BT Ireland

We are dealing with the topic of broadband and we will have an engagement with broadband providers. This is part of our consideration of the appropriation accounts for the Department of Communications, Climate Action and Environment. We will be engaging with a number of broadband providers in regard to our examination of the appropriation accounts for the Department. The committee decided that in order to understand how value for money can be achieved in such a technical matter as broadband provision, it would be worthwhile hearing from those companies engaged in this market and have direct experience of it.

The companies and the representative body of smaller providers are here voluntarily. They are not under examination by the Committee of Public Accounts. They are here to help us understand the Department’s effectiveness in regard to the national broadband plan and broadband provision in general.

We have five groups here today, BT, Eir, the Regional Internet Service Providers Association, Imagine and Enet. The engagements will be short and we have asked each of the companies to address a specific number of items as follows: outline the company’s involvement with the national broadband plan, or its non-involvement, as the case may be, or its discontinuance of involvement if it had been involved and is no longer involved; describe briefly what it sees as the administrative and bureaucratic challenges and financial and operational challenges with the plan; comment on any communications with the Department in regard to the operation of metropolitan area networks, MANs; comment on facilitation of provision of broadband services throughout the country and new technologies, such as 5G; comment on the potential use of MANs for rollout of the national broadband plan, where appropriate; and comment on mapping of MANs, private fibre networks and mobile blackspots.

I emphasise that the companies are here voluntarily to assist us and we are very grateful they are here. They are not here as witnesses from a Government Department or agency, who can be required to attend. They are here to help us with our understanding. As Oireachtas Members, we are lay people with no technical knowledge of this area. We had a preliminary discussion with the Department on it and we felt we could do with a broader understanding of the broadband issue, if the witnesses will pardon the pun. We have asked people involved in the industry to come in so that we can listen and learn. That is why we are here today, not to examine them in regard to their particular company.

I welcome from BT, Mr. Peter Evans, director of wholesale, pre-sales and strategy. He is accompanied by Mr. John O’Dwyer, head of regulation.

I remind members, witnesses and those in the Visitors Gallery that all mobile phones must be switched off or switched to airplane mode. Leaving them on silent mode is not enough as they may still interfere with the recording and broadcasting systems.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the provisions of Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies. If any member happens to ask what the witnesses think of the Department's view, they are not here to answer for the Department. That is a matter we will address to the Department, and there is no problem in replying in that way if someone inadvertently puts such a question to them.

I invite Mr. Evans to make his opening statement.

Mr. Peter Evans

I am grateful for the invitation to speak with the committee on the national broadband plan and related matters. I am director of wholesale for BT Ireland, and I am joined by my colleague, John O'Dwyer, head of regulation at BT Ireland.

BT is the main alternative provider of fixed line communications services in Ireland, employing more than 650 professionals throughout the country. With a global network in 198 countries, our expertise lies in building and managing complex communications solutions for multinationals, public sector organisations and large domestic businesses. We are Europe’s largest telecoms services wholesaler by revenue and market share, serving more than 50 Irish communication providers, including Sky Ireland and Three. We have invested heavily in building a high-capacity fibre network with nationwide reach, supported by sophisticated IT platforms and an expert in-house team. We are in our 20th year of organising the BT Young Scientist and Technology Exhibition, Ireland’s flagship science and technology platform for primary and secondary school students.

Our formal involvement to date with the national broadband plan, NBP, has been relatively limited so I will comment briefly on this before focusing primarily on our perspective on the opportunity presented by the metropolitan area networks, MANs, to improve broadband service provision throughout Ireland.

On the national broadband plan, as mentioned, BT Ireland provides national and international business, IT and communications services to corporate and public sector customers, alongside wholesale voice and broadband services to fixed and mobile telecommunications companies. We considered entering the NBP bid process to roll out broadband access but we found that our business was better aligned with providing wholesale backhaul facilities and connectivity to service providers. BT Ireland, therefore, offered to be a subcontractor to the Gigabit Fibre bid, which ultimately did not proceed past the pre-qualification questionnaire stage. BT Ireland considers that high-speed connectivity to every home and business is an essential goal for Ireland, and one we actively support.

The metropolitan area networks were established using EU state aid to overcome limitations in the supply of fibre for entrant operators to invest into 94 provincial towns, such as Tralee, Wexford and Sligo. The conditions of state aid approval sought to ensure that the MANs achieved the aim of stimulating investment and competition in regional areas on an open and transparent basis for all users of the MANs, for example, network operators such as ourselves which provide services directly or indirectly to homes and businesses. We believe there is a considerable opportunity for some relatively straightforward enhancements to how the MANs are operated and monitored today. Such enhancements could include the Department of Communications, Climate Action and Environment requesting the support of ComReg in the governance of the contractual obligations of the MANs managed services entity, MSE. In doing so, we believe it is possible to ensure that its original purpose - equitable, open and transparent operation for all operators - is preserved, and will encourage further investment for more consumer-friendly solutions to homes and business throughout these provincial regions.

I thank the Chairman for this opportunity to speak to the committee. My colleague and I would be happy to provide the committee with further information or to support it with any query members might have.

I thank Mr. Evans for his presentation. I call Deputy Murphy. There is a maximum of one hour per group, so I ask members to take no more than ten minutes for questions.

I thank the witnesses for coming in and I am sorry if they were delayed, although it might be the same for each group. As time is short, we might go forward and backwards with the questions and answers, and I might get fairly snappy answers, if possible.

I picked up on the part of the opening statement that referred to ComReg. I looked at the Analysys Mason report that was published yesterday, although it is unfortunate it was only published yesterday as it did not leave much time to study it.

The report says there were several complaints in respect of the activity of the metropolitan network area, MAN, contracts. Was BT one of the entities that made a complaint? If so, what were the concerns that prompted the complaint?

Mr. Peter Evans

Yes, we were one of the organisations that submitted concerns to the Department, going back to 2014. We have had a number of correspondences with the Department in respect of the operation and governance of the MANs. We welcomed the Minister's announcement yesterday and the publication of the Analysys Mason report. While it was only published yesterday, in the limited time we have had to study it, we have seen that it addresses some of the concerns we raised back in 2014 and which we have continued to raise since then.

What were those concerns?

Mr. Peter Evans

Many of them are addressed in the report. They include things like the transparency of pricing for the MANs. We are a customer of the MANs. We spend quite a lot of money every year buying services from them. We were concerned that the pricing, the levels of pricing and the discounting were not as transparent as we believed necessary in a public contract such as that for MANs. We also believed that, in managing that contract, the Department would benefit from bringing in ComReg. ComReg is the expert in telecommunications in Ireland and the expert regulator. It understands cost models, pricing and competition. We sought the bringing in of ComReg to provide a level of governance on that contract not only now, but on an ongoing basis. We had a number of other concerns around the operation of the managed services entity. Does the managed services entity own and run the MANs or is it a telecommunications operator itself? The EU state aid rules make it very clear that it was not to be an operator, but it clearly is an operator today. We believe that necessitated a level of separation between the company that manages the MANs and the company that runs the commercial organisation. Some of that level of transparency between the two organisations is addressed in the Analysys Mason report.

Irrespective of which company was running the MANs contract, if it had a wholesale element and a retail element they would have to be clearly separated. It is fair to say that.

Mr. Peter Evans

Deputy Murphy is correct. Not only would the wholesale and retail elements have to be separate but, within the wholesale area, the commercial and non-commercial parts of the organisation would be also. The MANs are a public asset and need to be managed by a body with a transparent and distant relationship with the commercial organisation.

Mr. John O'Dwyer

As my colleague was saying, there are effectively two companies. It is very difficult to see the gap between them. There is the managed services entity, MSE, function which runs the MANs, but there is also a commercial entity which is a separate company. That issue is brought up in the Analysys Mason report. The gap between the two companies cannot be seen and that has worried us.

The BT representatives reckon that this issue is more or less addressed in the Analysys Mason report.

Mr. Peter Evans

Some of it is addressed in the report.

Is anything outstanding? The report says that elements have been implemented so there has obviously been a dialogue between the Department, the people who produced the report, and the company. The report says that elements have been implemented. Have the elements relating to these concerns been fully implemented or are some things outstanding?

Mr. Peter Evans

As a large customer of the MANs and of the managed services entity, we have seen no evidence of any changes to date. In fact yesterday was the first time we saw new pricing published on the website. We have not seen those changes implemented as of yet. We look forward to working with ComReg and the Department on making sure that those changes are implemented, but as a big customer of the MANs we have no evidence to date that they have been implemented.

Mr. John O'Dwyer

I will add one issue to that if I may. As my colleague has said, we purchase services from the MSE.

Will Mr. O'Dwyer explain the term "MSE"?

Mr. Peter Evans

It is the managed services entity, the company that operates the MANs on behalf of the Government.

Mr. John O'Dwyer

We purchase a considerable amount of services from the MSE, but we also purchase commercial services from the other part of that organisation, the other company. We only get one bill. If we are only getting one bill from two separate companies, we have to ask whether they are actually separate. We would expect to see commercial services treated one way and the services from the State-aided MSE treated another way.

The State owns the network.

Mr. John O'Dwyer

Yes.

The MANs essentially manage the network and have concessionary agreements to do so.

Mr. John O'Dwyer

The Deputy is referring to the MSE.

The managed services entity is a private company.

Mr. John O'Dwyer

It is not a company name. It is what it is called for state aid purposes. It is not the name of the company. It is just its function. There is a company.

This company carries out the job.

Mr. John O'Dwyer

Yes.

I hope the representatives will understand if we ask them very basic questions.

In the end we are concerned with ensuring the end user gets the best value for money and that it is possible to get the best value for money. I accept that we are talking to commercial entities today, which shows that there is a profit element involved as well, but if this system does not function properly it may have a bearing on the end user. Is that fair to say?

Mr. Peter Evans

It would have a direct bearing on the end user. Transparency allows competition. More companies, such as ours, will enter the market if the pricing and discounts are transparent. European and international operators will be brought into Ireland. More competition is proven to deliver better services to the end consumers and businesses and at lower cost.

The Analysys Mason report, for which we have been waiting a long time, listed out a number of things that have been implemented. Mr. Evans has identified one thing, which he only saw change yesterday, which is down as implemented. Are other changes listed as delivered or implemented which he has not seen delivered yet?

Mr. Peter Evans

We have not seen any of the changes listed being implemented. Some are internal changes to the managed services entity and we would not have visibility of these anyway. As a big customer of the MANs, we would have expected others to have been visible externally. We have not seen them.

I will move on to the national broadband plan.

Will the Deputy read out the name of the report which came out yesterday?

It is the Analysys Mason report.

By whom was it produced?

It is a review. It was the final report for the Department. A consultancy produced the report. It looks at the MANs.

I thank the Deputy. It is great that this report came out yesterday. I have not seen it. Some of us might not be familiar with it. I will ask the secretariat to download it from the Department's website and circulate eight or ten copies. Can somebody arrange that? We will not all have it in our hands before the representatives leave, but we will be here for a few hours. It will be useful to have that as the meeting goes on. I ask that it be circulated as soon as possible.

I do not want to intrude on Deputy Murphy, but can I just add something? The report is a year old but was only published yesterday. I do not think that is coincidental.

Okay, that is fine. We are achieving something already this week.

I have an issue with it appearing yesterday.

If a press release relating to the report has been issued from a Minister or anyone else in the Department, we will want to see it. If the report is a year old and miraculously arrived only 24 hours before this meeting, there must be people out there who pay heed to the Committee of Public Accounts, despite what some say.

It is a bit like one of these people who say "and here is one I baked earlier". That is not me. That does not reflect me at all. I have trouble finding the right dial on the oven, but that is neither here nor there. I happen to have the press statement from the Department. I completely concur with what Deputy MacSharry has said.

It is really annoying when a report arrives the day before a meeting because one needs time to study it and it was appropriate for today.

There were approximately ten recommendations that the Department drew attention to in its opening statement. Most of those were implemented and some remain in progress. It looks like there has been great progress. The only way we can test that is by asking the people who are the subject of this and it is helpful to us to have that kind of understanding so as we make sure we get the optimum regulation and a cost effective delivery of broadband, where it is in place and where it may, and should, be in place in the future.

It would be useful if Mr. Evans could give us a note, even after the meeting, in response to the kinds of things that are supposed to be implemented and if he believes they are not implemented. That would be useful for us to hear. We only got this report yesterday evening.

Moving to the national broadband plan, BT has considerable expertise in the area of broadband, as outlined by Mr. Evans in is opening statement, as do other providers. BT considered making a bid and it probably would have been beneficial if there was a lot of bids and a large amount of competitive tension. BT considered partnering with Gigabit. What put BT off? Did it not make the cut? Were we comparing apples and oranges? Why did BT not proceed to make a bid?

Mr. Peter Evans

We participated in the task force, going back to 2012. Our chief executive officer and a number of our officials participated in that throughout the years. We were heavily involved at that stage.

When we looked at the original tender, our business interests, as I mentioned in our opening statement-----

What year was the original tender?

Mr. Peter Evans

The task force started around 2012, so there was probably three or four years of discussion and dialogue around the industry before an initial conversation started about what it would look like.

Our business in the Irish market is around serving multinationals, the public sector and wholesale operators. We are not an access provider. We do not build local networks in Ireland, although we do in the UK and Northern Ireland. It is our business in the UK and Northern Ireland to build local access networks, as well as the services above it, but in the Republic of Ireland, our business is multinationals, public sector and wholesale operators. The network here was about building fibre access. While we had the expertise to do it in the UK, it was not aligned to our business interests in Ireland. We decided, at a very early stage, we were not going to participate in the tender process.

This is the critical question I want to ask. Can I go back to the metropolitan area networks, MANs, and the concession contracts that were extended. They were first issued in 2004 and 2009 and they were to run until 2019-----

Mr. Peter Evans

2019 and 2024.

-----and 2024, or something. It was decided to give an extension to an existing company without tendering. Would BT have been interested in tendering for those? Was Mr. Evans disappointed that there was not a tendering process for those?

Mr. Peter Evans

Yes. Going back to the early stages in 2004, we expressed an interest at that stage in becoming the managed services entity. However, the EU state aid approval stipulated that an operator could not run the MANs. They wanted that separation so we could not bid for it at that stage.

When it became clear, over the following years, that an operator actually was running the managed services entity, in 2017 we expressed an interest in participating in an upcoming tender for the management of the MANs. We were told the decision had been made by the Minister to extend the contract for another ten years.

The facility was available for the contract to be extended to the existing operator. That was done and there was a report-----

Mr. Peter Evans

A Norcontel report.

That was done by the Department. That report recommended the extension to that existing company. That company, and any other company making a bid if there had been a tender process, would presumably have had to demonstrate that they were going to invest and it was not just a question of managing what was there but expanding and investing in it. Is that Mr. Evans's understanding?

Mr. Peter Evans

We were surprised that it was extended so early, two years before the expiry of the first contract. That seemed to us quite early for a contract to be extended.

If a tender had taken place, there was nothing to stop the existing company bidding for that, as we did with our 999 emergency call-answering service, Ecas, contract. We bid, re-bid and won the tender to renew it. We were surprised that the contract was extended so early without a tender process.

If there were a number of bidders, might it have produced an expansion? Might it have put more money into the expansion of the infrastructure?

Mr. Peter Evans

It might have. That is what the competitive bidding process would have done. It would have brought a number of bidders in and the Department could then have chosen the best one to market and ensure that the MANs was extended.

BT was disappointed not to have that opportunity?

Mr. Peter Evans

Yes.

Forgive us for the questions we ask, but people do not know one company from another. Mr. Evans mentioned that BT manages the 999 emergency service.

Mr. Peter Evans

Yes.

Could he tell the public, in a sentence, what that is because the public might not know BT does that.

Mr. Peter Evans

The 999 Ecas service is another concession agreement that the Department manages. The Department went out to tender, eight or nine years ago, for a company to run that service on behalf of the State. We have been running that service for the past eight or nine years. Our agents take the 999 calls. They have the first point of contact with the person who makes the call and they ask whether the person wants to talk to the Coast Guard, the fire brigade, the police or the ambulance service. The agent then triages the call out to the appropriate State agency to take those calls.

BT has that contract having won it by pubic tender.

Mr. Peter Evans

We run that contract, having won it by public tender, on behalf of the State. Interestingly, ComReg is brought in to do the pricing and cost analysis on an annual basis for that contract so there is heavy and severe governance around that contract to ensure we are managing it effectively on behalf of the State.

The public will be happy to hear that. The 999 service needs to be tightly managed, regulated and controlled.

Mr. Peter Evans

We have won awards recently and we can show the committee statements.

I only ask because, even though the committee members may have heard that before, a lot of people might not understand that BT does that on behalf of the State.

Mr. John O'Dwyer

It is also worth mentioning that, in that concession agreement, the Government re-tendered it. The first contract came to its natural conclusion and the Government re-tendered it correctly through the public procurement process. BT won the contract a second time and that is just starting. It did go through the re-tender stage, as required.

I welcome Mr. Evans and Mr. O'Dwyer and thank them for coming before us in a voluntary capacity.

The witnesses have answered some of these questions already. We are talking about the wholesale operational licence for the MANs infrastructure. That is what Enet has; is that correct?

Mr. Peter Evans

Yes.

Two years before the current licence or contract was due to expire, it was renewed.

Mr. Peter Evans

Yes.

There was no tendering or competitive tension in it. It was simply renewed.

I understand there was no publication or information distributed about the pricing structure. Mr. Evans mentioned earlier, as a critique of the process, that there was no allowance to pricing. Can he expand on that?

Mr. Peter Evans

Pricing for the MANs is published and has been published on the website of the managed services entity since it was put in place in 2004.

It has not changed downwards in 15 years which is unheard of in the telecoms industry. Prices are falling and have been falling rapidly. The prices two days ago were the same prices that were there in 2004 for the MAN products.

As a result of the document yesterday-----

Have there been any publications as to why that was the case? I accept the prices are put out there. If it is the case that this is not something that is comparable with other countries, for example, have there been any publications as to why the price has remained static in this State?

Mr. Peter Evans

Not until the Analysys Mason report yesterday.

Which is the one that appeared yesterday?

Mr. Peter Evans

Yes. The prices have stayed the same since 2004.

In simple terms, what did yesterday's report say about the pricing structure?

Mr. Peter Evans

It stated, number one, that the pricing structure is not transparent and open and the discount structures are not available and published, and that it is too high.

Therefore, the pricing structure is not transparent and open. We are here meeting the providers today. We see in this report, which was published yesterday and of which we were not made aware of, that one of the obvious issues in relation to the MANs was the pricing structure and the fact that it reminds static. Only that Deputy Catherine Murphy had it, we would not even be in a position to put the questions to the providers. It shows a sleight of hand.

On the renewal of the contact to Enet, Mr. Evans will have to be careful in how he responds. Would he have seen that as a transparent process?

Mr. Peter Evans

No.

Mr. Peter Evans

There was not a process at all. There was no tendering process at all.

Would Mr. Evans see as unfair the lack of a tendering process or the fact that there was not any competition, for example?

Mr. Peter Evans

Yes.

Mr. Evans stated he made a complaint. To whom did he complain?

Mr. Peter Evans

We did not make a complaint about that. We made an application to participate in an upcoming tender process, if there was going to be one, and we got a letter saying it had already-----

If Mr. Evans had a view that there was a lack of transparency and a lack of fairness, how or to whom does he communicate that? Is it merely that he does it through the media?

Mr. Peter Evans

No. We communicate directly and in confidence to the Department.

What was the Department's response?

Mr. Peter Evans

That the tender had already been extended.

Was it that it was too late and tough luck?

Mr. Peter Evans

Yes, it had already made the decision.

That is interesting. At some point after we hear from the providers, we need the Department back in. We can put it to them.

In fairness, it is not the private sector's fault that the Government did not re-tender.

Absolutely, I am not suggesting that. I am looking for their opinion as to why that happened.

Perfect.

They have put on the record that they did not believe it was transparent or fair. Most of us would agree with that.

In relation to the national broadband plan, Mr. Evans stated he considered it. I appreciate the reasons, he stated then, that he did not continue. I understand the original proposal was meant to be for 840,000 homes, 300,000 of which were taken out and given to Eir. Did that have implications for the viability of that process?

Mr. John O'Dwyer

It is how the Deputy describes it. When the Deputy says "taken out", what happens is that one can only give state aid where the commercial sector has not invested. This is worth clarifying. What happened here was Eir went to the Department and said that it had decided to commercially invest in that 300,000. By saying it was going to do that - obviously it made a commitment because there was a commitment agreement given for that - it was saying to the State it was going to commercially do this and the State cannot provide state aid where it has commercially rolled out. In this situation, Eir made that decision to make that roll-out and to be honest, I do not think-----

It might have, but I ask Mr. O'Dwyer to bear with me for a second. My understanding is - I have read all of the commentary in relation to this - that those 300,000 were some of the most commercially viable ones-----

Mr. John O'Dwyer

That may be so.

I ask Mr. O'Dwyer to bear with me. We have had this discussion with the Secretary General who conceded that that had a bearing on the overall contract. Whatever about the rights and wrongs of it - I hear what Mr. O'Dwyer is saying - if it started off as 840,000 and Eir made that proposition to commercially invest in those 300,000, and they were the most commercially viable, did that have a bearing on the commercial viability of what was left as the remainder of that contract?

Mr. Peter Evans

The bidders at the time have expressed that is the case and they will know more than we did. We were not part of the bidding process. Clearly, there would be an impact if the estate is reduced.

I note BT looked at it and then, maybe, for different reasons, did not continue in the bidding process. Would Mr. Evans have seen that particular process as a transparent process?

Mr. Peter Evans

Until the point we decided we were not taking part in it, it was a very collaborative process. When it became a formal tender, we were not involved at that stage directly so we would not have an opinion on that.

Given that the one consortium that is left is unrecognisable from when it first started out, would that be a concern to Mr. Evans?

Mr. Peter Evans

In our view, that would certainly raise questions.

Raise questions.

Mr. Peter Evans

Yes.

One final question relates more on a policy issue but it is one on which they might have an opinion. Ofcom in Britain is looking at providing a legal minimum broadband speed. That is one of the issues that is a source of public debate. What would be the witnesses opinion on introducing such a policy in this State?

Mr. John O'Dwyer

The Deputy is correct. That discussion in the UK is happening as we speak. There is a debate. The universal service is looking at 10 Gbps, which is lower than is being required here, although in practice a lot of the technologies would give one 30 Gbps or above anyway. It is going down the road of this universal service approach to it. One of the things which may be quite useful here is that BT has put forward a proposal in the UK to pragmatically look at the remainder. One of the things that has happened is it has looked at introducing this from 2020. It is saying that in 2020 it thinks it will be short of meeting the 100% coverage by approximately 600,000 premises - very similar to the numbers here, to be honest. It thinks it will be short by that amount.

What BT, our parent company, has done is make a proposal. It is in the public domain and is on the Ofcom website. It has made a proposal, which is being discussed with the regulator as part of consultations, etc. It has looked at it pragmatically. It has said it is a lot of customers and has asked how it can do this quickly and pragmatically. It said, "Well, let us look at radio.". It has asked if 4G or 5G can help, because that can be rolled out very quickly and it has already got a lot of coverage, could work. It reckons it could cover approximately 450,000 of that 600,000 with radio technology, like 4G and 5G. EE, the company we also own, runs very good 4G. It reckons it could get on average approximately 30 Mbps downstream, which, actually, is the specification for the NBP download speeds.

It said, "Well, okay, that is the first 450,000. Let us look at the next piece of it. We are 150,000 short." It asked what it could do now and it set a threshold." It is £3,200, or something of that order. It asked what it could do within that. In terms of a price range of £3,200, it could pay for itself. It said that it could probably do 40,000 and pay that itself commercially without too much of a hit and that it would recover that eventually. It would then be down to 110,000. At the moment, there is a discussion - it may not be arguing but debating - how do one deals with the 110,000. It has taken a very pragmatic approach of chunking it to see what it can do rather than saying that it is just a big number, it is a big problem, let us break the problem down and see how we can split it up. That is roughly what is going on.

That is very useful. It is probably useful for the sectoral committee.

If we ask a question that is obvious to Mr. O'Dwyer, so be it, but the public might not be as well up on this as he is. Is BT regulated by ComReg?

Mr. John O'Dwyer

Ofcom in the UK.

No, here.

Mr. John O'Dwyer

We are.

Are all the providers regulated by ComReg?

Mr. John O'Dwyer

They are but in different ways. Open Eir has got more regulation.

My question is whether the metropolitan area networks, MANs, system is regulated by ComReg. This is where I am coming from.

Mr. Peter Evans

The MANs are operated on a contract between the managed services entity, MSE, and the Department. Up until yesterday, ComReg had no role to play at all. The report recommends that ComReg come in and do an investigation into the compliance of the managed services entity with the contractual obligations. We believe it should go further. We think ComReg should be involved in the pricing and cost methodologies that are used by the managed services entity going forward on an annual basis.

That is what I picked up. I find it unusual that this report was commissioned by the Department. I wondered why the Department was involved, as surely we have a regulator that deals with all this. It should not still be in the hands of the Department. There is no regulator, effectively, in respect of the MANs. As we speak, there is a proposal that the regulator would examine aspects, which suggests there is not a regulator for the metropolitan area networks.

Mr. John O'Dwyer

There is one slight difference there, if I may. My colleague is completely correct that the Department issued the concession agreement and the contract to run it, and the company running the MANs has to comply with that contract. However, there is an extra piece to this. This is a state aid and, in 2005 or 2006, the European Commission issued a state aid approval for this project. There was some debate at the time as to whether it was the correct sort of investment for state aid. The European Commission issued a document, which is quite easy to obtain via Google, providing a set of conditions for that state aid. In the concession agreement and the operation of the MANs, in my opinion, they have to comply with those conditions set as part of the state aid approval. That is where the non-discrimination is coming through from. It is the European Commission state aid approval that states that it must be open and transparent and that it must not be an operator. All these conditions came from the European Commission.

I have one last question so I understand what it being said here before Deputy MacSharry comes in. At the time of that contract being given for a managed services entity with the Department and at the time that contract was signed, the organisation that got the contract would not have been involved in the retail trade. Maybe on day one it was in compliance with the state aid rules. However, Mr. O'Dwyer is saying that due to the passage of time and the change of business model being operated by the company that got the contract, it is a matter that needs to be looked at because it might not meet the state aid rules now.

Mr. Peter Evans

Yes. In our view, the state aid rules were very clear, as Mr. O'Dwyer mentioned. Over the years, our view is that the managed services entity has been allowed to diverge from those rules that were set back in 2006. Yesterday's report was the first attempt to bring it back in line with those rules. We welcome the fact that the new Minister, Deputy Bruton, has published that report, brought ComReg in and involved it in this process in an attempt to make sure the governance is right around that contract. That is to the benefit of competition, as I said. Bringing in more operators means better prices for consumers and more broadband.

We will take this up with the Department. BT's concern would be that at the point of extending the contract, which was quite recently, certainly it did not meet the state aid rules at that point because it was an operator of the service and was doing the managed services entity process at the same time. Mr. Evans and Mr. O'Dwyer have a concern about that now.

Mr. Peter Evans

They were the concerns that we expressed in our letter to the Department.

That is something we will have to take up with the Department when we have it back in.

I thank the witnesses for coming in voluntarily. We appreciate it. It is great that they have come. On a similar thread to do with the MANs, around the issue of the extension, it is still not clear to me why it was extended two years before it was going to expire and with no tender process. We are all about proper procurement procedures in here. Is there correspondence between BT and the Department that would be relevant to that?

Mr. Peter Evans

We first became aware through a parliamentary question asked of the Minister that there was consideration being given to an extension of the MANs. I think the words used were "he has made"-----

Was that a parliamentary question in here?

Mr. Peter Evans

Yes. I think it might have been in the Oireachtas Joint Committee on Communications, Climate Action and Environment or else in the Dáil. There was a question asked around this and the reply was that the Minister was providing for an extension. When we saw that, we knew something was happening and that it looked like consideration was being given to extending it early. We wrote to the Department to say that we would like to participate in an upcoming tender process, which we understood from the question was happening. We got a letter back saying it was too late and the Department had already made the decision.

On timelines, when did BT became aware of the question having been asked?

Mr. Peter Evans

The question was asked around May and we wrote in June, a couple of weeks later.

It was all within a few weeks.

Mr. Peter Evans

We wrote our letter a couple of weeks after we saw that and about a month later we got a response back.

The time between the answer to the question and the renewal that the Department said was already complete was about two months. Is that right?

Mr. Peter Evans

It was roughly two to three months. We understand now from other public reports that it had already been signed off when the Minister answered that parliamentary question, even though the language he used indicated he was considering it.

It was done at that stage.

Mr. Peter Evans

We were too late with our request.

I am going to chance my arm here and ask a private company if it would be prepared to give us that correspondence.

Mr. Peter Evans

The correspondence was in confidence between ourselves and the Department so we would obviously need to talk to the Department to see if it would happy with releasing it.

It would be delighted, I am sure.

We will ask the Department.

I am going way off the reservation here but if BT was prepared to give us the correspondence it sent and got back in respect of this, it just might equip us in terms of timelines. What is being indicated here is very concerning. If the witnesses were prepared to consider that, it would be very useful for our work.

I am sure the Deputy would agree that we now write directly to the Department on foot of what we have heard to get a copy.

The implications of what we have heard certainly make a mockery out of the Dáil, answering questions and all of that stuff.

The Deputy has highlighted an issue there. We will write to the Department for clarification on foot of this conversation.

Of course we can ask the Department and I know I am chancing my arm. There is certainly no onus on the witnesses but I am saying that if they were so inclined, we would really appreciate a copy of the correspondence.

Mr. John O'Dwyer

I have a feeling that particular letter may already have been subject to a freedom of information request and that we have released it. Not all the letters were released but that one was, I think.

In that case, BT would be able to give it to us no problem, presumably.

Mr. John O'Dwyer

I do not quite know all the rules there. I think it is that one. I might be mistaken but I think it is.

Was there any follow-up after the fact? The Department wrote back and thanked BT for its expression of interest but said that unfortunately the deal was done. Did BT follow up?

Mr. Peter Evans

No.

Right, that was just the end of it. Any correspondence that is relevant that the witnesses may feel they are able to make available to us would be very welcome. That is all I have to say.

I thank the witnesses for coming in. Their plain speaking is very helpful. I also thank the Deputy beside me for pushing this matter, which is why we are discussing it today. As it emerges, it is shocking. I have just got the report. I am certainly no expert on this terminology but a number of things jump out. The MANs is a good project, theoretically, run by the Government. It is a very good project to roll out the infrastructure that is necessary.

BT is a customer of the MANs, as are other private entities.

Mr. Peter Evans

Yes.

It is run by Enet.

Mr. Peter Evans

Yes.

The report indicates that Enet has a sister company.

Mr. Peter Evans

ETNL.

ETNL, yes, which was separated from Enet in 2015. That sister company provides a similar service involving wholesale products and services.

Mr. Peter Evans

It provides commercial services. One entity is due to manage the State broadband and the other company runs its commercial business involving backhaul end services and other services not paid for by the State.

On the backhaul, paragraph 2.2.2 of the recently published review addresses concerns with the current business model and it states:

Under the concession agreement, enet must treat all its customers in a transparent, non-discriminatory and equal way. Given that ETNL and its backhaul business is a related company of enet, enet may have an incentive and the ability to discriminate against customers who buy only MAN products in favour of customers who buy MAN-plus-backhaul products.

There is an incentive to discriminate in favour of their own customers. Is that Mr. Evans's understanding of that section of the review?

Mr. Peter Evans

That is what the review states. It concludes that without transparency and an understanding of how the two companies are run, including details of their accounts and how staff and functions are separated, the relationship between them is unclear.

I ask Mr. Evans to revisit the issue of bills.

Mr. Peter Evans

We are a large customer of the MANs and we are charged by the company for the services it provides to us. We buy MAN and commercial services from the company and those services are billed together.

The services are billed together even though, theoretically, they are provided by two separate companies. BT buys services from both companies.

Mr. Peter Evans

We receive a single bill for those services.

A single bill. On tendering and the extension, the contract for the company to operate the MANs for 15 years, from 2004 to 2019, was signed in 2004.

Mr. Peter Evans

There were two contracts.

I understand that.

Mr. Peter Evans

One ran from 2004 to 2019; the other from 2009 to 2024. They are two separate phases.

Both have been extended.

Mr. Peter Evans

Yes.

It has been clearly set out that the contract running to 2019 was extended in 2017.

Mr. Peter Evans

Yes.

BT was unaware of that extension until it was brought to its attention.

Mr. Peter Evans

Yes.

BT inquired further but was told the decision had been made.

Mr. Peter Evans

Yes.

Were reasons given for the decision to extend the contract rather than put it to tender?

Mr. Peter Evans

Norcontel was commissioned to prepare a report for the Department.

What is Norcontel?

Mr. Peter Evans

It is a consultancy company. The report has been made public. The Department asked Norcontel to consider whether it would be preferable for the Department to extend the contract or put it out to tender. The Norcontel report recommended that the contract be extended.

That report is available.

Mr. Peter Evans

It is.

Mr. Peter Evans

We have. We disagree with its findings.

What was the rationale for the decision that it was better to extend rather than go to the market?

Mr. Peter Evans

Norcontel concluded it would be better value for money for the State to extend the contract and that there was inherent risk that the existing company would not invest or would de-invest in services in the period between 2017 and 2019 if the contract went to tender. We do not agree. Enet is very profitable and we do not think it would have de-invested in the MANs.

It is obliged under law to comply with its contract up to 2019.

Mr. Peter Evans

Yes.

The analysis concluded that it would not comply with its contract.

Mr. Peter Evans

The report did not state that Enet would not comply with the contract.

That is the implication.

It is a risk.

Mr. Peter Evans

Yes, there was a risk.

Was there any public consultation with various stakeholders?

Mr. Peter Evans

No.

Mr. Peter Evans

None. We expressed our interest in talking to the Analysys Mason consultants and Norcontel. We were told our concerns would be taken on board but that we were not to speak to them.

BT was not to speak to them.

Mr. Peter Evans

We were not allowed speak to them.

Mr. Peter Evans

I do not know.

How were the concerns of BT taken on board?

Mr. Peter Evans

Some of our concerns were taken on board in the Analysys Mason report.

How were the concerns of BT taken on board in the Norcontel report? What was the mechanism for that to be done?

Mr. Peter Evans

Our concerns regarded the governance and the running of the contract, dealt with in the Analysys Mason report.

BT was not allowed to speak to the consultants preparing the report that justified the extension of the contract without any open competition.

Mr. Peter Evans

We did not ask to speak to them. We did not know that was happening until the report was published.

That report reached a decision but no stakeholders were consulted and the market was not tested.

Mr. John O'Dwyer

We were not consulted but we cannot speak for other stakeholders.

BT cannot speak for other stakeholders.

Reference was made to that report when representatives of the Department appeared before the committee. We will have it circulated, if that has not already been done.

On the costs, some of BT's concerns were taken on board in the Analysys Mason report.

Mr. Peter Evans

Yes.

In particular, there were concerns regarding pricing.

Mr. Peter Evans

Yes.

The prices were published and available online but had not changed since the initial contract.

Mr. Peter Evans

Exactly.

BT is of the view that, given the nature of the business, the prices should have fallen.

Mr. Peter Evans

Yes. Prices are falling in the telecoms industry. They have been falling for decades. Yesterday, the pricing was reduced by 50% on the back of that report.

It was reduced by 50%.

Mr. Peter Evans

New pricing published yesterday involved a 50% reduction.

A 50% cut was announced yesterday.

Mr. Peter Evans

Yes. It was published on the website.

That cut was announced the day before this meeting but the Department has had this report for 12 months.

Mr. John O'Dwyer

The 50% price reduction is mentioned in the Minister's statement.

Where in the statement is that referenced?

Mr. John O'Dwyer

I do not have the statement in front of me. My apologies.

The statement by the Minister indicates that the connection fees for any product and the existence of any discounts should be published. That was to be implemented by Enet. Enet published that information yesterday.

Mr. Peter Evans

It published the headline or maximum price.

What level of price reduction is involved?

Mr. Peter Evans

It was reduced from €5.20 to €2.60 per metre.

The MANs contract has been in operation for many years. The Department was given the completed review a year ago. The committee scheduled a meeting with the providers at which, inevitably, such matters may be discussed. The day before the meeting, the Minister, Deputy Bruton, published a report which had been in the possession of the Department and recommended that the pricing should be addressed. I give him credit for that. Enet was responsible for implementing that recommendation. When were the new prices published?

Mr. Peter Evans

Yesterday.

Enet published the prices shorlty before the Minister said they should be published. Mr. Evans stated there has been a 50% reduction in the cost of new connections. I ask him to explain that to us in layman's language. A major reduction of approximately 50% in the price of the service provided through the metropolitan area network for a new connection was announced yesterday based on a report that has been sitting in the Department for the past 12 months. Coincidentally, that was the day before the providers, including the operator providing that service on behalf of the Department, were due to appear before the committee. Lo and behold, a 50% price reduction was announced yesterday.

Mr. Peter Evans

To clarify, the price reduction also relates to existing services. It does not refer to connection but, rather, rental of the service, which is the headline price.

The public will want to know whether they can expect to see a reduction in their bills in due course.

Mr. Peter Evans

That price reduction will immediately flow to operators such as ourselves. It will encourage more people to use the MANs, which will encourage flow-through reductions in costs to consumers.

The reduction will eventually trickle down to consumers.

Mr. Peter Evans

Yes.

Fabulous.

This begs the question as to whether, if the review had been done earlier and the committee met on this issue earlier, prices would have reduced and been published online sooner.

That might be the opinion of the committee.

Mr. Peter Evans

The price reduction is referred to in the third paragraph of the Minister's statement.

The review made a number of recommendations which are currently being implemented by Enet, including a reduction in the maximum annual price of dark fibre by over 50% to €2.60 per meter.

Before my time runs out I would like to go back to one last matter. When this was tendered originally, BT wanted to enter that process?

Mr. Peter Evans

Yes.

Did I understand that BT was told at the time that it could not because of an operator? Can Mr. Evans clarify that for me?

Mr. Peter Evans

The EU state aid rules, which Mr. O'Dwyer mentioned, are published by the European Commission. The Commission was very clear and it said the MANs must not be run and operated by a telecoms operator because Europe saw that there would be a conflict of interest. If one is a telecoms operator and one is managing the MANs, there was a perception of an incentive to distort competition in that way. They wanted a company to come in and just run the MANs. We were a telecoms operator at the time so we were excluded from that process.

There is a question now as to whether there is a conflict of interest with the entity that actually won. That is the very thing that prevented BT from going in. The rules prevented BT from going in but the entity that got it-----

Mr. Peter Evans

The entity that got it was not an operator at the time. It has become an operator over the years and that is where the conflict has arisen.

When it became an operator in time, the rules applied.

Mr. Peter Evans

Yes, that is what we believe. The Department clearly has a different view.

Therefore, there is a role for the regulator or for somebody else here. It can happen that somebody is not an operator at the time, they become an operator and then there seems to be conflict of interest. There is nobody in a monitoring position to say that matters have changed. Not alone that, but the contract was extended after that had become apparent.

Mr. Peter Evans

Yes.

I call Deputy O'Connell and I ask her to be brief so we can bring in Eir in a few minutes to deal with it before the vote.

I will only be a minute. I am just trying to get my head around this issue this morning. I thank the witnesses for coming in to speak with us. I refer to the Norcontel report. Do the witnesses think it is right? Would they argue that it is not correct? My understanding from what has been said here this morning is that the Norcontel report basically said not to fragment the market and that it would be better to have consistency and continue with company A. Do the witnesses agree with that as people who operate in the business? Was the Norcontel report correct?

Mr. Peter Evans

No, we do not agree with it. It could have still achieved that by doing a tender and having the company that is the incumbent bidding for the tender and winning it. That would have still achieved the continuity that was needed but it would have been in the environment of a competitive process to keep it competitive in how it will run the contract. We deal with multinationals and public sector organisations and it is very rare that contracts get rolled over for the long term. In almost all cases, the company will look for a retendering process to get the best value and service out of the bidders. Even if that same company retains the business it still goes through a process.

I am only after seeing all of this now this morning but the 50% reduction seems like a very round figure. Can BT match that price or is that commercially sensitive? Is that the price of it? How much is it per metre and how does it compare? Obviously the comparisons are other countries with different landscapes, different poles and different everything but all things considered, what is Mr. Evans educated guess coming from the sector? Is that a real price?

Mr. Peter Evans

If the Deputy has the time to read the Analysys Mason report, it does a pretty-----

I will later but not now.

Mr. Peter Evans

It does a pretty good study around where the pricing was. ComReg has recently done an analysis of Eir's duct pricing and fibre pricing and the ComReg regulated price for Eir is even below €2.60. It is below the €1 mark. The Eir network is different, it is a bigger network and it is in more places but even at the new and reduced price there is still a gulf between that and the regulated price from ComReg.

Before this morning there was an even bigger gulf.

Mr. Peter Evans

Yes, exactly. That is why we feel ComReg's involvement with the management of this contract on an ongoing basis is essential because it knows the prices-----

The Minister said that it will be. He referred it.

Mr. Peter Evans

He said ComReg is just there to look at it now. We think it should be an ongoing annual monitoring.

Mr. John O'Dwyer

They do this for us in the emergency call answering service, ECAS. An annual review by the regulator, ComReg, would be very helpful to manage this going forward.

What is BT's regulator called? Who does it provide to every year?

It is the 999 emergency service.

Mr. John O'Dwyer

It is a concession agreement with the Department but it has effectively contracted the ComReg communications regulator to audit us every year and then to publish that audit every year for consultation. ComReg then sets the pricing etc. within the wholesale market. It is all controlled by the communications regulator, not by the Department.

On the EU state aid rules where the MANs were not to be run by the operator where this all started out, if audits were carried out every year like with the 999 emergency service, would that annual audit throw up something like this new relationship that has emerged since?

Mr. Peter Evans

Absolutely.

Mr. John O'Dwyer

Yes.

I hope I am phrasing this correctly but from day one, the company clearly had no involvement with this sister company but through the process it has obviously acquired it. Are the witnesses saying there should be an annual audit to see if the terms have changed?

Mr. Peter Evans

That would be one of the matters it would look at. It would look at the transparency between the commercial entity and the non-commercial entity but it would also look at matters such as pricing and cost models for the organisation, publication of discount schemes, transparency and non-discrimination. It would look at all those matters which ComReg is expert in.

I call Deputy Catherine Murphy and I ask her to be brief because we want to bring in Eir and complete our discussions with it before the voting starts.

I do as well so I will try to be very quick with a few questions. BT expressed concerns to the Department way before the extension of the contracts about how the MANs were being run. Is that fair to say?

Mr. Peter Evans

Yes.

Did BT notice any change in its dealing with Enet either before or after the acquisition by Granaghan McCourt or was it pretty much a similar relationship all the way through?

Mr. Peter Evans

It was pretty much a similar relationship. Similar people were involved in the business here even though the ownership had changed.

I want to ask about the language in a lot of the documentation on broadband coverage, regions of the country and all this kind of stuff. There is a difference between passing the availability of a facility and the penetration of the facility. It gives the impression that there is a large take up. Cost and the 50% reduction is important from that point of view. Cost will be a determining factor for some people in taking up the contract because of affordability and that. It is true that the language is more or less about the coverage running past as opposed to the penetration. Would it be more appropriate to match the level of penetration? Is that possible? Is it done?

Mr. Peter Evans

On the MANs?

Say BT has the MANs but there are other entities with broadband as well. It would be quite useful to have a full mapping service so we know what is available and also what the penetration is as opposed to what is there in theory, what is being taken up in practice and what the impediments to taking up broadband might be. Some of that has been addressed yesterday to some degree by a reduction in the costs. Would that be fair to say?

Mr. Peter Evans

The reduction in the costs is always helpful because that will flow down and add to the competition in the areas. The Deputy's question is around operators talking about coverage of 1.6 million homes or 500,000 homes but what is actually more important is how many people have taken up the service.

Mr. Peter Evans

For example, do they have 10% penetration or 20% penetration? What really drives that is competition. If there are multiple operators, retailers and wholesalers in an area at lower prices, consumers will buy the best service. It drops prices down but it also increases service levels.

It is all the more important that the MANs contract works effectively if that is the case.

Mr. Peter Evans

Yes. It was a lot money. It was €180 million that was spent back in 2002.

There would be consequences for the State under state aid rules for not operating this correctly. What consequences does Mr. Evans understand there will be?

Mr. Peter Evans

Mr. O'Dwyer is probably more of an expert in this area. The State will be given an opportunity to address the concerns and non-compliance first and then there would be a more formal approach if the State did not address the concerns.

Mr. John O'Dwyer

There are possible sanctions.

Were the witnesses aware that this has been with the Department since March last year?

Mr. Peter Evans

Yes, and we have been asking for it to be published.

A Deputy asked if the witnesses raised the issues of MANs generally. I would love to have that correspondence if the witnesses could consider it.

Mr. John O'Dwyer

To save time, we can look at that and check with the Department because it is in confidence. We can ask.

That is fine. The witnesses knew about this report since last year. If the witnesses asked for it, what response did they get from the Department?

Mr. Peter Evans

It said it was looking through it and that it would be published shortly.

I am not an expert and am learning all of this from what the witnesses are saying today. If this was published a year ago, would there have been a 50% reduction then?

Mr. Peter Evans

That was a recommendation from the report so it would have been down to the Department and Minister enforcing that. We think the Minister, Deputy Bruton, has done the right thing by publishing it.

Would it have been more beneficial if it was out last year?

Mr. Peter Evans

Absolutely. It would have had a year of lower cost for the industry and for consumers.

Ultimately, there would have been a trickling down period.

Mr. John O'Dwyer

Stimulating the investment, we could have-----

We could have gone through it by now and I, the consumer, might have cheaper broadband.

Mr. John O'Dwyer

It would stimulate investment and there may be more choice.

I am going to conclude this session. On behalf of myself and the committee, I thank Mr. Evans and Mr. O'Dwyer for being here. We found it interesting and educational, which is why they are here. I think the public has learned a lot in the last hour or so. I thank them and appreciate their attendance here.

Sitting suspended at 12.02 p.m. and resumed at 12.05 p.m.