Eir

I welcome Ms Carolan Lennon, chief executive officer of Eir. She is accompanied by Mr. Edward Storey, director of strategy and corporate communications. I remind everybody to put mobile phones onto airplane mode, as merely having them on silent can interfere with the recording system. I thank the witnesses for their attendance. I want the public to know the witnesses are not obliged to be here and we are grateful for their presence. They are here to inform and educate us about the telecommunications and broadband issue. The Department attended some time ago. We do not have any technical expertise and felt that talking to industry would help us in our understanding in order that we are better informed when we have the Department back in. The witnesses are not under examination like a Department and are here to assist us. If any question is directed at them which they feel is one for the Department, they should say that and not answer for the Department. We will deal with the Department.

I advise witnesses that 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 the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I call Ms Lennon to make her opening statement.

Ms Carolan Lennon

I thank the committee for the invitation. We are happy to be here and hope that we can help with the information on the telecommunications industry and market in Ireland. I will begin by addressing Eir's current investment strategy, which is underpinned by strong support from our new shareholders, NJJ. We are focused on further network expansion of both mobile and fixed services and plan to spend €1 billion over the next five years. That is on top of the €1.5 billion that we have already spent, making Eir the largest investor in telecommunications infrastructure in Ireland in the last five years. The European Commission states that Eir's €1.5 billion investment moved Ireland from a position where 30% of the population had access to high-speed broadband to 90% today. Earlier this week, we announced a €500 million investment over five years to expand our fibre-to-the-home network, FTTH, beyond rural Ireland to a further 1.4 million premises. That will cover 180 towns and cities. When this project is complete, 75% of premises in Ireland will have access to fibre-to-the-home technology, which will move Ireland to third place in Europe for fibre to the home roll-out. Every town in Ireland with 1,000 premises will be included in this roll-out. Eir also contributes more than €1 billion to the Irish economy annually.

In our material submitted to the committee and our discussions today, we are conscious of the ongoing national broadband plan process and our own engagement with the one remaining bidder, as a likely subcontractor to National Broadband Ireland. We welcome the opportunity to attend the committee and to be as helpful as possible. However, there may be some specific questions about the process of the draft contract which we may not be able to discuss.

Eir's rural fibre investment, to pass over 300,000 premises, has attracted much public and political commentary and criticism. When the Department of Communications, Climate Action and Environment approached all the network providers, we were asked to provide any future investment plans we had in the intervention area. We faced a decision at Eir. We were fast approaching the end of our fibre-to-the-cabinet investment programme, which brought high-speed broadband to 1.6 million homes and businesses in suburban and urban areas. We put together a team of engineers, planners and contractors, to prove that we could roll out fibre quickly, efficiently and on budget.

We had to decide whether to dismantle that team and wait for the national broadband plan, NBP, process to conclude and possibly rebuild the team at that point or to keep that team moving forward and continue our fibre investment into the remaining commercially viable areas. We knew we had a commercial business case for roll-out to another 300,000 homes in rural Ireland. Eir decided to continue fibre investment into rural Ireland. The specific 300,575 premises - identified by Eircode - were selected based on a number of criteria but essentially to provide the greatest number of premises which were commercially feasible that we could deliver within our €250 million budget. We needed to stay within that budget and we needed to see how many homes we could get passed for €250 million.

In April 2017 we entered into a formal commitment agreement with the Department - at its request - and we shared with the Department an indicative deployment timeline. I am pleased to say that as of last month, the programme is 76% complete and more than 228,000 of the specific 300,000 were passed. We have also passed an additional 30,000 rural premises. People refer to the 300,000 premises but these are not just statistics: 800 people have laid 22,000 km of fibre across the State from Drumcliff in Sligo to Rathmoylan in Waterford. When we are completed in June this year, some 900,000 people in rural Ireland will have access to high-speed fibre broadband, as will 30,000 farms, more than 1,000 schools, 300 business parks and 50,000 small businesses.

Our rural fibre programme is an investment of €250 million by Eir shareholders, connecting rural communities with high-speed future-proof technology. We believe this is the single largest investment in fixed fibre technology in rural Ireland and is unmatched in scale and scope by any other operator. I reiterate that our rural fibre to the home investment is Eir's own private capital. It is not subsidised in any way by the Government. Consequently, by June of this year more than 335,000 homes and businesses that originally required a subsidy under the national broadband plan will be able to avail of high-speed broadband without any contribution from the taxpayer.

As for the national broadband plan, as Eir began the rural 300,000 deployment we also remained a bidder in the national broadband plan and committed to securing the contract to deploy high-speed broadband to the remaining premises within the intervention areas. We entered the national broadband plan process with only one goal, which was to win the NBP. We invested more than €7 million on our bid. On 26 September 2017, we responded to the Department's invitation to submit a detailed submission, known as an invitation to submit detailed solutions, ISDS. This included more than 3,000 pages of information, maps contained in 35 memory sticks and 52 lever arch files. We actually had to make a wooden box to contain the submission. The Department was aware that at that time, Eir had a range of commercial, regulatory and governance concerns about elements emerging in the procurement process. We had raised these issues in August 2016 so the Department was well aware of our challenges. We had decided, however, to remain in the process. Even though there were three bidders remaining at that stage we were only one of two who submitted an ISDS. It was a lot of work to put that ISDS together and submitting it.

In January 2018 my predecessor, Richard Moat, met the then Minister, Deputy Denis Naughten and the Secretary General of the Department, Mr. Mark Griffin, to inform them of Eir’s decision to regrettably withdraw from the bid process for the national broadband plan contract. We confirmed this in writing on 30 January 2018. Following protracted discussions we ultimately we came to the conclusion that the NBP framework would drive very substantial additional costs and delays to the roll-out of high-speed broadband to rural Ireland. In our view the NBP framework resulted in duplication and inefficiency, adding to the ultimate cost to deliver high-speed broadband to non-commercial areas of rural Ireland. We could not, therefore, accept it and we could not recommend it to our board.

There were specific requirements, such as ring fencing of funding, the creation of a wholly separate subsidiary company and the proposed restrictions on our existing wholesale division’s ability to compete in the NBP areas. These were all critical factors in our ultimate decision, as was the knock-on effect of NBP pricing and other decisions on our business outside of the intervention footprint. This was a big consideration for Eir.

These challenges were unique to us because Eir is the only operator with an extensive wholesale division. It was also looking as though Eir's infrastructure was the most likely to be built on. There were processes and aspects that applied to Eir that did not apply to other bidders.

The committee has asked that we also refer to any other details we had on the metropolitan area networks, MANs. The MANs did not form any part of our bid for NBP. As we have a network everywhere there is a MAN, we do not use the MANs. We did not have any communication with the Department on the MANs. We had, however, been awaiting the launch of a re-tender of the MANs contracts and we expected to see it out in the summer of 2019. We had planned to tender because, as I said, we have infrastructure everywhere there is a MAN and we thought there would be synergies there so we could probably put in a good bid that would save some taxpayer money.

The committee also asked for information on our mobile and 5G investments. Recently we began a €150 million mobile network upgrade and expansion. This will grow our network by 25% with over 200 sites. It will expand our 4G coverage to 99% population and geographical coverage.

It will also allow us to trial 5G later this year and to trial fixed wireless access as another potential mobile solution to rural broadband coverage.

It remains a source of real regret for Eir, and for me personally because I was the managing director of Open Eir, which was heavily involved in putting together the NBP bid, that we ultimately found ourselves in a position where we could no longer remain in the NBP bid process. I worked very closely on the process with a dedicated team of employees. It was not a decision we took lightly. We continue to engage extensively with the remaining bidder and we continue to support the Department in rolling out the NBP.

I am happy to take any questions that the members may have and will endeavour to be as helpful as possible, conscious of our obligations in respect of the communications protocol.

I thank Ms Lennon for her presentation.

I wish the witnesses a good afternoon and apologise for the delay. I wish to deal first with the MANs. I appreciate that Eir has its own network but did it indicate its interest to the Department in advance? These contracts were not due to come up until 2019 and 2024 but would have been dealt with in advance of that.

Ms Carolan Lennon

Yes. The normal process for this is to see the information on the eTenders website. We were constantly looking at the website to wait for the details.

Eir was expecting it.

Ms Carolan Lennon

We were expecting it and we expected to bid. We were very disappointed to hear in the press - we did not hear it officially - that the contract had been re-awarded.

That would have been several entities potentially in a competitive process.

Ms Carolan Lennon

We expected that and we felt we had a good opportunity there. As I said, we already have infrastructure in all of these places so we thought there was an opportunity for some cost savings and to potentially make a successful MANs bid.

In fact it might have driven down the price several years ago because we noted there was a 50% reduction per metre announced yesterday, as a consequence of the Analysys Mason report.

Ms Carolan Lennon

We just saw that last night and we have not gone through it in detail yet.

I may come back to that. I want to concentrate on another point. Ms Lennon touched on her regulatory concerns with regard to the withdrawal of the national broadband plan. We have only one entity now. Ms Lennon said there were only two. It can only be Eir and Enet who were still in it - if that is what the consortium is called now. It would have been SIRO. I understand it was in the process. Was it in the process?

Ms Carolan Lennon

It was in the process then but at the formal submission in September 2017 which required the detailed, specific solutions only two bidders submitted that detailed solution, and we were one of those.

Ms Lennon has gone through the efforts and costs for that.

Ms Carolan Lennon

To put that together, yes.

It is not an inconsiderable effort to do that submission. Did Ms Lennon raise the concerns at the time with the Department? I understand there is a communications protocol but there would have been a separation within the Department for the team that was dealing with it. Did Ms Lennon raise her concerns?

Ms Carolan Lennon

Absolutely. Right off the bat, the Department gave us the detailed communications protocol and we were very happy with that. There was no issue there. As part of that there were regular meetings with the Department's team for the NBP. I was at many of those meetings in my previous role. We were raising those issues for 18 months. We started raising them in August 2016. To be honest, those issues never changed and across that entire 18 months the issues remained the same. As we worked through the process we knew the September date for the detailed submission was approaching. Our chief executive officer got in touch in writing with the Minister in July and they met in August as part of an overall meeting on communications infrastructure and investment. He raised those issues-----

Should he have raised those issues?

Ms Carolan Lennon

I believe he should have. We wanted to submit our submission and make sure he would raise these issues. He raised them and we then went ahead and submitted our ISDS. The next step was for the Department to issue the contract in the new year. We were hopeful that between the submission of the ISDS in September and the contract in the new year a number of our issues would be addressed. However, when we saw the contract in the new year, there were a few small changes, but none of the fundamental issues surrounding governance, cost and regulation had been addressed. The next stage which was due to be in February was to sign off on the contract. It was to commit to all of the commercial arrangements included in the contract, but we knew then that we would not be in a position to do that. We had been raising issues for 18 months and the bid was due to be awarded in April. We did not believe there was any opportunity between January and April for these things to be addressed because they had not been addressed in 18 months. Therefore, we made the unfortunate and sad decision to pull out of the NBP. That was the sequence of events.

Does Ms Lennon think there was inequality of treatment? We see in Mr. Peter Smyth's report that there was ongoing engagement with another entity, but in Ms Lennon's experience, was there inequality of treatment?

Ms Carolan Lennon

Given who we are in terms of the ex-incumbent, that it looked likely that our infrastructure was going to be used and that we are regulated, in any decision we made, for example, on pricing in the intervention footprint or access to our products or a service level agreement to repair, we had to worry about the impact on the rest of our business. That, however, did not apply to anyone else.

Would Ms Lennon say Eir was subject to inequality of treatment?

Ms Carolan Lennon

I was surprised to hear about the other meetings with the other bidders. I found out about it in the same way as everybody else and was surprised.

Eir accepted the protocol, but the protocol did not seem to apply universally.

Ms Carolan Lennon

That was a surprise, but it was not the reason we withdrew. Our reasons were the same as those back in August 2016 and we communicated them throughout the process.

However, judging from the report, there was no equality of treatment.

Ms Carolan Lennon

In the communications it certainly does not look like there was.

In retrospect, does Ms Lennon think the concerns Eir expressed undermined the national broadband process? It appears that instead of the process accelerating the delivery of broadband, it has delayed it. Is that correct?

Ms Carolan Lennon

There are a couple of issues. The fact that there are state aid rules on top adds a level of complexity. From where we were coming as a regulated ex-incumbent, Eir had a level of complexity. However, we were of the view that if we had a commercial case to deliver the NBP - we do not, but if we did - we could have done it cheaper and faster than it could have been through that NBP process because of the complexity and cost that arose from it.

Eir's recent investment which I accept is a commercial one and does not require a subsidy from the State is in part of the area mapped as an intervention area.

Ms Carolan Lennon

Not any more.

No, not now, but it was in terms of the business case made at the beginning. Does this change that business case? Does what Eir and possibly others are doing change it?

Ms Carolan Lennon

Potentially, it does. If the 300,000 for which we had a commercial case were still in the NBP, we believe, based on our analysis, that it would require a subsidy. We had a case to make, that we could do it cheaper than if it was part of the NBP process. Second, the subsidy required for the NBP is based on two things: how quickly one can do it and how many people are in it. If other network developments happen at the same time and people avail of a fixed wireless solution, a satellite solution or whatever else, potentially, that will reduce the number of people who are in it. However, building a fibre connection to the home network is a long-term investment. As it is future proofed, we will not look at our business case in the next two years. We expect the level of uptake to grow over time, but undoubtedly that will make an impact on the subsidy.

We note what Eir stated about the terminology used of "passed" and "access to" and that it does not necessarily mean penetration.

Ms Carolan Lennon

Absolutely.

The regulation is quite confusing. ComReg does some things and not others, while the Department appears to be a regulator of sorts. Did the Department dictate duct prices and the like?

Ms Carolan Lennon

No. The regulator sets the prices. It is done on what is called a cost orientated basis. The regulator looks as the cost of erecting and maintaining poles in rural Ireland and bases the regulated price on this. We are bound by the regulated prices. Again, we are concerned that in being asked to have a different regulated price in one part of the country we would then be required to have the same price in the rest of the country. We are obliged to be equivalent to other operators all over the country. We do not have varied prices across the country.

There has been much discussion about whether 5G is an alternative to fixed fibre. It would be useful to have Ms Lennon's input on that issue. Does it differ in urban and rural areas? What does it look like physically? It would be helpful to know.

Ms Carolan Lennon

The 5G network will certainly deliver very impressive speeds, if one will benefits from it.

A fast rate.

Ms Carolan Lennon

It will be an upgrade on the 4G network. If one is in an area that can benefit from it and loads of people are not trying to benefit from it, one will have fibre-like speeds. That is definitely the case. The problem is that if there are 100 people on it, everybody is looking for the same footprint, whereas if one has a fibre to home connection, one does not have that contention issue. The other issue is that the 5G network requires an awful lot of masts, which can be a challenge, particularly in rural areas. I believe the 5G network can solve some of the problem, but it cannot solve all of it.

When Ms Lennon refers to an awful lot of masts, is it more than one per town?

Ms Carolan Lennon

Some of the equipment used can be smaller, but it is line-of-sight technology. From one's house one must be able to see the mast. Also, as they cover smaller areas, there will be more of them.

Why does Ms Lennon think the Department and ComReg are not in a rush - they certainly appear to be stalling - in the publication of mobile black spots? Would it not be something obvious to map in order that Eir would know what it had to work on, or would it know anyway?

Ms Carolan Lennon

The operators would know where they were. The challenge in dealing with mobile black spots comes back to commercial decisions. As an operator, it is difficult to make a commercial case to gain access to a site. They are black spots for a reason and perhaps one cannot get access to them. However, all operators know where the black spots are. From talking to other operators who are committed to trying to solve the problem, we would like the Department to state: "Here are the sites you can use because we own them. Now, as mobile operators, you can tell us how this is going to work".

In her opening statement Ms Lennon focused on possible duplication and inefficiency. It is part of the reason that mapping is so important. Bord Gáis and the ESB also have some fibre networks and there are others. Esat has some in County Mayo. Is the absence of it being connected what Ms Lennon was talking about in terms of duplication and inefficiency?

Ms Carolan Lennon

Not for us. In our case, part of the tender and the requirement for the national broadband plan was that we would set up a completely new wholesale team. We have a wholesale team today; we are the biggest wholesale operator in Ireland. Part of the NBP was that we would set up a duplicate wholesale team to sell into the national broadband plan footprint and that our current wholesale team would not be able to sell into it. If I had 80 people selling today, with all of the systems and costs involved in supporting them, I would have to have another 80, probably, selling into the national broadband plan footprint. That did not make any sense for us and we could not stand over it. Therefore, we could not recommend it to the board.

These are strictly five minute slots in order that everybody can ask his or her questions before the witnesses leave.

Five minutes is more than enough.

I welcome Ms Lennon and Mr. Storey. I will start with the existing infrastructure. In the past couple of weeks there have been announcements by Eir, SIRO and Imagine Telecommunications Limited of increased investment in infrastructure. I live in and represent part of a rural constituency.

In the past, issues were raised relating to old infrastructure, poles, and copper rather than fibre to the mast. Are those the areas where investment will be directed? I believe the sum was €500 million.

Ms Carolan Lennon

No. The 300,000 which we are now building and which will be complete by June is pushing into rural areas. The investment announced on Monday relates to urban and semi-urban areas, that is, towns of over 1,000 premises. The Deputy is correct. We are over-building our copper network with fibre. It is future-proofed technology, which will serve Ireland well into the future up to 10 GB.

While it is great that urban areas will receive increased investment and an enhanced infrastructure, the difficulty is that many customers in rural areas are serviced by single masts. They are often copper to mast. Why is there no investment in those areas, particularly when they are the same areas?

Ms Carolan Lennon

Because there is no commercial business case for this. We did those 300,000 rural build - and that is very rural - because there was a commercial business case but there is no business case for us to go beyond that. That is the reason a national broadband plan exists in the first place, because it recognises that subsidy is required to bring fibre broadband to certain areas.

I get that. The lack of commercial business case is what I was getting at. It goes back to the argument, which some might say is ideological, that the State has to intervene to ensure something is available when it is not commercially viable, but that it is necessary in the interests of the State that it be provided.

Ms Lennon referred to the NBP. It has been problematic, to say the least. Someone living in a rural area might hear a service provider say that it is not commercially viable for it to make the investments but that there is an NBP that will resolve their problem. So far it has not resolved their problem and it has been dogged with difficulties. I raised this with BT earlier. Notwithstanding any changes in the structure of the company which have made it almost unrecognisable from when it first drew up its bid, one problem that has been raised is that the initial plan was for 840,000 customers. Eir made a pitch for 300,000 of them.

Ms Carolan Lennon

Eir did not make a pitch. The Department contacted all telecoms operators and asked what our plans were to build into that 840,00 or 850,000 intervention footprint. We understand that several telecom operators, including ourselves, went back to the Department and told it our plans. The only operator that went off and put its money where its mouth was, spent the €250,000 and did the build, was Eir. We signed a commitment contract at the request of the Department. We would have done that build anyway.

Okay. BT was saying something different, namely that the prompt came from Eir.

Ms Carolan Lennon

That is absolutely not correct.

That is fine. The point is that the 300,000 customers we are discussing here are considered the more commercial viable.

Ms Carolan Lennon

Absolutely.

That goes back to my point. As Ms Lennon has pointed out, the NBP deals with households and areas where it is not commercially viable. That was to include the 840,000 customers. When 300,000 of the most commercially viable of that figure are removed, it makes the remaining number more problematic in terms of their viability. Is that part of the reason for the current difficulty and why there was not sufficient competitive tension in the process?

Ms Carolan Lennon

I do not believe so.

Did Eir bid for it?

Ms Carolan Lennon

We started with a challenge of 850,000. Now we have 540,000. By June, 335,000 rural homes, businesses and farms will be passed at no cost to the State.

Was Eir a bidder for the remainder?

Ms Carolan Lennon

Yes. We left for the reasons we gave, namely, that none of our issues was addressed in the 18 months that we raised them.

Does Ms Lennon believe that what was left was a transparent process?

Ms Carolan Lennon

Absolutely. We not only signed up to 300,000 but -----

No, I do not refer to the 300,000 customers but to the remainder that Eir did bid for.

Ms Carolan Lennon

We knew what we were bidding for but we had issues which, as I said, we raised back in August 2016. Those issues were not addressed in the following 18 months. We put in our detailed submission solution. We saw the contract in January. Nothing much had changed apart from a few small things around the margins. When we looked at that, we knew that we did not have a case on which we could recommend Eir's participation.

Was that from Eir's end?

Ms Carolan Lennon

Absolutely. Of all the issues with which we struggled, such as a separate wholesale team, the regulatory impact on the rest of our business, all the process and overheads, none had been addressed by the Department. Eir, therefore, just could not go forward because it made no sense for us to do so.

We will take these issues up with the Department.

I now call Deputy Connolly.

I thank Ms Lennon for coming before the committee. It is very helpful. There is no obligation on her and we appreciate it.

Does Eir have figures on uptake and use?

Ms Carolan Lennon

We do not share them, as there are other companies building fibre networks so that it is commercially sensitive. In terms of our business case, the uptake numbers are in line with what we expected. They substantially measure what we saw in our fibre to the cabinet build in urban areas of Ireland. We are very happy with the uptake. The last figure we published was 14% but that was some time ago. For homes that were passed at the start of the build, penetration is more than double that figure. As time goes on, there is more awareness and more people are coming onto the network.

Eir is not publishing the figures because they are sensitive, but it has something in its business plan and targets to be achieved. What percentage did Ms Lennon give?

Ms Carolan Lennon

We no longer present these figures, as others are building networks and it is commercially sensitive.

Eir used to present the uptake at one time.

Ms Carolan Lennon

Yes, and the last figure was 14%.

Ms Carolan Lennon

It was about nine months ago.

Eir has decided that it will no longer publish these figures.

Ms Carolan Lennon

Yes, because other companies are building fibre to homes so it is commercially sensitive.

The figure of 14% seems very low.

Ms Carolan Lennon

I do not believe so. Consider the people who were passed earlier -14% is more than double. It is exactly what we saw in urban areas. We do not have 100% penetration in urban areas; it is about 80%. There might be homes, holiday homes, or households where age is a factor, which are not connected.

I am only trying to check.

Ms Carolan Lennon

We are not worried about uptake. Our business case is fine and we are not worried about the commercial case.

I refer to the 300,000 properties for which there was a commercial business case. Eir wishes to complete this by June.

Ms Carolan Lennon

Yes.

How many remain to be completed?

Ms Carolan Lennon

We are 76% -----

That is rural and urban.

Ms Carolan Lennon

No, that is all rural.

Therefore, 76% of that is done.

I return to the MANs. Presumably Ms Lennon has read the report.

Ms Carolan Lennon

We only saw it last night.

That is okay; we only saw it less than an hour ago.

Ms Carolan Lennon

I am not a speed reader, unfortunately.

Did Eir know that the report was with the Department for a year?

Ms Carolan Lennon

We knew that the Department was working on a report and we expected to see it. We did not know for how long it had been ready, so we were surprised to see it had been there for a year.

According to Ms Lennon's opening statement, Eir was waiting for the project to be retendered and was disappointed that it was not.

Ms Carolan Lennon

Yes.

Ms Lennon said that Eir was going to enter that process with a view to getting the tender -----

Ms Carolan Lennon

Of course.

---- in the same way that Eir entered the broadband area. What is Ms Lennon's understanding of why it was not tendered?

Ms Carolan Lennon

To be honest, we did not get any information.

Eir was watching the appropriate sites to see it come up.

Ms Carolan Lennon

Yes, and we did not see any retender. The first we knew was that there was not going to be a retender process.

However, Eir had expected that there would be.

Ms Carolan Lennon

Yes, we expected that there would be.

Would that have been the normal in this business?

Ms Carolan Lennon

Yes. It was assigned in 2004, which is 15 years ago. In 2019, we expected to see it in eTenders.

Eir was watching for it.

Ms Carolan Lennon

We were having a look at it.

How did Eir become aware that it would not be retendered and that it was being extended?

Ms Carolan Lennon

In the press.

Did Eir make a complaint at that point?

Ms Carolan Lennon

No, we did not make a complaint. We discussed it but we did not make a complaint.

Eir discussed it with the Department. Can Ms Lennon share what was discussed?

Ms Carolan Lennon

We just told the Department we had expected to see it retendered.

Was a reason given?

Ms Carolan Lennon

No.

No reason was given at all. Was Eir happy to take no reason?

Ms Carolan Lennon

We have our own build. We were finishing our rural build. We were getting on with the things on which we were focussed.

It a serious matter not to retender something. A decision was made - and I am not saying that there was anything wrong with that - but we now learn that a report was done. Did Eir have an input into the report on which that decision was based?

Ms Carolan Lennon

No.

Did Eir have any input into this report?

Ms Carolan Lennon

No.

Eir applied. BT explained to us earlier that, under state aid, it wanted to participate in the initial tender. Did Eir enter into the initial tender going back to-----

Ms Carolan Lennon

I do not know. It was before my time.

It was indicated, by the entity that was before us earlier, that it was excluded because there would have been conflict. The entity that got it did not have that conflict but, subsequently, did. Would Eir not have had the same conflict had it applied if the Department had retendered?

Ms Carolan Lennon

We did not believe we did. We have a separate wholesale business and all the regulations around that so we believed we were in a position to re-tender had if the opportunity had arisen.

I thank our guests for appearing before us voluntarily because they did not have to do so. I also thank them for their commitment to the north west and Sligo. We hope their new national call centre will based there.

Ms Carolan Lennon

Yes, it will be. It will open in March.

I hope recruitment for that is going well.

Ms Carolan Lennon

It is going really well. We are delighted. It will be full in terms of recruitment by the end of February.

Eir should tell all its commercial friends to come and do the same up in the north west.

Ms Carolan Lennon

Deputy MacSharry is welcome to come to our launch in March.

No problem. After 18 months of "Look, we have these issues. Can you address them? If you do, we'll go on", did Eir get a sense that there was no effort to answer its questions or did it feel that the Department was doing its best to-----

Ms Carolan Lennon

We knew there were some real restrictions, particularly in the context of state aid. We know who we are in terms of our ex-incumbency. Our regulation poses some challenges. We raised all of the issues in the context of understanding that we would all love things to be simpler but sometimes that they cannot be. We were disappointed that they were not addressed. I can say this not as CEO. I was the person who led the NBP bid from the start. We wanted to win it and we thought we were best placed to win it because we know how to build networks and we know the infrastructure. It was disappointing. We kept thinking that the issues would be addressed but in the end, they were not.

Was Eir strung along? Was it told that the issues would be dealt with, that it should not worry and that it should remain in the process?

Ms Carolan Lennon

That is a question for the Department.

Make no mistake - I will be asking it. I am just interested in Eir's perspective.

Ms Carolan Lennon

We gave it our best shot to try to change, to say why and to give the reasons.

I understand that fully. Eir did that. It asked the Department questions and told it about its concerns. Did the Department say it would sort that out or that it would provide an answer? Was it a case that Eir was putting these questions and raising these matters of concerns and they were falling on deaf ears?

Ms Carolan Lennon

The Department was looking to address some of them while it pushed back on others. For example, on the registration pricing and our worry that if we set a price over here, it would end up our de facto price over there. That is a real issue for us with a business that is all over the country and an equivalence requirement. The Department will state that this will be okay but we cannot take it that it will be okay because we are regulated, as are our prices. There were some areas where the Department did not accept our issue and we believed it was an issue because we are regulated and know how the rules work while there were other areas where the Department engaged on them. We went for it in terms of the ISDS submission. We did an awful lot of work and produced a large submission. We hoped that would show how serious we were about the bid in terms of the effort. We hoped for changes after that. That went in in September and the contract came out in January. That was when we realised that nothing was going to change because there had only been very small marginal changes in the contract and none of the major issues had been addressed. Up to then, we were probably hopeful that we might make some progress. We kept making our arguments, kept pushing and put in a very good submission but it was obvious in January that we were not going to get traction on those issues. At that time, the tender was meant to be awarded in April. If we could not get traction in 18 months, we were not going to get in three months. That was when we decided to-----

It was a case of "There is no point in flogging a dead horse. We need to get on with our own business." I understand that. When Eir indicated to the Department that it was pulling out of the process because it was not for it, did the Department say "Fair enough, good luck" or was there much of an effort to try to get Eir to stay in?

Ms Carolan Lennon

My predecessor went to that meeting, which I did not attend. The feedback was that the Department asked us to reconsider and not to be hasty. Richard Moat came back and we discussed it. We also discussed it with our board. At that stage, it was too late. We were of the view by April that those major issues were not going to be fundamentally addressed. They are major issues that require a lot of thought and many solutions.

This committee has been told that there were exhaustive efforts involving dinners and lunches to keep people in the process.

Ms Carolan Lennon

I am obviously not a good dinner or lunch date because I was not at any of those.

That was what I was wondering. Would Ms Lennon or her predecessor-----

Ms Carolan Lennon

No, sorry.

Would Ms Lennon have a view on that?

Ms Carolan Lennon

As stated earlier, the Department was up-front with us about the communications protocol from the start, which I understood and respected. We followed that. I was as surprised as everybody else to see that other meetings were happening because that was not our experience at all. In our case, the communications protocol was followed to the letter, which was fine by us. We bought into that.

Is the communications protocol a document?

Ms Carolan Lennon

There was a document. There was also a website if people wanted to submit questions, which were all anonymised. At the start, it seemed very cumbersome but we bought into it and that is the process we followed.

Looking back, does Ms Lennon feel that the protocol process to which Eir adhered seemed to apply to it but not to others?

Ms Carolan Lennon

It looks like there was a different process for both of us. That did not impact on our decision to withdraw. Our decision to withdraw was about the issues that we had raised for 18 months.

Eir was perfectly entitled to withdraw and Ms Lennon has laid out very clearly the reasons for its withdrawal. We are delighted to have Eir before us. It is able to give us a perspective that is very important to our work. I know that others are under pressure to get in. One's instinct would indicate that there seemed to be one set of rules in terms of communications protocols that applied to Eir and a different set that applied to others.

Ms Carolan Lennon

That is what the evidence seems to say.

I thank our guests for attending. In the view of Eir as a large operator, is fibre the way forward in terms of future-proofing the network in Ireland? Is that the only show in town in Ireland?

Ms Carolan Lennon

It cannot be the 100% solution because fibre has 10% of premises in Ireland that are going to-----

In an ideal world.

Ms Carolan Lennon

Absolutely, because it is possible to guarantee matters. There is a lack of contention and the future-proofing aspect. We do not want to do this twice, we only want to do it once.

From reading about it, my understanding is that it is about laying a proper network-----

Ms Carolan Lennon

Forever.

-----to which we can apply upgrades.

Ms Carolan Lennon

At the moment, fibre will support 10 GB. Nobody needs 10 GB today but they may need it in the future and it is there. In terms of that future-proofed piece-----

It is the only show in town in terms of the product that should be used. I do not want to misinterpret Ms Lennon. Eir is 76% complete regarding the 300,000 homes. Is that right?

Ms Carolan Lennon

Yes, that is right. At the end, it is going to be 335,000 homes. Of the 300,000 homes we signed up to those specific Eir codes, 228,000 have been done. We have also done another 30,000 because as we got out to build, we picked up more on the way and it made sense to pick them up when we picked them up.

Is Eir on budget with-----

Ms Carolan Lennon

Yes, we had a €250 million budget for that project and we will bring it in on budget. I get asked all the time and I get letters from Deputies, Ministers and other people asking to be added. I have the money. I have €250 million and have done as many as I can for that figure. I do not have €260 million. I only have €250 million so we are on budget.

What price is it per metre? Am I allowed to ask that question?

Ms Carolan Lennon

The average price past a home is just over €700.

Ms Carolan Lennon

It is just over €700 to pass a home.

But Eir does not do it per metre-----

Ms Carolan Lennon

To have fibre go past one's house - if one wants a connection, the average cost is about €450.

The Deputy was asking a different question about the cost of deducting-----

Yes, in light of the report we got this morning-----

The Deputy is thinking of the MANs figure-----

-----that there is a 50% reduction in cabling down to €2.60 per metre from about €5. I assume that is probably commercially sensitive.

Ms Carolan Lennon

That is commercially sensitive. We do not charge that way. We work on a homes passed cost and have an all-in cost with our contractors so we do not look----

Does Ms Lennon have a view on the price? Based on her experience in the sector, does it seem unusual to her that the price of anything could be cut overnight by 50%? Would that indicate that things were inflated previously?

Ms Carolan Lennon

I honestly have not gone through the report in detail. It sounds like a big reduction, but it has gone through.

On market players in this area and reported speeds, does Ms Lennon believe we are getting the correct information? Various players are stating there are certain speeds in County Kerry, Thurles and Tyrrellspass, for example. Is there enough transparency in that regard? As someone who works in the sector, does Ms Lennon believe we are getting the real figures?

Ms Carolan Lennon

ComReg is doing quite a lot of work in this area and hoping to produce a lot more clarity on the speeds of service in individual homes. For Eir, speeds to the cabinet network can range up to 100 Mbps.

What is the range?

Ms Carolan Lennon

It is from 30 to 100 Mbps, depending on how close one is to the cabinet. That is a challenge. With a fibre to the home connection, because it is a linked-in system, much of the variation can be taken out of the equation.

In that instance, the range is probably not 30 to 100 Mbps but a static 50 Mbps or 60 Mbps.

Ms Carolan Lennon

It really depends how close one is to the cabinet, but it probably averages at around 70 Mbps.

If one is part of the cabinet network, rather than connected via direct home connections, one will not have speeds below 30 Mbps at any point. Is that correct? When companies state they can reach speeds of 30 Mbps in County Kerry, can we trust that is the case?

Ms Carolan Lennon

One can trust the figures, but there are a few anomalies. For example, within our new roll-out to 1.4 million homes, at a cost of €500 million, there are pockets which are coloured amber on the map provided which are housing estates which have been built since the network was put in place. As they are too far from the cabinet, there are reduced speeds. We are including approximately 50,000 such houses in the urban areas roll-out. There are discrete pockets which are not receiving that service, but, in general, people are getting what is being advertised.

In discrete pockets speeds are less than 30 Mbps, but in terms of percentages-----

Ms Carolan Lennon

The Department has recognised this and they are included in the intervention footprint map. We are going to solve some of the problem with our-----

The problem will be solved by way of direct cabling.

Ms Carolan Lennon

Yes.

The people in question will not just be left hanging there. There is a plan in place.

Ms Carolan Lennon

No, they will not. We will address the problem for approximately 50,000 homes.

I want to go back to the Smith report. In Eir's engagement, it was not listened to. It had serious concerns which led to it dropping out of the tender process. If there been different engagement, might it have been heard? I am thinking of the concerns it expressed about regulatory processes, among others. Is it the case that if a company plays by the rules, it is at a disadvantage? Ms Lennon has said this is not the reason Eir dropped out of the process.

Ms Carolan Lennon

No, absolutely not.

Could Eir have had different engagement with the Department if it had been heard?

Ms Carolan Lennon

We had a lot of engagement with the Department. There were regular meetings with our team and the national broadband plan, NBP, team; I attended many of them. Our issue was that all of that engagement did not change anything in dealing with our issues which were the same at the end as at the beginning. It is not that nobody met us to discuss them with us or knew about our issues. They were known, but as nothing changed, we had to pull out.

Was Eir aware that Enet was for sale in 2013 when Granahan McCourt bought it? Would Eir have been interested in buying it at that point? Is Ms Lennon aware of that, or was it before her time?

Ms Carolan Lennon

I was not aware of-----

Mr. Edward Storey

We were not aware that it was for sale.

Would it have been something that was of interest, given that the networks are-----

Ms Carolan Lennon

Not really. We have infrastructure everywhere where it has infrastructure. We have infrastructure everywhere there is a MAN. It would not have added to our network.

I assume Eir was not interested when the Irish Infrastructure Fund purchased it at a later stage.

Ms Carolan Lennon

No.

I have a few questions, the answers to which perhaps might give us a better understanding of the whole system. Eir started to talk to the Department several years ago. I am looking at the updated Ireland broadband intervention strategy 2015. When did Eir start to talk to the Department about the rural broadband plan?

Ms Carolan Lennon

The procurement process kicked of in December 2015 when we assembled our bid team.

The discussion n the tender process started in December 2015.

Ms Carolan Lennon

Yes.

We are still not at the end of the process three years later. I have a concern about how relevant the tender process is after three and a half years. The process now covers approximately 540,000 houses. When the discussions started, how many homes were scheduled to benefit?

Ms Carolan Lennon

At the beginning we planned to connect 850,000.

There has been a change. That figure was reached on the basis that it was not commercially viable and that it qualified for State aid.

Ms Carolan Lennon

The Department created its first intervention map based on its analysis or view that it was not commercially viable. It then contacted all of the operators and asked them if they could make a commercial case and if they had plans in that regard. My understanding is a number of operators came back to it, not just Eir, but in the end we made the bid. We had the machinery, having finished one network build, and wanted to keep it going. We also had a commercial case.

Were the other 300,000 homes included at the original stage? It might have posed a risk to the overall project and access to State aid if there were 850,000 houses involved, some of which were not entitled to such aid.

Ms Carolan Lennon

My understanding is that, whether we had signed a commitment contract, if Eir or another company had started to build in the intervention footprint, it would have been a suggestion the project was commercially viable. In that instance, the company could not apply for State aid.

In the intervention area which now includes 540,000 houses, if there are people who are willing and able to pay for a broadband service, are there providers in the market which could provide it? Are they allowed to do so?

Ms Carolan Lennon

It is very difficult to do it. We receive requests every day to extend our footprint and we do. However, I can go back and say "No" to some of them because I cannot make it happen owing to my budget and timeline. Recently I was asked to look at the issue for someone. I had a look and it would have cost €30,000. Fibre cable has to be provided from the core network to the house. It is very hard for anyone to go in and out of small-----

Ms Lennon has mentioned that during the course of her work Eir has pulled in an extra 30,000 new houses which were not on the original map. If another €100 million was provided, could Eir pull in another 100,000 homes? Could that be done if Eir was given the budget to do it by its shareholders and board? Some 310,000 houses have been taken out of the plan on the basis of the budget of €250 million. If Eir had more money, could it pull in more?

Ms Carolan Lennon

When we carried out our analysis, we thought that potentially there could be another 150,000 connections, if we had more money.

Is that 150,000 pulled in from the figure of 540,000?

Ms Carolan Lennon

Yes.

How can Ireland go to the European Union under state aid rules and ask that this be approved for a subsidy when a company such as Eir is stating a significant proportion could be done commercially?

Ms Carolan Lennon

I am saying Eir could do it, but not when the processes are applied.

The 300,000 would have required subsidy if they were left in the NBP.

That is my point.

Ms Carolan Lennon

This 150,000 would have required subsidy. We can do it at a lower cost.

Is Ms Lennon saying there are 150,000 houses in the existing 540,000 houses for which, if Eir had the budget, it could do it commercially?

Ms Carolan Lennon

Yes.

We are now saying that a chunk of the plan in front of us can be done commercially if Eir had the budget. My concern from the Department's point of view, not from Eir's point of view, is how the Department can run a competition on the basis of getting rural broadband to 540,000 houses without contravening state aid rules. There is going to be a subsidy and then, lo and behold, someone says "sure I can do a third of them without any state aid". Given where we are on this contract, I am sure Ms Lennon can understand my line of thought.

Ms Carolan Lennon

I understand.

It might be possible that other providers could do the same through other mechanisms; Ms Lennon mentioned that 5G can be a partial solution in some places. Leaving the ideology out of it for a minute, if there are people who are willing to provide the service, is it possible that a larger chunk out of the 540,000 than the 150,000 could be provided commercially?

Ms Carolan Lennon

I understand Imagine is coming in later. Based on its announcement yesterday, it will say it is going to do a number of these homes.

We started off with a plan that was going to be eligible under the state aid rules at 850,000. We now have 300,000 knocked off that. Ms Lennon is saying that if Eir had another budget it could knock off another 150,000 on its own. She is saying another company is going to say it can do a whole lot more. I wonder why we are talking about the 540,000 houses now. That is really a question for the Department.

Ms Carolan Lennon

We do not have a plan to address those premises because we have our urban and national build that we are going to start. We do not have a plan to address them but when we looked at it in the past, we believed there was a commercial case for another 150,000.

If Eir's board of directors was willing to give a budget to it, it could be done.

Ms Carolan Lennon

Yes.

That is where I am coming from. The complaint I am getting in rural areas is that people are willing to pay in and do not want to have to wait for the national broadband plan. They want to get on with the job themselves but they are being held up by this process that has been going on for three and a half years with no sign of a contract. Where we started out with the contract is worlds apart form where we are now. I think the Minister is going through this matter with a fine tooth comb. I would be appalled if he were to sign a contract for this now, given that a lot of it can be dealt with.

Ms Carolan Lennon

The challenge is that it has taken such a long time and technology moves on. That is the problem.

The passage of time has made some of this process redundant.

Ms Carolan Lennon

That is the challenge, yes.

People might be surprised at me saying that. It might not be popular in some areas to say this is not necessarily the answer. However, my point is that a lot of this can be done by providers. How many premises are there in the country?

Mr. Edward Storey

There are about 2.4 million premises.

When we started out, 850,000 were to be in the broadband plan. That figure is now down to approximately 550,000.

Ms Carolan Lennon

I do not want to confuse everybody but for the sake of clarity, because we have done 335,000 as opposed to the original 300,000, the Chairman can take that 35,000 off. They are in the rural one. Because we are going to pick up 50,000 of urban infills, the Chairman can take them off. The figure of 540,000 probably goes down to 460,000.

Ms Lennon is also saying that if Eir's board of directors gave her a budget, she could take more out of that. Then there are the other companies.

Ms Carolan Lennon

The committee will hear from Imagine this afternoon.

Bord Gáis and the likes of the ESB and others have network as well.

Somebody suggested €3 billion for an ever-diminishing number. I get worried when I hear billions being mentioned and the need for the contract. We have seen documents. There is a cohort that can only get it with State support; we accept that. However, there are other ways. When people were not able to get water, they set up group water schemes and got grants. It is even simpler to run a piece of fibreoptic cable to a house. There may be other ways of doing this that we will put to the Department. When Eir started the conversation with the Department, what speed of broadband was specified in the terms?

Ms Carolan Lennon

The minimum at the time was 30 Mbps but now I believe it has gone to 100 Mbps, which is in line with Europe was saying.

Is that download or upload?

Ms Carolan Lennon

That is download.

What would the upload speed be?

Ms Carolan Lennon

I think it was 10 Mbps at the start.

We are now talking about what is envisaged by the contract for those who get it might be 100 Mbps download and what upload speed? What was it when Eir last left the table?

Ms Carolan Lennon

I do not know what it has increased to from the 10 Mbps. It has probably gone up to about 30 Mbps.

Going back to the MANs, I look at towns that have a gigabit now available. That is 1,000 Mbps. What is on offer in this contract is only 10% of speed that is available to the neighbouring town a mile away.

Ms Carolan Lennon

I do not think that is correct. If the solution that is on the table is fibre to the home, people will be able to get 1 Gbps at a minimum.

I hope Ms Lennon does not mind me asking this and she is not obliged to answer. One would see a benefit to Eir, in or out, from the plan because the Department told us it has a million poles around the country-----

Ms Carolan Lennon

We have 1.5 million.

-----and it is going to require another €200 million to do this running from pole to pole. One way or the other, Eir is going to be centrally involved.

Ms Carolan Lennon

Yes. We have been working with the remaining bidder on access to our infrastructure.

ComReg sets that price.

Ms Carolan Lennon

Yes.

Let us say in respect of our conversation this morning that ComReg had no role in setting the pace in the metropolitan area networks.

Ms Carolan Lennon

They are still not regulated.

I think it is bizarre that ComReg had no role in the urban areas while Eir is heavily regulated doing a similar type of business making its network available. When Eir is increasing the number of poles that the Department mentions, ComReg will be the adjudicator and Eir is obliged to provide it whether it likes it or not.

Ms Carolan Lennon

Absolutely, we have to provide it to anyone who wants it.

Eir cannot refuse to provide it. I am looking at the broadband plan from 2015; we have the notes. Reference is made to procurement lots, as in different regional authorities. When Eir started, were there different procurement lots? That is what is in the most recent document from the Department, as if it was going to be done on a regional basis. Did that go out the door during the process?

Ms Carolan Lennon

When we first started talking about it, we thought it was going to be in one lot. Then there were discussions about different models and in the end two lots were decided on, a north and a south region.

At the moment, are there two separate lots?

Ms Carolan Lennon

Our detailed submission had a bid for the northern lot, a bid for the southern lot and a bid for the whole lot. It was possible to bid for one, two or the whole lot together.

Eir was bidding for both. We can ask the other groups what they were bidding for. I did not know the contract could be subdivided into two lots. In terms of the 335,000 Eir has added on, were more of them in the northern or the southern end?

Ms Carolan Lennon

They were evenly split, as it happens.

In respect of fibre to cabinet, being so big, Eir is part of the landscape. When it was originally part of the Department of Post and Telegraphs it had these cabinets all around. In some villages they still have the old cabinet and Eir puts in a new fibre cabinet. In respect of the old cabinets that are, say, three miles from the exchange, has Eir any plan to upgrade them?

Ms Carolan Lennon

What we announced on Monday is basically a plan to overbuild our copper network. At the moment in a lot of those places we have fibre going from the exchange to the cabinet and then a copper line into someone's house. Our recent announcement was to bring fibre into 1.4 million premises.

That will bypass the old cabinet.

Ms Carolan Lennon

Over time, we will not need the copper line because we will have the fibre connection. We are regulated so we will have to engage with the regulator and the other operators who use our infrastructure. Our plan will be not to have two networks but just to have a fibre network.

Is Eir going to provide a fibre cable to every house in Ireland?

Ms Carolan Lennon

To 1.4 million plus our rural, so 1.735 million.

Under the broadband plan, is the plan to bring fibre to every house in Ireland?

Ms Carolan Lennon

That is the national broadband plan. What we are going to do is bring fibre to 75% of the premises in Ireland. That is our plan.

I refer to the broadband plan.

Ms Carolan Lennon

That was the solution that we originally heard.

My point was that fibre broadband could be brought to many houses but some of the householders might not want it.

Ms Carolan Lennon

The homes will be passed and the householders can then decide whether they want to be connected.

It is similar to the provision of water. Some people have their own water supply. Why run water to a house and then find the householders do not want it because they have their own supply?

Ms Carolan Lennon

The problem is that in building networks, it is not efficient or economical to build to order because a home could be 20 miles down a road. Homes should be passed because that is efficient. If the householders want to be connected, we connect them, but if not, we do not. The business case is made on the number of people who are expected to want to be connected.

Okay. The pragmatic point that many householders in rural Ireland, rather than urban areas, would make is that they might have a pole at the edge of their house or garden, and they might have an underground connection to their house-----

Ms Carolan Lennon

Yes, an underground duct.

The old, copper cable might have been in place for 30 years. In general, many people will have to replace the ducting. Will Eir bring the cable to the house or the edge of the property? What is provided for in the broadband plan? We should ask those responsible for the plan.

Ms Carolan Lennon

It is a 50 m drop and our plan is to bring the cable from the pole outside one's house to the eaves of the house. Some people say they do not want that and that they want an underground duct. In that case, generally, they install the duct and we meet them at the road.

For example, if they do not want wires over their garden.

Ms Carolan Lennon

Yes, if they think it is unsightly or whatever.

Okay. We are nearly finished and the voting has taken place. Eir is bringing the cables to homes. We are learning useful information that will help us a great deal when representatives from the Department appear before the committee again.

I have a final question before the vote. The Chairman referred to the figures of 850,000 and 330,000 customers, and Ms Lennon stated that Eir could provide another 150,000. She referred to Imagine's announcement yesterday and what it could provide-----

Ms Carolan Lennon

That is fixed wireless, which is different technology.

It is a different product. Although Imagine is offering fixed wireless, it is not equal to Eir's offer. I wish to clarify the matter.

Ms Carolan Lennon

It is absolutely not the same technology.

In that case, the two types cannot be equated.

Ms Carolan Lennon

Yes. The challenge to the plan is that the intervention footprint is based on uptake. A lot of people will benefit from Imagine's roll-out and they will take its broadband on. They will not then go on to the NBP, although they may in the future. Future-proofing is the challenge.

It is not the same product when we talk about following on from Eir. The water network is not the product to build the infrastructure and the network.

Ms Carolan Lennon

That is correct.

On my own behalf and on behalf of committee members, I thank Ms Lennon for appearing before the committee. It has been helpful and educational, which is why we asked her to attend. We appreciate her presence and we are grateful for all the information she has provided.

Sitting suspended at 1.15 p.m. and resumed at 2.25 p.m.