceptable. Why did the figure double?

Mr. Tuohy

The total cost of all advisors was £1.2 million out of a £60 million project, that is less than 2%.

Chairman

I accept that, but it was estimated to cost only £630,000.

Mr. Tuohy

When we commenced with this we had a broad idea what we wanted. As we got into it we realised we needed not just the supply contract with Global Crossing for the physical network but a capacity purchase agreement, which included how many STM-1s and their locations. We increased the number of EU cities and had to draw up a dark fibre agreement which we did not think we would need up front. As it was available we decided to move on that. We also had a maintenance agreement on the dark fibre. The committee will note that our maintenance costs have dropped by almost 50% since we started, which is simply because of the way we wrote the contracts. We had to enter co-location agreements for the landing sites, both for the two in Ireland and the two in the UK, which we had not originally envisaged. We drew up access contracts for the other companies. We established a re-sale process, using the principle of the Cablelink sale, and instituted the alliance members agreement with the different members. There was a "telehouse" process, where we agreed to provide a "telehouse" facility and the Government would provide the building. The process started in October 1999 and was running on time for the cables to be laid in July 2000. At the start of the process we thought Global Crossing might do that but as it evolved we found it was more effective for us to do it.

The contracts expanded and changed as they progressed. That is part of the telecoms business - 12 months or two years is an awfully long time in the industry. We feel that the operating costs were reduced on pan-European circuits by over 40%. We decreased the operating costs from Dublin to New York, and got the same operating costs to Los Angeles. We got the price of four STM-1s reduced to the price of two.

There is no doubt that the costs almost doubled, but we got a tremendous series of benefits in return. The project was always changing because there were opportunities afforded to us. It was also a tremendous learning experience for our staff. We have managed the project since the legal advisors have left.

Chairman

Is the doubling of the costs a reflection that the Department was also on a learning curve? It was the first project of this nature.

Mr. Tuohy

Yes.

Chairman

Despite what you have said, the Department of Finance said an overrun of this magnitude was unacceptable. I would like the Department of Finance to comment on that.

Mr. Byrne

I do not have the specifics of this case before me. Retrospective sanction is not something that the Department of Finance does lightly. I can assume that in this case there would have been concerns at the overrun. Where such sanction is being sought, the Department would conduct a rigorous examination and ask for information as to why such circumstances would have arisen. I can only assume that the reference to an overrun of this magnitude being unacceptable would be a warning - a shot over the bows. A warning is not something that one likes to see happen. I do not have the specific papers but if it pleases the Chairman I could certainly look into it.

Chairman

You have listened to Mr. Tuohy's analysis of the reasons for the increase. I am sure that logic was presented by Mr. Tuohy and his Department in justification to the Department of Finance for the cost overrun.

Mr. Byrne

I am quite sure it was. It would have been on foot of an analysis of that sort that the sanction would have been given. If a satisfactory explanation was not forthcoming it would have been very difficult for the Department of Finance to issue a retrospective sanction. I am quite sure the Department of Public Enterprise gave a very thorough explanation along the lines of that given by the Secretary General to the committee.

Chairman

Would a financial overrun in the context of professional advisors and consultants be unusual?

Mr. Byrne

It depends on what the Chairman means by an overrun. Final costs being in excess of the initial allocation would be reasonably unusual, but not unprecedented. Generally, the amounts would be much smaller and the extra costs might be sanctioned in advance rather than retrospectively.

Chairman

The conclusions of the Comptroller and Auditor General praise a lot of your achievements such as what you were doing with regard to the core Global Crossing interconnectivity. Mr. Tuohy indicated that his Department would undertake a value for money review of the project shortly. Has that been proceeded with?

Mr. Tuohy

Yes, we have started that.

Chairman

When will it be concluded?

Mr. Tuohy

It will be concluded by the end of the year. I would point out that this is really a long-term strategy. We try to do an internal value for money audit in most areas with a view to learning from the process.

Chairman

You will produce a value for money report before Christmas.

Mr. Tuohy

That is a commitment.

Chairman

We are all enthused about this project and recognise the importance of it. You mentioned various areas with which you are progressing, some with a timeframe of three to four years. The committee would like a full analysis of progress as it is vital for future industrial development. Deputy Durkan posed a specific question to which you might respond.

Deputy B. O’Keeffe

A second global connection was enthused about. The chamber of commerce in Cork - the real capital of the country - made a case for the second connectivity coming to Cork. That would serve the western seaboard better than the City West hub. What is the present position of this second global connectivity?

Mr. Tuohy

I am a Cork man. At the moment there are two landing points, one each at Kilmore Quay and Ballinesker. There are two separate routes to Dublin, one comes up the Kilkenny-Dublin road to City West. The other comes up the other side and back in a loop to City West. We are looking at a second point of interconnection in Dublin. There is a redundancy in two routes to any one point. If one of them goes down, it is always repaired from the back route.

Earlier, I talked about the Atlantic broadband corridor which will extend from Donegal to Cork. We have had a series of discussions with the local authorities in Cork and the chamber of commerce and we realise the work they have put in and what they are interested in. They want to get one of the tier one Internet access points. Our objective, in the broad sense, is identical to theirs. We want to be able to get into the backbone network at the same price anywhere in the country. One of the problems is that industries in Cork, Donegal, Galway or wherever say that to run a line from there to Dublin is more expensive than running a line to New York. The statement is not unreasonable from their point of view.

We want to end up with a country-wide loop that brings one into the backbone network at the same price. The Atlantic broadband corridor will give that connectivity down the west coast to Cork. We are looking at different submissions on that; I think some of them will include the idea of getting connectivity out of it as well. Whether it is by the global crossing or some other route, that issue is on the table. We have set it up but it is being evaluated by independent consultants as it is an EU-funded project.

Deputy B. O’Keeffe

When is it expected that the evaluation will be completed?

Mr. Tuohy

Early in the new year; normally it takes no more than about eight weeks. The committee can be notified when it is completed. There is a tremendous interest in it and we are very pleased with the results so far. The challenge is very much about providing this on a country-wide basis.

Deputy B. O’Keeffe

This is a time when public service provision payments are coming into question, particularly as to their viability and the need for them. The public service provision was £115 million and went up to £150 million. How does the Department of Public Enterprise define public service provision? How does it stand over the £150 million that has been put into it? Does the Department feel that the provision is going to be endangered by private investment?

Chairman

Deputy O'Keeffe is referring to C1 of the Vote, public service provision payments to CIE. He has moved from global crossing to the accounts proper. Before we do that, can we be told what local authorities have accepted the inducements to do something about the cabling? What type of inducements are there?

Deputy B. O’Keeffe

I take it that is the subsidy.

Chairman

Yes.

Mr. Tuohy

That is the subvention to CIE. Can I have the question again because my mind was on the telecoms sector?

Deputy B. O’Keeffe

At a time when we are anxious to bring the private sector into various State enterprises, the question has often been raised about the £115 million subvention set aside for CIE and the out-turn is £150 million. How did this significant increase arise? What discussions are ongoing within CIE in terms of privatisation while at the same time ensuring that the public service is maintained?

Mr. Tuohy

That additional £34.6 million covers the three operating companies. Members will recall the series of disputes last year in CIE dealing with so-called low wages. It was generally accepted that for people to earn a decent living, they had to work very long hours. What came out of that, and under the PPF, was a new structure of salaries. That is covered in the subvention.

There has been a massive increase in public transport. For example, the average age of the fleet of buses in Cork has dropped dramatically in recent years. Peak-time traffic has increased dramatically and that has slowed the movement of buses. Their average speeds have dropped dramatically. In the past a bus could, for example, do two runs in the morning. That can no longer happen because of heavy traffic. The number of buses and drivers being provided had to be increased. That is an operating cost that goes straight into the subvention. That is a feature of the traffic system. More public transport is needed to cope with gridlock, but until there is good public transport people will not stop using their cars. The Stillorgan quality bus corridor has seen almost a doubling of capacity and take-up simply by providing buses every 90 seconds to two minutes at peak times. We have extended the number of QBCs in the Dublin area to nine, with proposals to extend that. While the Stillorgan route is the most effective, the other routes are quite good as well. The impact of the wage increases and the increased subvention to cover the increased fleets are included in the subvention.

Deputy B. O’Keeffe

I understood that part of the incentive for the wage increase was that savings were to be effected in terms of cost-cutting within the sector. I take the point about traffic and the increases in pay, but I understood that there would be significant improvements in productivity.

Mr. Tuohy

I think the Deputy will see that in the type of work practices that are being talked about. In parallel with the CIE developments, the Government has also authorised the Luas project which is projected to be on-stream by 2003. That will be run by an independent operator. A contract is currently being negotiated with the new operators. We are down to five of them and we hope to have someone else with us in the near future on that. We will nominate one of them and continue final negotiations but part of that will be a contract with them for the delivery of services and what you will see within that is, hopefully, an alternative or a choice for people. They will see what another operator can provide. I saw in the media in the last week or so that some of the possible contenders for this have announced that they have signed off on no-strike clauses with the unions - at least one of them has anyway. I am not sure if that is the successful one because I am not involved in the detail of the competition, but it makes the point that if that can be done with one of the new operators, there is no reason it could not be done with the existing ones also, and that is an issue.

The second point, to come back to the other more general issue about the privatisation, is that the Government has said that it is going to split CIE into three operating companies: Iarnród Éireann, Bus Éireann and Dublin Bus. We issued a discussion document on a new transport and institutional arrangement for the Dublin area where we talked about franchising out the routes in Dublin. What we mean by that - it is important to explain this to people - is that you can have two types of competition in the transport area. You can have competition for the service or you can have competition between operators. What we have opted for is competition for the running of the routes. Therefore, we package Dublin in the broad sense into different routes, some of which are economic and some of which are non-economic, and we will then go to tender on those in order that Dublin Bus can compete but others can also.

I would point out that the forum that was set up under the PPF involving the unions, etc., asked for an independent study to be done on this. They do not particularly like that model and a study was done under their aegis and the Department organised independent consultants. I think the most recent forum meeting was adjourned because the unions had tabled counter motions. They do not agree with the outcome or they do not like the outcome from the consultants in this area. Therefore, there is an issue in that regard which needs to be worked out because the Department's proposals and the Government's proposals in this area about franchising out the routes which I personally think makes a lot of sense. You get the benefits of competition but it does not mean that you have two buses on the one route competing with each other. At the same time, it means that you drive down the costs but, more importantly, you get people providing the service. The partnership forum is still very much in disagreement with the Department on that and, therefore, that is an issue which will arise.

The other point is that there will be a Bill, which hopefully will be enacted before the end of the year, all going well, providing for the railway procurement agency, RPA, which will procure the services for the Luas initially and then for the metro. The agency will be a new semi-State body which will take away some of the functions from CIE and look at the idea of specifying the service. The Government will say that it will pay the following for such a service and the RPA will specify and purchase those services from the outside. Therefore, you end up with an element of competition but, at the same time, it is not open season.

Deputy B. O’Keeffe

On a previous occasion at the Committee of Public Accounts, we had a look at the land bank of CIE and, in particular, at the under-utilisation of that land bank. Certainly a great deal has happened since then. Although it may not be possible today, would it be possible for Mr. Tuohy to give a report to the committee on the extent of the land bank, how it has been utilised over the past five years and the proposals for land utilisation by CIE on the books of the Department?

Mr. Tuohy

There are a number of points in that regard. There is no difficulty about giving the committee a report. We can arrange to do so after the meeting. There have been ongoing discussions with CIE on this issue. CIE commissioned a study which I think Sherry Fitzgerald carried out. They updated it earlier this year and there have been ongoing discussions. The deputy chairman of CIE, Mrs. Tras Honan, is the chairman of the property committee dealing with this. She is very keen that the specific areas be identified and that they be sold effectively, and utilised. Some of this is under way at present. From memory, there are two areas in Dublin which, I think, are going out to tender at present. The company is selling properties in Serpentine Avenue and Carnlough Road in Dublin. There are other ones which have also been talked about. Rosslare Harbour has been talked about as a possibility, which is a big project and a big area, and other areas around the country. The Luas people were also interested in some of the properties in Dublin which the company was looking at selling from the point of view of depots and stations. It is a very live topic within CIE and, therefore, it is best that we come back to the committee with a report on that. It is an issue on which we are very keen.

Deputy B. O’Keeffe

I would like to get that report to see what has in fact happened. Obviously I am aware that there is a major development proposed for Cork station. The report might also refer to the suggestion that, while there is to be a major development for Iarnród Éireann, they are not even putting in a proper bus terminal or one-stop-shop and that they are separating the Bus Éireann from what will be the Iarnród Éireann terminal. That does not seem to make good sense from the point of view of integrated services.

Mr. Tuohy

If I may respond to that, I know the area to which the Deputy refers and I was down there some months ago as part of the Cork land use study, with which I am sure the Deputy is familiar.

Deputy B. O’Keeffe

I was coming to that.

Mr. Tuohy

I gather that in recent weeks the two councils have signed off in principle on the land use. For the benefit of the members who are not from Cork, I might explain that land use studies are happening in the urban areas outside Dublin, Cork, Limerick, Waterford and Galway. Part of this is to get the local authorities concerned not just to talk about roads anymore but to look at the greater land use area and link that to transport corridors. Cork was the first county council and corporation to do it about 20 years ago and that was the basis of the development of the Cork area. We are on the committees for the different ones. The current Cork plan has been submitted. We have taken the Cork plan and the Government, in July of this year, as the committee will probably be aware, approved in principle that Iarnród Éireann would be asked to look at the proposals for the greater Cork area on the rail side, which is a major element in the new Cork land use study.

Deputy B. O’Keeffe

It is the major element because the housing development is proposed to take place along the rail line.

Mr. Tuohy

On that one, we are talking about taking the existing rail network from Mallow into the city centre - Mallow, Blarney, Kilbarry, Rathpeacon, city centre - and extending it down towards Midleton. Always in the back of our mind is the thought that if developments go well over the next ten or 15 years, it can be extended to Youghal - the line is there anyway. The point is that the debate we had with the council and the corporation was that there was no point in the Government spending probably £80 million or £90 million on a rail network if the land use in the area was not rezoned because there is no point in running trains through rural areas. What you want to do is link in the land use strategy for the area with the transport strategy.

The other point in Cork, in particular, is that traditionally the developments in Cork have been to the west and south-west - the hospital, the Regional Technical College, UCC - in that whole area of Douglas, whereas on the east side of Cork, and particularly on the north-side and in the north-east, there has been tremendous underdevelopment. I am thinking of Kilbarry, Blackpool and Mayfield. There are problems in those areas and by at least running your train network through them and linking that in with the development strategy with the IDA, etc. you are in a position to zone areas and see an increase. That is the first point.

The second point in that regard is that it is worth saying that the total number of buses in Cork in 1998 was 69. Since then, we have increased the fleet by 42% and the average age of the fleet has dropped from 9.7 years to 3.4 years. Therefore, while the rail system and the rail network is important, it will not deal with a lot of the circumferential routes, for instance, running a bus from Mayfield to the Regional Technical College is equally as important as running it into the city centre. That is part of the strategy in Cork. I can refer to the other cities also but, seeing as there are Deputies from Cork present, I will concentrate on Cork.

Deputy B. O’Keeffe

One of the problems we have in selling the bus corridor proposal for the next 20 years to the towns in the south is that neither Ballincollig, which has a population of 20,0000, nor Carrigaline, which has a population of 19,000, have city bus services even at this stage. We are even being told now that while there are ten new buses coming into service, we may not have staff or funding to operate those new services. It does not add much weight to the thinking that in 20 years there will be real beneficiaries of quality bus corridors in these towns.

Mr. Tuohy

People may not appreciate that one of the differences between the national development plan for roads and the national development for public transport is that once you build the road, after the maintenance costs, there is no operating cost. That is one of the differences between the national development plan for roads and the national development plan for public transport. Once one builds the roads, there is no operating cost apart from maintenance costs. However, there is an ongoing cost to staff new buses and trains. The more we invest in public transport, the more the ongoing subvention or ongoing operating costs. It is a different principle but it is important that people appreciate it. We can provide for infrastructure, buses and trains, but we also need people to staff them and that is part of the reason for the increased subvention in the CIE Vote over the last number of years.

Deputy B. O’Keeffe

What level of discussion has taken place between your Department and the NRA? It seems a travesty that we have an excellent ring road to the airport in Dublin, yet there is no rail link. There is an excellent network of roads around Cork city, yet nobody thought of integrating road and rail. Two arms of the State are working separately but could be linked if extra space was garnered and set aside for further development and future strategic planning. Have there been any discussions with the Department of the Environment and Local Government and the representatives before us to see how strategies and planning in terms of road and rail networks, including light rail, and QBCs can be integrated? Such integration is not taking place, which is a travesty, and many of today's problems may stem from that.

Mr. Tuohy

There is a Cabinet infrastructure committee chaired by the Taoiseach and involving our Minister, the Minister for the Environment and Local Government, the Attorney General, the Tánaiste, the Minister for Finance and the Minister for the Marine and Natural Resources - probably half the Cabinet. It meets once a month and has a group of assistant secretaries drawn from the different Departments. The NRA and CIE are involved so what the Deputy referred to exists. Part of the outcome of that has been the spatial strategy and the final versions of that are being worked on by the Department of the Environment and Local Government. This involves getting people to look to the future, to examine spatial strategies and then to examine the infrastructure necessary to support that in terms of roads and public transport. In the Dublin area we are talking about a specific institutional arrangement which would cover the greater Dublin area, not just the metropolitan area, but the adjoining authorities of Wicklow, Kildare and Meath. It will deal with strategic planning guidelines and implementation of the transport policy for the area.

Regarding Dublin Airport, we have carried out a market consultation on the metro system. Luas will be up and running by 2003, with one line from Tallaght to the city centre and one from Sandyford to the St. Stephen's Green. The other major public transport project in Dublin will be the metro. We hope this will be out to tender before the end of the year. The first phase will be from the city centre to the airport and out towards Blanchardstown. The second phase will continue that in a loop to the Maynooth line and taking over the Luas line from Sandyford to St. Stephen's Green. That line has been designed in such as way that it can be assimilated into a metro system over time. It will connect to the DART system, probably in Shankill. This will result in a linked network. We can provide the DTO strategy in this regard which outlines the plans. All we want is the money for the plan. I am quite confident there is a case for it and I think members will appreciate it will not come cheap. It is a huge investment, but the programme is over five, ten or 15 years.

The Taoiseach and the Minister are very keen to see the metro system proceeded with quickly and that will be done on a PPP basis. It will take time to negotiate and do the necessary planning, but we hope to have the first phase to the airport up and running in the next few years.

Chairman

The DTO will be here next week and the DTO action plan will be discussed, so members will have a chance to raise questions at that time.

Deputy Durkan

I listened with interest to the scenic tour given by Mr. Tuohy and I compliment him on it. I hope the Luas vehicle currently on Merrion Square does not take until the end of the projected period to get off the ground. How was the Luas carriage placed in Merrion Square? It seems to have appeared through magic. I noticed a lot of people waiting in it yesterday and reading newspapers as if it was the London Underground. I wonder if something happened of which I am not aware.

Mr. Tuohy

It came in through Rosslare and was taken by truck to Dublin.

Deputy Durkan

Will it remain there until the track is laid on both sides of it or will it be removed pending the construction of further infrastructural facilities?

Mr. Tuohy

The commitment given to many of the communities during the process was that the first Luas carriages would be made available to people to view. Viewing is ending this evening at 8 p.m. The line and the system has to be tested and the proposal is that a phase of the track will be built from the Red Cow Inn depot to the Belgard Road, Tallaght, and the major testing will take place at that stage.

Deputy Durkan

When?

Mr. Tuohy

That is the next phase. Construction of that is under way at the moment.

Deputy Durkan

Will it be within weeks?

Mr. Tuohy

It will be in the new year, but not too early.

Deputy Durkan

Which new year?

Mr. Tuohy

I do not have the dates with me, but the full system will be up and running before Christmas 2003.

Deputy Durkan

The purpose of the question is to find out if that road or rail show has been included in the costings. What are the costs of bringing it around the country? Will it go to places other than the city?

Mr. Tuohy

No, it will stay in the city centre until tonight and then it will be moved to the Red Cow Inn depot. The first set of tracks to be built for testing purposes will be from the Red Cow Inn to the Belgard Road. This is real testing. Construction is bang on target and those walking around the route will see what is taking place. All services and utilities have been moved and the physical construction is now under way - the operator is being picked at the moment. The project is going exceptionally well and the Minister made the point on Sunday that it is set to come in on target. We have had an ongoing independent committee——

Deputy Durkan

You did not tell me about the cost of testing.

Mr. Tuohy

It is part of the overall cost of the project.

Deputy Durkan

I know that.

Chairman

What is the overall cost of the project?

Mr. Tuohy

The overall cost is £530 million.

Chairman

And it will be finished in December 2003?

Mr. Tuohy

In the period October to December 2003. We hope it will be closer to October, but it will be finally commissioned before Christmas 2003.

Deputy Durkan

What is the cost of bringing a rail vehicle to two or three locations?

Mr. Tuohy

Two locations. We brought it to the city centre just to show it to people. I was there on Sunday and saw the number of people who turned up to view it.

Deputy Durkan

I hope it is not like the provision of a telephone kiosk in an isolated part of the country once upon a time. I hate to be political about these things, but in the course of an election campaign it was discovered there was no cabling for the telephone and it has not been provided since. I hope this is not a repetition of that event.

I wish to refer to the Radiological Protection Institute and the total of £3.665 million for consultancy services. This represents an underspend. It is unusual for consultancy costs not to come up to expectations. Could I have some further information about that? The Radiological Protection Institute of Ireland was granted £1.746 million for general expenses. We might look at the areas they are involved in, such as the issue of radon gas. Certain expenses associated with the BNFL case came to £200,000. I presume we do not send any materials to Sellafield for reprocessing, as we did once upon a time.

Mr. Tuohy

That is correct.

Deputy Durkan

What do we do with material of that nature? There is a provision for a gas regulator's office and for an aviation regulator's office, amounting to £650,000. On page 253 a seabed survey is mentioned. Why are we surveying the seabed?

Mr. Tuohy

To deal with the consultancy services first, the Estimate provision was £3.665 million and the outturn was £2.24 million, with a saving of £1.245 million. Basically we had to take on a consortium of consultants to help us on the EU electricity directive about liberalising the ESB market. We saved over £400,000 on that simply because of the way things worked. We put in estimates and it did not turn out the way as expected. We were setting up the market and had legal and financial advisers, and through a mixture of good project management and moving ahead and doing things the outturn was less.

Deputy Durkan

Was it that the money was provided and not utilised?

Mr. Tuohy

No, the problem is that you must give an estimate up front. The second point is the less than anticipated expenditure on EU co-finance consultancies under the technical assistance programme. In general, the consultancies cost less than we envisaged. Sometimes consultancies do not start on time or are late, but overall that was a positive result.

The second point raised was the RPII grant-in-aid. Basically the RPII is an agency of the Department, set up as a corporate body. It was established in 1992 and has 45 staff. Previously the Nuclear Energy Board, it now deals with radiological protection, and as such is a key agency. They came in on budget, as members can see. I am not quite sure what the Deputy wants me to say about it. I can talk about its work or——

Deputy Durkan

I raised a query about radon gas.

Mr. Tuohy

The Government has approved in principle a radon gas scheme. It will be incorporated in the Bill we are drawing up concerning the Radiological Protection Institute which will allow us the legal basis to make payments. We needed a legal authority, which we did not have, to introduce the radon gas scheme, and we cannot just pay money without the necessary legal basis. The proposal is that - I can give the detail - the scheme will apply to private houses, local authority houses and houses provided by voluntary housing agencies. The grant will be up to 50% of the total cost of radon protection, to a maximum of £800. We hope the RPII to run the scheme.

Surveys have been done around the country showing the levels of radon gas concentrations, some of which are less acceptable than others. Radon gas is a naturally occurring radioactive material and normally one must provide ventilation where it occurs. Our findings have international parallels. Gas emission levels in areas such as Wicklow, Cork and Galway depend on ground conditions and the rock in the area. The Department of Education and Science commissioned and funded the RPII to do a survey of all schools. We have a proposal to part-fund some of the work on houses. The broad principle is about venting the gas from enclosed areas and reducing people's exposure to it.

Deputy Durkan

Is the gas dissipated completely in the atmosphere to the point where it is harmless?

Mr. Tuohy

It is dissipated. Its concentration varies and the RPII can carry out a test for people for a cost of £15. The Deputy can check their website. We actually have a map available - the Deputy has seen it - which shows the areas concerned. The reason the Government went on this basis was that it was giving ordinary individuals some sort of stimulus to get this done, even though it is in their own interest to do it, by providing funding up to £800. It would help individuals or community groups to become involved in a radon protection scheme.

The Deputy asked about the BNFL case, not the big case that the Government recently announced but the case taken by the residents in Donegal——

Deputy Durkan

Was it not residents in County Louth?

Mr. Tuohy

Yes, it was residents in County Louth.

Deputy Durkan

Cork men have been known to wander off the beaten track.

Mr. Tuohy

In this case we are providing money towards research, some computing equipment, IT, etc. The State has joined in the action so we have to be very careful we are not funding an action against ourselves. There is a very delicate balance, as you can imagine, so the funding is only for research purposes. There has been a very small drawdown on it and there have been discussions with the solicitors for the residents. The Minister of State has met them on a number of occasions over the last number of years. Money was put aside but it has not been drawn down. It will only be drawn down on the basis of expenditure.

On the bigger court case, I'm not sure if you were asking me——

Deputy Durkan

There are two aspects, namely, what we are doing with our waste and the current status of the case.

Mr. Tuohy

I gather this case is due for a hearing. The BNFL case in the Irish courts is due fairly soon and discussions obviously will be ongoing with their legal advisers, the Attorney General's office and the Minister of State. The bigger case that was announced on 25 October launched international legal proceedings against the UK in connection with the MOX plant at Sellafield. Really we are taking a number of cases in parallel. We are taking cases based on the OSPAR convention - the Oslo and Paris conventions - that deal with protection of the marine environment and which are quite complex. We had started arbitration proceedings on this already against the UK and hoped the UK Government would not proceed with authorising the MOX plant in Sellafield, but that did not happen. On that basis the Government decided to initiate proceedings against the UK under the notification entitled "Dispute Concerning the MOX Plant, International Movements of Radioactive Materials and the Protection of the Marine Environments of the Irish Sea". It was initiated under Article 28 of Annex VII of the UN Convention on the Law of the Sea, 1982 - the UNCLOS agreement. This is really about getting a stay on what they propose doing. It will be heard in Hamburg in the next number of weeks, I think. The proposal by the UK means they will initiate developments towards the end of November. Our proceedings are like an injunction, but it is an international procedure and so is more complex. Arbitration is taking place on the OSPAR Convention.

Given the 11 September developments, there is real concern in Government and among the public generally that there are procedures in place at Sellafield for the protection of the installation against terrorist attack. Part of our concern is the additional anti-terrorist procedures, particularly in light of the terrorist attack. This relates partly to the protection of the marine environment, discharges and existing ship movements. The Government has taken a pro-active approach in this regard.

A number of cases are being taken in the Irish courts, including the BNFL case. Greenpeace is taking a case in the High Court in London, but we are not party to that. There are a number of things happening in that regard. It is a very sensitive issue in the current climate. It is quite complex because these are all international agreements.

Deputy Durkan

What are our disposal methods in respect of radioactive waste at present? Do we know what we are doing with it?

Mr. Tuohy

All our radioactive materials covered here are done under licence by the RPII. That includes the waste disposal facilities. I do not believe we actually dispose of them here; I think we transfer them. I will come back to the Deputy on the details.

Chairman

Some of it is disposed of in Wicklow.

Deputy Durkan

The reason I ask is that I know from previous experience that we do peculiar things. We have Irish solutions to Irish problems. I would be very anxious to know exactly what we do, how we dispose of this waste and with whom we dispose of it, notwithstanding that disposal may take place under licence and the degree of supervision that exists in regard to disposal. The licence may well be given and taken in good faith but I have for many years been dubious, to say the least, about how dangerous material of that nature is disposed of in this country. Given our attitude to producing Irish solutions to Irish problems - this is not an issue with which we should play around - I hope we can have a satisfactory answer to that question, which is needed at present.

Mr. Tuohy

My recollection is that the RPII is responsible for the licensing arrangements, which are very strict. We do not have the type of operations about which the Deputy spoke. What we are talking about in regard to the MOX plant in the UK is the reprocessing of spent fuels and so on, which is not what we are talking about here. What we are talking about in the Irish context is the licensing of things such as radioactive materials, both for industrial and medical purposes. This is very strictly regulated, and not just within the country. As they are not manufactured here in the main, even if they are being transferred from country to country by ship or by plane, there are very strict regulations. These are things that are fairly tightly controlled. We are not in the same business as our UK colleagues in regard to processing spent fuels.

Deputy Durkan

We may not be but what we do presents a possible hazard. Transport either by air or by sea in the current security environment has certain hazards whether we want to accept that or not, plus the fact that we use materials that leave radioactive residues. I presume this is being disposed of in accordance with the regulations. I would like to know what they are and how this is done. The question of safety, both in the air and at sea, has been raised in the past and I would be interested to know as soon as possible what procedures are involved.

Mr. Tuohy

We will give the Deputy a note on that. On the issue of the gas regulator's office, the estimated provision was £650,000 and the out-turn was zero. The simple reason for that is that we made provision in the Gas (Amendment) Act for the implementation of a scheme to allocate gas capacity in the natural gas network. Members may recall the regulator setting up the contest for electricity generators. The electricity regulator engaged consultants and the Act subsequently included a provision that any expenses incurred by the regulator or the Minister in relation to the scheme would be recouped. What happened was that the regulator engaged consultants after the passing of the Act. As we were not sure if the legislation would be passed in time, we included the provision so that we would have the right to spend the money. What happened was that the legislation was passed and the regulator employed them, so we did not need to spend the money. The actual work was done by the regulator.

The aviation regulator's office was not formally established until 27 February 2001. There was a provision of £600,000 in the Estimates for last year, with an out-turn of £107,000. As the aviation regulator was not established, the establishment costs of the office did not arise. Therefore, we ended up with a situation that was much lower than expected.

On the seabed survey, the geological service is part of the Department. We have a sea area of 900,000 square kilometres, which is ten times the national land surface. Up to now it has never been surveyed. There have been hit and miss surveys of individual parts. This is about the second or third year of it. It was decided that over five years we would carry out a survey of the seabed to ascertain what is on it. It is a huge strategic decision for the long-term to find out what is out there. There is also a UN convention to which we have up to ten years to respond.

On the delineation of our continental shelf, there is a major debate internationally in this regard. Some people are laying claim to different parts and obviously we will be laying claim to areas outside what we have at the moment. A certain formula must be complied with where the seabed changes direction and so on.

Deputy Durkan

Inside or outside the existing limits?

Mr. Tuohy

Outside the existing limits. The area will include Rockall and so on. I am straying into the Department of the Marine and Natural Resources side, but my recollection is that there are issues which need to be delineated and a survey must be carried out for that. Even if we did not have that, there would be benefits from carrying out a survey of our natural resource, the seabed. We had a higher out-turn last year because the process moved ahead faster than we envisaged. As one can imagine, this is very dependent on the weather to keep going. We were able to get money from other budgets that were under-spent so we allowed them to go ahead and do it. The overall project costs remained the same and we felt this project was well worth doing. It is a long-term five year programme but the benefits will be phenomenal. The marine issue will be huge in the future if one considers saleability in the long-term.

Deputy M. Ahern

Subhead D5 deals with residual work at regional airports. I note the explanation in regard to the delay in relation to the runway project at Galway Airport and anticipated expenditure under the national development plan/airport measures scheme which did not arise. Have they gone ahead since or what is happening?

Mr. Tuohy

The Galway project has not gone ahead. They were awaiting planning permission so we rolled over the money available. We had given them a commitment. There was an under-spend last year but again we will roll it over. Approximately £2 million was carried over and money is included for the regional measures for the different airports. As the Deputy is probably aware, a number of regional airports are being funded for the service obligation, which is the daily flights, and some of the capital works. We have a marketing grant for them also. I can go through the figures if the Deputy wishes.

Deputy M. Ahern

There was a marketing fund of £1.5 million for regional airports such as Farranfore?

Mr. Tuohy

Kerry, Sligo, Galway, Donegal and so on. Waterford is also receiving marketing money. Cork receives money from Aer Rianta.

Deputy M. Ahern

The Estimate for Telecom Éireann shares amounted to £500,000. The expenditure was adjusted. I presume the costs were less.

Mr. Tuohy

We had a situation in that we had left in £1 million residual to cover the bonus shares that had to be paid out. One never knows in these matters what it will cost because part of it depends on how many appeal, legal issues or whatever. The figure of £1 million was an estimate and we did not go anywhere near it. We went to about half of it.

Deputy M. Ahern

On appropriations-in-aid, from whom are the Met Éireann receipts?

Mr. Tuohy

The main Met Éireann receipt comes from the Irish Aviation Authority which provides met service information for the IAA which it requires for overflights, etc. The en route charges are £5.5 million; the general forecaster, nearly £1 million; and climatological data, £80,000. The broad aviation side is a major source of revenue.

Chairman

When will this fact sheet be produced? During a radio interview a few months ago——

Mr. Tuohy

Which fact sheet?

Chairman

The fact sheet on what to do in the event of nuclear fallout which was supposed to be issued to every house in the country within a matter of weeks. What is the current position?

Mr. Tuohy

The Minister for Defence has taken over and set up an office for emergency planning in the Department of Defence involving different Departments, and they have a series of meetings. They meet a number of times a week to co-ordinate plans for a potential emergency situation and examine emergency planning. It is important to stress that the events of 11 September changed fundamentally a number of the basic concepts and parameters we have used in the past. To give an example, in the past, security at airports was designed on the basis that nobody would get on a plane with a bomb. In other words, we always made sure that people's baggage was on the plane with them. That was deemed to be an appropriate check in that people would not commit suicide. That changed fundamentally from 11 September. Different countries across the globe are looking at this. The principles were that we might have a Sellafield type accident. Even the accident at Chernobyl had an impact on Ireland from a radiological point of view, particularly on the highlands where sheep graze because the winds carried the radiation which was deposited here by falling rain. The basic principle was that there would not be a military attack or anything like it.

We now have to look at other options in the light of the changed environment since 11 September, one of which is the possibility of a non-nuclear attack, a biological attack. While that was never on the agenda before, we have very effective emergency planning procedures in place around the country.

Chairman

Sorry, I must interrupt you. I asked a simple question. Based on the Minister of State's interview during which he told the Irish nation that within a few weeks they would have a fact sheet with a summary of what they should or should not do in the eventuality of nuclear fallout, what has happened to it? Is it coming out?

Mr. Tuohy

It is.

Chairman

When?

Mr. Tuohy

The Minister of State said it will be out in the next number of weeks.

Chairman

It was the next couple of weeks a few weeks ago on the Marian Finucane programme. What does he mean by "the next number of weeks?" This episode about the fact sheet seems to be going on for quite some time.

Mr. Tuohy

No. What happened is that some of the issues that came up——

Chairman

Are you preparing the fact sheet?

Mr. Tuohy

We have an input into it, as does the RPI. There are related issues. Even the iodine tablets——

Chairman

My understanding is that the fact sheet was prepared and ready to go out.

Mr. Tuohy

The Government allocated the emergency planning function to the Department of Defence. The group concerned is going through the stuff now. We are inputting information, but what is needed is to ensure that whatever we do is consistent across all Departments because it is not just ourselves who are involved. The Department of Health and Children and the Department of Justice, Equality and Law Reform, among others, and the Garda are also involved. That is happening. The Minister of State's commitment still stands. It has been delayed somewhat simply because of the effort of making sure there is consistency across Government Departments.

Chairman

Will people have it to cheer them up at Christmas time?

Mr. Tuohy

I think they could rely on it. That would be within the next number of weeks.

Chairman

To digress a little - perhaps this is not projected in the accounts but it concerns expenditure expended in 2000 - let me take you back to when Aer Lingus considered flotation, when its value was estimated at €700 million. Subsequently, in August, on account of the foot and mouth disease outbreak and the downturn in US business as a result of the outbreak, the valuation appeared to decrease to €250 million if flotation was considered. You had engaged a firm of merchant bankers with regard to a possible flotation and incurred legal expenses in the year 2000 of £700,000. I presume that £700,000, even though it was expended in the year 2000, will feature as part of the Estimates for 2001. You will probably agree that while flotation is no longer an option, it also appears, if one takes the flotation of Eircom as an example, that flotation cost the State a considerable amount of money. With a failed flotation, would you estimate that the loss to the State could be anything from £25 million to £30 million, based on the Eircom experience?

Mr. Tuohy

The Eircom expenses were within the average for any of the flotations worldwide at the time and well below most.

Chairman

I am thinking in terms of a barometer.

Mr. Tuohy

Okay. I believe the revenue the State received was over £5 billion, while the cost was about £70 million or £80 million. We have a provision in the 2001 Estimates for the fees and expenses related to the sale of Aer Lingus. We have £1 million in the budget for them. We employed consultants in the normal way and there was a change. We had a series of advisers, etc. and the total paid in fees in 2000 was £884,000.

Chairman

In the year 2000.

Mr. Tuohy

Yes.

Chairman

Where does that appear in the accounts for the year 2000? Would it appear under the heading "consultants?"

Mr. Tuohy

Yes, on page 7. In the 2001 Estimates we introduced a new subhead, D8, because the decision to pursue the IPO was made during the year. Therefore, it would not have been included in the subhead before we started. As you will appreciate, part of this would be the Government looking at the market conditions at the time which were much more favourable than they are today. As you rightly say, the market has changed dramatically in the past 12 months. Part of that would have been the foot and mouth disease outbreak at the start of the year while a major part was the economic downturn in the United States. We saw a drop in terms of transatlantic flights, even before 11 September, not so much in numbers, but in yield. There are two issues - the number of passengers and the yield from individual passengers. Obviously there is a greater yield from business rather than economy class passengers. In that sense, therefore, over 60% of Aer Lingus's profits have come from the US and Atlantic side which accounts for over 40% of its business. US business is very important to Aer Lingus.

You asked me about advisers' costs. We had contracts with different advisers which we terminated earlier this year when it became clear that the IPO would not be going ahead. We had asked them before the summer to do some work before that on the possibility of a trade sale. On the Attorney General's advice we terminated the contracts. Therefore, the advisers who were doing this work are no longer employed——

Chairman

Obviously the flotation has gone by the board with the sequence of events. Therefore, what you are really saying is that the State will not be at a considerable shortfall because you discontinued the relationship with advisers such as AIB and the international banks. Is that what you are saying?

Mr. Tuohy

I am not sure about the considerable shortfall in the sense that we have paid out the money on advisers for certain aspects, some of which will still stand because much of the work done by advisers, particularly the financial advisers, in any company in preparation for flotation is to make the company better in order that more money is made when floated. Much of the work is already done, not just in selling the company, which is the second or third phase. The first issue is to get the company up to speed on what needs to be done to position it. Some of this work has been very helpful to Aer Lingus which, unfortunately, has suffered on a European basis, probably disproportionately, as a result of the 11 September events, but that does not take from some of the work done by the advisers in advance. You are right in the sense that we have paid out the money. We are not going down the flotation route at this point and aspects such as advertising which was under way have stopped. The next phase is discussions on rationalisation within the company and I can go into the detail of that but it does not deal with——

Chairman

Flotation was a concept that was very much entertained throughout the earlier part of this year but that has changed.

Mr. Tuohy

Absolutely.

Chairman

With regard to legal expenditure, you were talking of over £700,000 already in relation to the flotation.

Mr. Tuohy

And legal fees.

Chairman

Yes, legal fees. In addition, the banks were engaged but you have reassured us that they have been disengaged, so that in the subhead for next year, under D.4, there is probably £1 million——

Mr. Tuohy

No, there is £1 million in the budget. You will appreciate that, when negotiating contracts with companies, it may not be appropriate to put figures in the Estimates too soon. The £1 million was a figure we put in to allow us an opportunity to negotiate with different people, which we would have done. I think the estimated cost for 2001 could be closer to £4 million, in total, than £1 million.

Chairman

That is what I am trying to establish. Obviously, the flotation is gone now, so it is probably lost money, but that is not necessarily your fault - it is due to factors outside your control.

Mr. Tuohy

Sure.

Chairman

Is that the end of it - a shortfall of £4.7 million as a result of non-flotation?

Mr. Tuohy

Including the current total and the £800,000 plus from last year, the figure is £4.8 million, or under £5 million anyhow.

Chairman

Under £5 million. That would be the loss to the State as a result of not having a flotation?

Mr. Tuohy

Yes.

Chairman

I have one final question. One of the Sunday newspapers had an article which was very critical of the train system. It referred to a train having broken down for over an hour, people almost suffocating due to overcrowding and heads out through windows, reminiscent of Auschwitz. I believe there are many positive developments in train services but events of that kind do not enhance the image of CIE, to say the least. What is the current status of railway rolling stock? The Minister for Public Enterprise indicated during the week that she is very committed to the modernisation of the railway structure.

Mr. Tuohy

I will just give an idea of some of the figures. Ten DART carriages were delivered in November 2000 and a further 16 were delivered in——

Chairman

Sorry to interrupt you, Mr. Tuohy, but I was referring to mainline rail services throughout the country.

Deputy Durkan

The commuter lines.

Mr. Tuohy

Under the NDP, apart from the DART, 20 additional diesel cars were acquired to provide 2x8 carriage trains, 58 other cars and 22 further diesel cars for delivery in 2003. There is normally a two year lead-in period and then there is a testing period. CIE is trying to increase the number dramatically, not just in the suburban area. There is an investment programme in public transport of about £1.6 billion. The Iarnród Éireann figures which I have here refer to 220 carriages of varying manufacture outside of those for the Dublin area. Iarnród Éireann is currently examining initial tenders for the supply of 16 mainline rail carriages.

Chairman

Do you expect that by 2002 we will have a modern fleet of engines?

Mr. Tuohy

They will not all be modern in that sense. We are talking of a 20 year programme of investment in railcars and the average age of the fleet is diminishing dramatically. To put it in context, the rail safety investment is about £500 million over five years. In addition there is an investment of about £150 million to enhance the system, including rolling stock and such like. There is £150 million for regional public transport which I referred to earlier, including for buses in the areas outside Dublin. For the main rail programme, rolling stock and building stations, there is also about £150 million, which is not insignificant.

Chairman

In relation to the Cork jazz festival, there was an arrangement for pre-booking seats on the train from Dublin. Is pre-booking likely to be a feature of train journeys in future, or does that present logistical problems?

Mr. Tuohy

There are two aspects. The traditional Iarnród Éireann policy was that anybody who turned up at the station got on the train. That was a fundamental ethos or core value. That is now in conflict with the expectation of people for a certain element of comfort. In most places people pre-book and are guaranteed the seats they book and I think Iarnród Éireann is moving in that direction. There are also plans for Internet booking. That is the situation towards which we have to move. My own personal preference is for the traditional system of accommodating people who turn up on the day. On Friday evening trains from Dublin, there is a fairly regular clientele who travel home for weekends or whatever.

Chairman

A very bad image is being projected by having trains overcrowded to the point that people are standing in corridors and even in the toilets. It may only happen occasionally but, when it does, it is reported.

Mr. Tuohy

Even from a safety point of view that is not acceptable. Overcrowding on trains is of concern. The DART is slightly different because it is acceptable on a suburban network, but the general issue of overcrowding on trains is part of the safety submission which our railway inspectorate has asked CIE and Iarnród Éireann to put together.

Deputy Durkan

Chairman, we need to move on. I was very interested in the travel arrangements for the jazz festival but there are more serious issues. The depiction of the situation on trains may have been horrific but it was factual. In the last two months on the route from Maynooth, in north Kildare, to the city centre, the trains have been late consistently. Trains have travelled at walking pace on some occasions and that is in the context of an upgraded system with improvements in lines and rolling stock. In reply to a parliamentary question, I was told that fallen leaves on the line are causing a problem. With proper planning, the presence of leaves should have been anticipated. I have received a colossal number of complaints from commuters. I am not sure what the Department can do about it but is very difficult to explain to commuters why they should have to tolerate that situation. It is also difficult for commuters to explain to their offices and employers when they arrive an hour late for work. We are supposed to have an upgraded system on which a great deal of money has been spent. It has come with great promise and much aplomb and one would expect the goods to have been delivered by now.

Chairman

I know you will comment on that, Mr. Tuohy. May I mention that the Dublin transportation plan will be discussed by this committee next week and Deputy Durkan will have an opportunity at that meeting also to raise the matter.

Mr. Tuohy

I will give a short response. On 15 October, Iarnród Éireann introduced a new system on the rolling stock on the Maynooth line which can deposit grit on the tracks to give the grip mentioned. Leaves falling on tracks is a natural occurrence which creates problems in terms of grip.

There were other more general issues. The entire network comes together at either Heuston or Connolly. A key problem at Connolly was the limit of 12 train movements per hour, which has now gone up to 16. However, to go beyond this would require an additional investment of £200 million to £300 million, both on signalling and track systems. Upgrading the network from the point of view of safety and in general has necessitated slowing down trains while the work is being done. It will take a while, therefore, before we realise the benefits. What we are seeing is the impact of the safety requirements.

Deputy Durkan

One of the causes of delay on one particular morning was that a gatekeeper failed to turn up - probably as a result of not being able to secure transport to the location in question - and a gate was left closed for a considerable time. We should not be dependent on a person getting from one place to another in order to keep the whole system moving. There should be a fallback system. If we were to explain that incident internationally, it would sound very lame.

Mr. Tuohy

I could not disagree with the Deputy. However, it was not until 1997 that the Government committed significant money to rail upgrading with £500 million on the safety side, which included level crossings, bridges and the matters about which the Deputy is talking. In the past one individual was required to go out a few times each day to open the gates at a level crossing, more and more of which are being automated, both for safety and operational reasons. This is one issue that is being addressed, but it is being addressed over a period of five years, not one. About £100 million is being spent on it per annum and we are seeing real progress. Members of the Joint Committee on Public Enterprise and Transport have had detailed discussions with us concerning the associated safety issues.

Chairman

I thank members and Mr. Tuohy. We have had a very frank exchange over a wide range of issues. We note the paragraph, the accounts and the Vote.

Our next meeting will be on Tuesday, 13 November, when we will discuss the 2000 annual report of the Comptroller and Auditor General and Appropriation Accounts for the Department of the Environment and Local Government, Vote 25, and the financial statements of the Environmental Protection Agency from 1995 to 2000.

The witness withdrew.

The committee adjourned at 4.35 p.m. until2 p.m. on Tuesday, 13 November 2001.