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Joint Committee on Transport and Communications debate -
Thursday, 27 Jan 2022

National Broadband Plan Update: National Broadband Ireland

Apologies have been received from Deputy Duncan Smith and Senator Buttimer.

We are following up, as we have done previously, on our engagement with National Broadband Ireland, NBI. The purpose of the meeting is to receive an update from NBI on the national broadband plan, NBP. On behalf of the committee I welcome the following representatives of National Broadband Ireland to the meeting, namely, Mr. Peter Hendrick, chief executive officer, T.J. Malone, chief executive officer for deployment; Ms Tara Collins, chief marketing officer, Mr. Barry Kelly, chief financial officer, and Ms Jenny Fisher, chief legal officer. You are all very welcome. I thank the representatives for coming before us. We look forward to a detailed and constructive engagement.

On privilege, all witnesses are reminded of the long-standing parliamentary practice that they should not make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person. If their statements are potentially defamatory in respect of an identified person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I remind any member who wishes to participate remotely of the constitutional requirement that members must be physically present within the confines of the Leinster House complex in order to participate in public meetings. Reluctantly, I will not permit a member to participate where they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask members participating via Microsoft Teams that, prior to making their contribution, they confirm they are on the grounds of the Leinster House campus.

It is great to have the witnesses present. I call Mr. Hendrick to make his opening statement.

Mr. Peter Hendrick

I thank the chairman and members of the committee for the invitation to discuss the national broadband plan again today. As members are aware, I am the CEO of NBI. I am joined by T.J. Malone, who is the CEO of NBI deployment and leads the team building the NBI network. In addition, we have senior management team members: Ms Tara Collins, responsible for marketing and communications, Barry Kelly, who is in finance, and Ms Jenny Fisher, who oversees governance and the interface with the Department with responsibility for communications.

I thank the committee for their attendance at our offices in mid-October when we also took the opportunity to witness the operations in a nearby deployment area. It was a pleasure to present first-hand how the NBI network is being deployed and I strongly believe these field trips are informative and helpful as it is always hard to convey the size, scale and complexity of the NBP without this context.

As the CEO of NBI, I remain incredibly proud of the work our team is delivering, particularly against a backdrop of the turbulent conditions caused by the Covid-19 pandemic. Across the project, we have already made major achievements. Almost 294,000 premises have been surveyed, of which more than 252,000 are designed or are in detailed design. These activities are vital precursors to the main build and are continuing at pace. It is the survey and design activities that are creating the pipeline for the build works and, ultimately, for premises to be passed. Some 54,450 premises are currently able to place their order via their preferred retail service provider. There are more than 154,000 premises constructed or under construction. For context, the original plan would have seen us at approximately 180,000 premises at this stage of the programme. Some 454 broadband connection points, BCPs including schools, have been installed by NBI. Nationally across all 26 counties, we have BCPs and schools connected. We have also increased our minimum speeds from 150 Mbps to offer 500 Mbps as the minimum speed, as well as offering 1 GB and 2 GB products.

We recently announced we are delivering high-speed broadband infrastructure to six islands off the coast of counties Donegal and Mayo. In our view, building this world-class infrastructure now ensures that all people and businesses on the islands will have access to a broadband network capable of supporting the communications, information, education and entertainment requirements of current and future generations.

Some 50 retail service providers, RSPs, have already signed up to sell services on the NBI network. This is expected to bring significant benefits directly to consumers and businesses where competition between RSPs ensures better quality and an increased range of products, all being offered at competitive prices.

Since contract award, NBI has built an organisation to deliver the project with predictability and pace. As we roll out the network, we have encountered a number of issues, the majority of which have been beyond our direct control, meaning it is difficult to predict completion dates for premises with absolute certainty. While this is inevitable in the early days of delivery of a project of this nature, I appreciate that it can cause some frustration when seeking to communicate with stakeholders. In relation to 2022, it is important that I provide some context to the size and scale of our current work that is under way and how the volume of activity has substantially increased. As mentioned previously, right now more than 154,000 premises are either constructed or under construction. The equivalent figure this time last year was approximately 19,000. When we appeared before the committee last September, the same metric was 108,000. Members can see how this is ramping up and how it will directly feed into the premises passed and connection numbers in time. We believe this metric is the leading indicator in terms of delivering the programme. Having such a significant volume already in the pipeline means that the capacity is there to move through the various stages of build to completion and ultimately, to get users connected to this vital infrastructure.

Additionally, we are implementing a series of initiatives that lend confidence to delivery in 2022. We have contracted with Eir to increase the volume of pole replacement and duct installation. This commenced from 1 October 2021. We have submitted all of the Eir Make Ready packs required to support the build in 2022 to Eir for validation. Eir has provided committed start dates. We have now awarded contracts to our build partners for 195,000 premises. Other operational efficiencies and experiences gathered from the initial deployment areas are being industrialised to assist with project delivery. For example, 35 of the 40 section 254 licensing requirements to support the 2022 deployment have already been submitted to the local authorities. By way of contrast, NBI was only able to submit the majority of the section 254 licences requirements for 2021 after the new process supported by the local authorities was launched in May of last year.

As the Eir make-ready works are completed in advance of NBI's contractors commencing the main works and we incorporate the lessons we have learned in the past 12 months into our planning processes, we are confident that we will be able to provide greater accuracy and predictability in future projections for the programme. We also believe that it will be possible to increase the trajectory of the deployment programme over the coming years.

Turning to other matters, I can appreciate that some recent media attention on the shareholder structure of NBI may have caused concern for members of the committee. I would like to draw members' attention - and that of the public - to assurances from both NBI and the Department of Environment, Climate and Communications confirming "the ownership structure remains as it was at the signing of the contract". As a business, we are concerned about a series of inaccuracies and-or misleading claims in certain media reports surrounding our shareholdings and broader financial matters, most notably reporting that suggests subsidy payments to NBI were somehow used for reimbursing shareholders for bid costs associated with the tender process. I want to make it abundantly clear and categorically put on the record that the subsidy provided by the State is in satisfaction of NBI delivering defined milestones under the project agreement. NBI has not been and will not be paid by the State if it does not deliver these milestones. We are seeking to resolve the media inaccuracies and misrepresentations on an ongoing basis.

I would like to conclude by saying that at NBI, we are acutely aware of how vital reliable, high-speed broadband has become to our lives. We believe that despite the extreme and turbulent conditions faced throughout the project to date, the work of our team provides a platform and gives us confidence to deliver the project on time and on budget. We welcome the opportunity to take questions from the committee and look forward to its continued support in the delivery of this project for the citizens of Ireland.

I thank Mr. Hendrick. I am sure he will appreciate that it is the single biggest infrastructure project for Ireland. People want broadband. We are here, as a committee, to find out about the delays and why they have occurred. We will now move to questions. First up is Deputy Ó Murchú, who is substituting for Senator Boylan. He has seven minutes.

I thank the NBI team. I suppose we must start with the stuff that is in the public domain. I accept that the answer is that nothing has changed in relation to the contract. I do not want to spend a great deal of time on that issue. I ask for one of the witnesses to give me a quick synopsis on the structure. Obviously, there is a fear that there is a huge amount of debt equity rather than cash upfront equity. The fear was, even with the early release of the performance bond and other such things, that that was a cash flow problem. The worry is whether NBI is fit for purpose financially to do the business that needs to be done. I ask for a quick answer to be given because I want to get into the difficulties in the roll-out as soon as possible.

Mr. Peter Hendrick

The structure has not changed. The shareholders remain as is and the equity or shareholder funds are committed into the project. Our shareholders invested €100 million on day 1. That was subsequently followed by another €20 million in December 2021. We predict when we need shareholder funds for the project. That has always been the case. In terms of the structure, Granahan McCourt is really the controlling entity of NBI and/or the holding company.

Due to voting rights.

Mr. Peter Hendrick

Ultimately, through the voting rights of 51% of the business. Then we have Oak Hill Advisors, which retains 49% of the shareholding.

In which company?

Mr. Peter Hendrick

In the holding company, Metallah Limited, which ultimately, is the holding company for NBI.

Metallica?

Mr. Peter Hendrick

Metallah Limited, which ultimately, is the holding company for NBI infrastructure and deployment.

I will finish this up because there is talk of David McCourt seeking a different sort of financing structure. Obviously, there has been communication with the Department on that. I ask for a quick synopsis on that, where it stands at the minute and whether another financier or investor has been found.

Mr. Peter Hendrick

The background to this is we have always strongly believed that wholesale fibre networks are the future for connectivity, whether that is in Ireland or across Europe. If we go back to where we were in 2018 or 2019, there was not any evidence across Europe for fibre networking being built on a national scale. If you think about the technical risks, the commercial risks in terms of take-up and the construction risks associated with building full fibre networks, none of that had been developed or understood. It was always our ambition to bring on board a long-term partner-----

A long-term partner. I assume NBI is looking for someone in the telecommunications field, rather than the likes of Oak Hill Advisors?

Mr. Peter Hendrick

We are looking for a partner that will put Ireland on the roadmap to deploy fibre networks across Europe.

Okay. They have not been found yet.

Mr. Peter Hendrick

No, not as yet.

But the process is ongoing.

Mr. Peter Hendrick

Yes, the process is ongoing.

Due to the limited time, we will move straight on.

Mr. Peter Hendrick

We are happy to come back to the committee later on in the year, if that is successful.

I think there will be a need for a fair amount of interaction.

Mr. Peter Hendrick

Absolutely.

What is killing NBI, for the want of a better term at this point in time, is that initially, some 115,000 premises passed deadline for the end of January. Obviously, that was revised to 60,000. Now, the figure relating to premises passed is 34,417. Will Mr. Kendrick explain the difficulties that there are? We have consistently and constantly spoken about possible accelerations. What can be done to rectify that? What Mr. Kendrick is also telling me in relation to NBI's financial structures and all of that is that it is having no impact on its ability to do business.

Mr. Peter Hendrick

Going back to the issue of the premises that we have started under construction, the reason we sit here with confidence around the programme is because we can see what the leading indicators are to ultimately pass and connect premises. That is in the premises we have under construction.

I accept that the scope is a lot wider now.

Mr. Peter Hendrick

It is a lot wider. When we laid out the plan, we laid it out linearly in terms of the percentage of premises to be passed on an annual basis. It is not that straightforward. We are seeing more lumpy releases of premises. Over the next eight to 12 weeks, we will release between 30,000 and 40,000 premises.

I will now ask Mr. Malone to give a little bit more detail on some of the challenges, where we are at in the programme, and the plan for the year.

I suppose that is 60,000 premises passed being reached at the end of March. Perhaps Mr. Malone will outline the detail.

Mr. T.J. Malone

By the end of March we will have around 60,000 constructed and fully built at that point.

On some of the issues we have had, as Mr. Hendrick has said, most of those 60,000 are at a very advanced stage. Between 85% and 98% of them are completed at this stage. It is now about finishing out the final bits and pieces where we might have encountered an issue on the ground, for example, late in the day and we would just be getting those tied out and finished. The vast majority of that work is completed at this stage.

We were not immune to the effects of Covid, and during December and January we were particularly hard hit due to the Omicron variant. We were hit in January when up to 60% of our workforce in the field were affected and other contractors by up to 50%. We constantly hear this variant is not that bad, it is just a flu or, in some cases, just a cold. For anybody working in an office environment, that is fine and they can work from home or relocate, but one cannot build an infrastructure project from home.

We all accept that. Even if that did not happen, however, NBI would not have hit 60,000, so obviously there are difficulties and we need them laid out to consider what we need to do to facilitate National Broadband Ireland to deliver. The people out there probably do not care about the questions I asked about around the financial structure. They just want broadband delivered.

Mr. T.J. Malone

Sure. A lot of those are the final bits and piece of the jigsaw, as I said. When we are out on the road, by and large we are getting the vast majority of the work built. It is now about finishing off those final bits and pieces and the things we have encountered out on the ground. It may be the case we need to go back to local authorities to get licences or we have to go back to Eir and get more make ready work done. With that in mind, the main Eir Make Ready juggernaut is working through, and when they have finished their part, they go out of that area and into another area. If we then come across a situation that happens on the ground, it can be problematic to try to get the crews back to finish off bits and pieces. At the end of November we agreed with Eir we would get pointed crews, or what we call rapid response crews, back in. Now, instead of taking from the main go-forward crews who are doing the rest of the make ready work, a rapid response crew will come in and we can specifically point them towards cleaning up the last bits of the jigsaw and finish them out.

National Broadband Ireland gave us figures on 14 January where 34,117 premises were passed. Is Mr. Malone saying that by the end of March this will be 60,000?

Mr. T.J. Malone

By the end of March we will have constructed the network for those 60,000.

That is a 25,000 increase, which is a 71% increase. Between now and then, which is a two-month period, NBI is looking at doing 12,000 per month. Is National Broadband Ireland going to do that? Is it achievable?

Mr. T.J. Malone

From a construction-----

Based on history, we were looking at 115,000 by the end of January, and that has not happened. We looked at fewer than 35,000 by the end of the year. It has gone back and back. National Broadband Ireland is now giving us a figure which, while not quite double, is going from 34,000 up to 60,000 in the space of two months.

Mr. T.J. Malone

That is correct.

Is that credible to believe?

Mr. T.J. Malone

It is from the point of view that we know where we are in the cycle with all of these issues. Almost 38,000 are completed and built at this stage. As I said, anywhere between 85% and 98% of the remaining 25,000 are done and we are finishing off the bits and pieces. When we spoke to committee members on site in October, we had 108,000 under construction. We now have 154,000 under construction. That is growing all the time. By the end of this year we will have 225,000 under construction, which is 40% of the entire base for the national broadband plan. We are 20% ahead on the survey at the moment and we are 10% ahead on the design. By the end of this year we will have 70% of the survey and design for the entire State completed.

Yes, we have encountered issues, not just with Covid pandemic but also on the ground. On any project of this scale, the first 12 months are on-the-ground building, which is pretty much what we have done. We have encountered a lot of those problems to the point where we have even had to go back and redesign some of the works that had already been designed to take into account the lessons we have learned over the first 12 months. We are confident we are in the final throes of those 60,000 that are coming through the pipeline at the moment and which will be completed and built by the end of March.

On the basis on those rapid response teams, this would tell me there has been a difficulty with the Eir Make Ready process and in delivering to National Broadband Ireland. What else is needed to make sure there is an acceleration? I would like some detail on the acceleration. We have spoken previously on this. The idea was that seven years would become five years, and given the Covid delays and so on we would get to between somewhere between March and June. Where do we sit in relation to that? What are the big things that need to be delivered for National Broadband Ireland for to deliver this project?

Mr. T.J. Malone

To put the project into perspective, we are working through that to finish out with the Eir rapid response crews. Once we noticed there were issues in getting works finished up and tidied up, we engaged with Eir, which came to the table and produced those rapid response crews. It could not be done overnight and it took some time to do it, but Eir has worked with us to get to that stage.

We are still working on acceleration of the programme. As Mr. Hendrick said in his opening statement, we got agreement with Eir to give us additional capacity in the ducting and the poling for a go-forward position. Most of the ducting will be absorbed into bringing the programme back on track to get us up to the seven years. To accelerate beyond seven years is contingent upon one of two things happening. Either we can get additional capacity from Eir to go faster with the Eir Make Ready works so that we can come behind that or we get what we would call a self-install product that is fit for purpose in the market.

So National Broadband Ireland could do the business itself?

Mr. T.J. Malone

Yes, the self-install system is basically so that we can carry out the Eir Make Ready work in the duct access network. That product is available in other jurisdictions. It is available in Ireland and was launched by Eir in Ireland in August of this year. For a project of this scale and size, however, the product that is there at the moment is not really fit for purpose for us. We can put our ducting in but if we encounter a problem or a duct blockage on the network, which on the main structure duct is an average of 8 or 8.5 blockages per kilometre, we cannot clear that. We must go back to Eir to clear and repair that blockage. Members can imagine the time it can take to stop the work, go back, clear it, get us back in, and so on.

That is delays across the board.

Mr. T.J. Malone

We need to have that and we are engaging.

I accept that. In fairness to National Broadband Ireland, it has stated this is where it is being held up. It is perhaps something we as a committee need to chase up. We must make sure we can mitigate against logjams such as this as much as possible.

Will Mr. Malone just give some detail? We may as well throw all of the figures out there. If we are talking about an acceleration, in the real world what is it going to be?

This is the final question for Deputy Ó Murchú. He can come back in again at the end.

Mr. T.J. Malone

We are working through it. We are working on it at the moment. We are due back to engage with the Department in June to discuss where we are at that time. It is all dependent upon whether we can get increased capacity or self-install. We would be aiming to do it in the six years, if we can pull that in.

So that is it. It is not going to be five years. It is six years. I appreciate what we have been given. There were other issues, in fairness, that Mr. Malone had highlighted previously about poles and planning permissions. I assume someone will deal with those in their contributions. I thank the witnesses.

I have listened to Mr. Hendrick's contributions from my office. It is one of the benefits of the Covid changes around here. Where the witnesses may have seen the negatives, we have seen the positives.

I thank the National Broadband Ireland representatives for the outlines and for their engagement with us. It was helpful also that we had the opportunity to meet with National Broadband Ireland on site. I will follow on from the comments by my colleague Deputy Ó Murchú. Perhaps the witnesses will come back to us with a detailed outline of issues National Broadband Ireland has that we might be able to resolve through our engagement with the Department. Rather than going back over those waters, it would be helpful to do that.

From public representatives' point of view, the only thing the people we engage with and the people we represent want to know daily is, "When am I getting my broadband?" We have spent time out of number explaining to them the complexities of the interface between the private and the public, the commercial and otherwise. They glaze over. They really do not want to know. We understand the complexity, as does National Broadband Ireland, but the people we represent want to know "when" rather than anything else. In different debates in the House I have mentioned, it would be helpful to us and, ultimately, to the customers and consumers if National Broadband Ireland could provide some level of forward planning or insight into where it is at.

I know that would have taken time at the beginning but there have been learnings since then. There is an interactive map that clearly delineates where NBI's responsibility begins and ends. It would be helpful if there were also indicative timeframes. I know NBI has been trying to indicate to people if they will be connected within the next six months or so but consumers who are three years out or beyond that can only see so far into the future. I always believe in telling constituents the truth rather than creating hope where I know none exists. If they are beyond two or three years and are closer to four, five or six years, it is better that they know now because some of them will make a decision to invest in another product in the short term, such as a satellite or some other package system. There are some options out there. The uncertainty is a killer for people. NBI should do everything it can in that regard. I know there is a cost involved and money does not just fall off trees but maybe that is something for which NBI can seek additional revenue from the Department. I would certainly support that. Anything that can be done there would be helpful because certainty is important to the consumer.

I do not want to overlap too much with what my colleague said. At one stage after he took office, the Minister, Deputy Eamon Ryan, indicated a willingness within Government and in the programme for Government to try to hyper-charge the roll-out. That was always going to have limited capacity because there is only so much one can do on the ground at any one time. Does Mr. Hendrick have any thoughts on that? Is there anything he wants to share with us that might be helpful or that would bring the timeframe from seven years to five? Is that doable?

Mr. Hendrick addressed the media comments well in his statement. I do not want to dwell on them but there are issues and concerns there, some of which I would have expressed myself. I am on record with those comments prior to NBI being given the contract but I have always taken the view that once the contract is signed it is signed and we have to help get it done for the benefit of the people who need broadband. Is Mr. Hendrick confident that NBI is capitalised in a manner that allows it to do its work or is there still some background work to be done in shoring up that capital? Is there anything that concerns him as chief executive? That would be helpful.

Mr. Peter Hendrick

I look at the future and I see it being a lot brighter than the last two years of the programme. That is largely because we are now building in all 26 counties. This goes back to the confidence by operators and investors in projects like this. The unknown risks raise a lot of concerns and for the last two years we have been able to measure all those risks. Almost a year ago today we were able to measure the 19,000 premises we had under construction. We did not have full deployment areas completed but we had a measure of what those risks were and what we needed to do on our volumes in order to hit a five-year programme. As such, we engaged with Eir on the number of poles it needed to replace per annum and the number of kilometres of underground duct that needed to be repaired or installed and we contracted with Eir to move from 22,000 poles per annum to over 50,000 poles per annum, and from 1,500 km of duct installation to 2,500 km. To a degree, and certainly with regard to the poles, that has meant that our "make ready" programme will be a lot faster.

When did you come to that agreement?

Mr. Peter Hendrick

We signed that agreement in June. It is a phased ramp-up because one has to buy machinery to put poles in and hire contractors. There is mobilisation and the phasing of that started in October 2021. There will be another step in April and another in June to increase the capacity. A year on, we now have 154,000 premises under construction, almost ten deployment areas complete and we are active in all 26 counties. We have much better visibility in terms of what the risks are and what the volume needs to be. That is why Mr. Malone said we are now engaged with Eir again to say that we are clear on the programme and we know what the risks are. We now want to know how to build the same contingency into our build programme that we have in our survey and design. We are ahead percentage-wise so we want to do the same on the build programme and we are working on that.

With regard to areas of concern or areas where we need support, we can share the list of issues we had a year ago, which ones we have mitigated against and where we are today. We are always going to have challenges on the ground. We spent a number of millions of euro redesigning some of the deployment areas that we had already designed because of learnings we took from the first ten deployment areas. Those efficiencies will start to come through the programme but we will start providing more predictability around when homes are going to get passed.

On communications, in August we released a map on our website which gave people visibility, typically within a 12-month or 24-month period depending on where they are in the programme. The challenge with the predictability of that and giving them a shorter window was that we could not really do that until the designs were completed. As Mr. Malone said, we will have done 70% of the designs at the end of the year and will have much more certainty about the timing and activity that is required in order to pass those homes.

Today, 195,000 premises are awarded to our contractors. The contractors have start dates and finish dates and we know what we need to do to clear any blockages out of their programme, such as getting the S254 licences for the poles, using the Eir "make ready" programme or getting the rapid response teams to fix problems at the back end of that programme. We are putting all those things in place to mitigate the challenges and put predictability into the programme. Within Ms Collins's team we will update the website with more certainty around times. There are always areas or homes that might fall out of a deployment area. Deployment areas might fall behind because a national motorway is being put through an area and that means we have to delay a deployment area or a ribbon to a later date. There will always be that challenge in terms of communication but we are trying to bring predictability to the programme.

In terms of shareholder funding, we originally required €175 million of shareholder funding but we signed our shareholders up to €223 million of committed funding. Our shareholders are contractually committed and bound to provide that funding as and when we call it. Two years ago, getting operators or investors to look at investing in full fibre networks was very difficult but things have changed. We have always believed that wholesale fibre networks would be the future. Going forward, the European Commission has said that every single premises will have access to gigabit connectivity by 2030. That has driven a huge demand to roll out fibre networks, both under commercial funding and state aid funding. What we have developed and the lessons we have learned about construction and wholesale operations here in Ireland under NBI can add a lot of value in what is happening across Europe and we believe we have a part to play in that. We could bring an ESBI-type approach to what is happening in Europe and we have led the way to date on this.

Senator Dooley asked a specific question about being capitalised. Some €223 million has been committed. Of that, €120 million has been paid but €108 million of that has come in the form of loans. You can call them shareholder loans but they are still loans. Another €2 million is equity. There is a 12% charge on the shareholders' fund. The question the public will have is how long that shareholders' fund is being provided. With the 12% interest repayment, how quickly will that need to be paid back in cash? Is that putting strain on the balance sheet and the capital structure of NBI with regard to its ability to do the broadband roll-out? That is the question the ordinary public will have.

Mr. Peter Hendrick

This financial model was always envisaged and it is typical of any infrastructure project of this scale, or even of a smaller scale. I will let Mr. Kelly give some more details on the interest and how applicable it is to other projects. Effectively, because it is a standard shareholder investment the capital here is at risk and the shareholders only get a return upon success of the project, that is, when the network is ultimately built, customers are on it and it is generating revenue. There is no time limit on the shareholder equity or shareholder loans so there is no risk-----

In the interests of clarity, I will restate my concern.

We have all heard the concerns regarding inflation, particularly in the construction sector. No doubt some of that would have been factored in within the initial offering. Where is the company now with respect to accessing funds to meet the increased cost of rolling this out? Has it done some modelling on what the increased costs of building out the network will in light of a scarcity of staff? We have heard this is a major issue right across telecommunications companies and construction. That is putting pressure on the process. Is there a quantum of what that would be?

Mr. Peter Hendrick

We have forward-procured both materials and with our build partners on the build. All the way through until the middle of 2023 we are procuring materials, including fibre, the poles and the contractors to build out the network.

On the question of funding, we are engaged with our board and shareholders around the working capital requirements of the business, and this is the reason we injected additional capital in December. The plan is there will be additional capital at the end of 2022. We have forward-modelled what is required in the business and we are very comfortable in terms of the capitalisation of the business.

We have had much media attention and there is much optimism out there in the public that this can be delivered. They may read negativity coming through in the structure of the company. I accept today the explanation given that nothing has changed in the structure and the ultimate ownership of the consortium. It is also very important the message gets out today that the company has confirmed funding to deliver and complete the project, and that is not in doubt. Shareholder funds will be available as requested. That is important because, as I said, the public has an expectation that this broadband project - the biggest in the history of the State - will be delivered.

In this context it is usually important there is confidence. Before Covid-19, people were expecting broadband but now it is an absolute necessity. In particular, we can see the Government's efforts in respect of encouraging people to work from home and the supports being put in place in this regard. There is a significant culture change. Broadband was never more important than it is now in the context of people living in rural Ireland in particular.

I am in business and I know how difficult Covid-19 has been in trying to get a workforce available and fully functional. There are also procurement problems because other supply companies also have problems. With respect to procurement, everybody in business knows costs have risen steeply and procurement is a problem because manufacturing bases do not have the output they previously had. It is heartening to hear that the company has its procurement in place for 2023. Everybody out there has a problem with procurement and supplies. That is encouraging.

There is clearly a blockage in a number of systems and this partly explains the delays experienced by the company. What level of co-operation is the company getting from the local authorities in terms of planning and licences for poles etc.? Is this a complex matter and is it delaying the work? Is there anything the committee can do to encourage local authorities to be more supportive or speed up the process?

There is a area that all of us have been asking about for years, and these are the black spots or locations that must be joined between where Eir finished and NBI has taken over? It is incensing people in rural areas that there can be broadband within 50 yd. of a premises but a refusal to connect that premises. NBI refers to these as amber areas. What progress has been made in this regard and what timescale is involved in delivering service to those areas?

I am glad the witnesses are here and I thank them for their presentation and update. It is important. The company is quite good at responding to matters as they arise and answering queries we have on behalf of the public. I compliment the witnesses on that.

Mr. Peter Hendrick

As a management team and as a company we have over 300 people who are highly experienced in rolling out networks. We are at a point now where we can see over 150,000 premises under construction and they will quickly start to move to being premises passed and connected. We are very confident about that.

The amber area is the national broadband plan area in which we operate. The blue area is that which is currently serviced by commercial operators. Part of the challenge with the commercial operators is that they would say their infrastructure supports connectivity to this point. The definition of what is high-speed broadband today is 30 Mbps under the national broadband contract. In time, I expect that number of 30 Mbps to grow. We are trying to manage a future-proofed network and provide certainty for the future in building out our network to premises in the amber area.

There will always be premises that are close to existing infrastructure, whether that is Eir or another operator, and that fall into the national broadband plan area and cannot get connected by the commercial operator. We are seeing that all over the country. The last time I spoke before the committee I said we are looking at areas where there is existing infrastructure and where homes might be connected if the national broadband plan does not naturally go through the area. We have a tender out at the moment and we expect the first round of responses this week. We are doing an evaluation over February and March and doing trials and pilots of those technologies. We will keep the committee informed of that progress. We absolutely understand the frustration where a neighbour might have connectivity and others have to wait until 2024 or 2025. In some circumstances, even that procurement process we are looking to undertake might not solve those problems. We will keep the committee informed of the progress. We have committed to quarterly updates and as soon as I have an update I will give it. We will certainly add this to the quarterly updates on progress, even if we have not finalised the process. Mr. Malone will answer the question about local authorities.

Mr. T.J. Malone

I might elaborate a little on the procurement as well. We have forward-bought and worked with the Department to identify areas we thought there would be worldwide shortages. Fibre roll-outs are huge worldwide at this point. We have forward-secured for three years on our main products, such as fibre, etc. Where we would have ensured a stock of three months at any given time, we have doubled that so there is now a minimum of six months of stock held for us at all times.

On the question of contractors, we have added additional contractors to our framework at this time. As and when we need to introduce them into the programme if we have resource shortages, we can do that. We are going through another process at this stage and the Department has just signed off for it to go to tender for adding contractors on top of that. Our view is to ensure we have enough of a supply of materials and contractors. Some of the contractors we are adding have international links and they can draw on resources from other countries where urban fibre roll-outs may be coming to an end and we can take resources from there.

May I ask a question about procurement? Mr. Malone stated that there will be additional contractors but does the company book and supply materials to contractors or is it depending on contractors to do their own procurement?

Mr. T.J. Malone

We do the procurement of materials and supply it to contractors. We are in charge of that at all times.

The company is in control of that.

Mr. T.J. Malone

Yes. We issue a bill of quantities for an area once the low-level design is completed. We deliver that to the contractor's yard.

The Deputy spoke about local authorities. Significant progress has been made and we appreciate all the help and support we have received from this committee and local authorities. We have made significant progress in the past 12 months. Mr. Hendrick mentioned this earlier. We spent 12 months getting this agreement in place under section 254 on the poles.

It took us longer than we would have expected, but we got it in and the Minister launched it on 5 May. We had probably secured enough licences for approximately 15,000 premises by May 2021. As of today, we have enough licences for the poles for approximately 135,000 premises. Some local authorities move faster than others and construction of some of those will start later in the year and will not be delivered until 2023. However, for what we would expect to be delivered this year, out of the 40-odd deployment areas, all bar five are secured for this year and we believe we will get the other five within the next four or five weeks.

We are well advanced from that point where we are working and have worked very hard with them. A steering committee has been set up that involves us, the Department of the Environment, Climate and Communications, the Local Government Management Agency, LGMA, and the County and City Management Association, CCMA, and we meet regularly to check whether there are any blockages.

One area on which we need to improve, when we hit a snag on the ground from a road-opening licence point of view, is that we need to have the ability to turn them around faster. When we get a low-level design, we can predict where we are going. We put in forward-planner local authority road-opening licences at that point. The issue, some of which the committee will have seen on site, is when we come across an issue on site that had not been predicted at the time of applying for the initial licence. We need to speed that up because some of those licences can take anything between four and 12 weeks to turn around, depending on the local authorities. That is where the predictability of the numbers comes in.

Mr. Malone spoke about 135,000 licences. How does that translate into premises passed?

Mr. T.J. Malone

Those are the licences to cover 135,000 premises.

If NBI seeks to have 60,000 done by the end of March, what is the target for the end of this year?

Mr. T.J. Malone

By the end of this year, we will have approximately 200,000 to 225,000 premises under construction.

How many premises will be passed?

Mr. T.J. Malone

We are tying that down with the Department, but to give the Chairman a broad range, we believe that between 100,000 and 130,000 premises will be built by the end of this year.

How far is that behind the target that was initially set? It was 115,000 premises to the end of January, which is delayed.

Mr. T.J. Malone

Yes, it was 115,000. The constructed estimate was that approximately 200,000 to 205,000 would be built at that stage.

It is not quite half, but it is 205,000 versus 130,000 premises.

Mr. T.J. Malone

From the completed premises estimate. However, the key factor we need to look at is what is under construction, which are premises in the pipeline and started.

How many are under construction?

Mr. T.J. Malone

Between 200,000 and 225,000 premises, which is only approximately 30,000 behind where we had initially envisaged.

Were 255,000 premises initially envisaged?

Mr. T.J. Malone

Yes, to be either built or under construction.

By the end of this year.

Mr. T.J. Malone

Yes.

NBI is approximately 30,000 behind on premises built or under construction.

Mr. T.J. Malone

Some 30,000 to 35,000 behind by the end of the year.

The figure for premises passed is a good bit back, from 205,000 to 130,000.

Mr. T.J. Malone

That is down to tying out those last bits. The vast majority of them will be built. It is just a question of finishing out the last bits and pieces of it.

When will NBI catch up to the original target? Will it catch up by the end of 2023?

Mr. T.J. Malone

That depends. It comes back into the availability of getting the capacity and getting works done. We have capacity to get back on track for a seven-year programme. There will be a glide path back to the end of the seven years in that NBI will catch right back up. If we get additional capacity, we can start eating into that much more quickly.

I thank National Broadband Ireland for coming here today and for its continual engagement with the committee, which is very constructive, especially the field trip that was facilitated a number of months ago. Will Mr. Malone take me through, in global terms, where the roll-out is at and how long it will take? Will he take us through the years, in percentage terms? Will he set out the milestones along the way that will be reached in terms of getting all houses under the contract in the intervention areas connected?

Mr. T.J. Malone

The plan is still seven years. When we talk about the seven-year roll-out and plan, it is sometimes forgotten we are now two years into that. The seven years left to go is really five years.

It may even be three.

Mr. T.J. Malone

It may even be four. We look at having 154,000 under construction at this point in time, of the 550,000-odd premises that are now in the intervention area, which has increased from 537,000 in the initial signing of the contract. By the end of this year, which is the key statistic to which we are working, 40% of the entire national broadband plan will be under construction. We will then build on that incrementally each year thereafter with a view to putting it in and finishing this out by the end of 2026 or year 7. Those are the key milestones towards which we are working.

By the end of this year, approximately 70% of the survey and design work will be completed. We need to get a balance with surveys and designs in order that we do not get too far ahead. That might sound foolish, but if one can imagine us getting two or three years ahead of ourselves on the ground when we are surveying and designing, the designs become stale and things change on the ground within that period of time. We need that balance of being far enough ahead that if we get acceleration, we are far enough ahead, but that we do not go stale on our designs.

That is welcome. Connection is key. When clients get in touch with me or any other public representative, they want to know when they will be connected. In my constituency of Clare, there are 22,719 premises in the intervention area. I see that 3,500 premises are due to be connected around the Kilkishen exchange. That is a low percentage. One is starting from an extremely low base. Will Mr. Malone explain how NBI intends to accelerate that in County Clare?

Mr. T.J. Malone

I will take the Deputy through the survey, the build-commencing and build-complete dates, by year. Some 42% of premises in the county have been surveyed. By the end of 2022, almost 55% will have been surveyed. From a build-commenced point of view, 24% of the entire premises in Clare, in the intervention area, are under construction as of the end of 2021. If I roll that forward to 2023, 42% will be under construction. By 2024, 66% will be under construction and by 2025, 100% will be under construction. By the end of 2022, 5,280 premises or the equivalent of almost 25% of premises in the county will be completed in the build. By 2024, 42% will be completed. By 2025, 64% will be completed and the balance will be completed in 2026.

In terms of accelerating the scheme, I asked Mr. Malone how long this would take to deliver at the top. There are only five years left of a seven-year contract. Obviously, NBI has fallen behind. As with any other big business, many people are out because they have been impacted by Covid. Could Mr. Malone give us an idea of what Covid has meant? What impact has the Omicron variant had on NBI? It will be key for Mr. Malone to explain what NBI is doing to accelerate the scheme and what we can do in the Oireachtas to facilitate its further acceleration in order that those people who are waiting will be connected faster.

Mr. T.J. Malone

I will recap on the Covid impact we have had. Omicron, in particular, has spread its way through at a much faster rate. We have suffered hugely over December and January - no different from any other business. One of our contractors had a peak of 60% of staff either self-isolating or being directly affected by Covid.

We had a second contractor with absenteeism of 52%, right down to a rate of about 29% with other contractors.

What areas were these contractors operating in. Was that in surveying?

Mr. T.J. Malone

No, that was in the build area. And if the Chairman can imagine-----

That was after the surveying and design had been done.

Mr. T.J. Malone

Yes, it was the build in particular that affected us most. If you have a surveyor, he or she is on their own. A designer can work remotely in a bedroom, if necessary, but, as I said earlier on, you cannot build manholes from bedrooms. The infrastructural nature of this project is that-----

Would it be fair to say then that the surveying and designing was on track-----

Mr. T.J. Malone

It was actually ahead.

-----and the build was where it fell down?

Mr. T.J. Malone

Yes, the build is where we felt the big impact. It is important not to forget that we were behind in the earlier parts of this project and were further behind in surveying and design because it impacted us initially at that stage where we could not get people mobilised to do surveys.

When Mr. Malone speaks about the build, is he talking about getting on to Eir to repair their poles or is he talking about a contractor laying the cable on the poles?

Mr. T.J. Malone

I am talking about the contractor. In addition to Eir having to make ready its infrastructure on the ground, we also have to build new infrastructure. There are parts where Eir does not go and gaps between where one of its exchanges-----

No, but was there a delay with Eir in terns of-----

Mr. T.J. Malone

In the past number of months, Eir has also been impacted by Covid-19, as has every utility and organisation. It impacts in a greater way anybody who has been working on the ground because if you imagine that we have a six-person crew and one of them gets Covid-19, then the other five are close contacts.

We have a figure of 120,000 premises with build under way. How much has Covid-19 impacted on that build-out?

Mr. T.J. Malone

Rather than on the commencement of the build, it has impacted most on the close-out of the build. Where you saw the 35,000 builds - now 37,000 builds - completed-----

We would be talking about 60,000.

Mr. T.J. Malone

Yes, it has impacted us mostly in getting those pieces of work finished out. As of yesterday’s figures that I looked through at our management meeting yesterday, that figure is down to 15% at the highest level and down as far as 2% with some of the contractors.

Those are the percentages of people out with Covid-19.

Mr. T.J. Malone

Yes, it is dropping and is coming back in line and, hopefully, we can keep it to those sorts of levels.

Local authorities have been touched upon. As for the ESB, CIÉ and Transport Infrastructure Ireland, TII, and other organisations, are there many such organisations with which NBI has to work through the issues that have arisen and that were preventing the quicker roll-out of this project?

Mr. T.J. Malone

The Deputy is quite correct as Mr. Hendrick has also touched upon this earlier on. In the first year of any of these major projects, one comes across different issues where things have to be bedded in. CIÉ was obviously an issue with us in getting crossings of railway lines, whether that was underground or overhead. I am glad to say that this has been put to bed. We have a commercial agreement and contract in place with CIÉ. We have somewhere around 667 crossings to do in the life of this project. We have agreement and engineering solutions with CIÉ and we are working-----

NBI, then, have no issues with Eir.

Mr. T.J. Malone

No, with CIÉ.

NBI has no issues then with any of the contractors, including Eir, at this point.

Mr. T.J. Malone

No, Eir would already have had an agreement with CIÉ from the work it was doing previously to this, so this was a new agreement we had put in place ourselves.

In respect of the ESB, the Chairman may have seen instances when he was out on site himself about crossing bridges and so on. We have come to an agreement with the ESB this week, which is being documented and finalised. I imagine that in the next three to four days, that will be put to bed from the ESB’s point of view.

As for TII, while it has always worked with us, the issue we had was that it had a rule on the ground that it could not have two contractors working consecutively on the same national road at any one time. We piloted in Blessington an agreement to have two contractors working concurrently, which would be another company and ourselves or Eir and ourselves, on the same stretch of road. That is now being rolled out around the country. We have made significant progress in all three of those areas.

On the self-insulation product, is Mr. Malone confident that something like that can be modified that would help to accelerate the roll-out of broadband?

Mr. T.J. Malone

I am confident that if it was modified, it would definitely help the roll-out of the project. If we got a product like that on the market that we could avail of, even specifically for NBI, or the national broadband plan, which does not impact on the urban areas-----

What type of work would that be? In layman’s terms what is it?

Mr. T.J. Malone

That is basically our ability to install a subduct and cables and to do the Eir make-ready work ourselves on the ducting.

That is, the NBI would not be going through existing ducting-----

Mr. T.J. Malone

No, we would be going through the existing duct but instead of Eir having to do the work for us with its contractors, we could do it. That would help us with the capacity where we could either accelerate or keep-----

For that to be in place, what is required?

Mr. T.J. Malone

We are currently talking with Eir on this issue to see if we can reach a resolution and there is no certainty that we will but we are talking with Eir on that at the moment. As I said earlier, there is a product that it brought to market in August but is not at scale for what we need. If we cannot arrive at a resolution there, we then will need to engage with the Commission for Communications Regulation, ComReg, to see if we can resolve-----

If that product was provided, how quickly would it speed up the roll-out?

Mr. T.J. Malone

It is hard to put figures on it but it definitely would have a very significant impact.

Would it take a year or two off the project?

Mr. T.J. Malone

It would help to take a year off it. At this stage, as I said earlier on, we have five years left in the programme. In the case of this year, the third year, we already more or less know what those figures are going to be like at this stage, as they are locked in. That leaves four years. If one can take 25% off a four-year project, at that stage that would be very significant.

Has Deputy Carey concluded?

Yes, that was great and I thank the Chairman very much.

We will now move to Deputy O’Connor, who has approximately seven minutes.

I greatly welcome the representatives from NBI here to the meeting. I greatly enjoyed the experience of going on-site to see the work that is being done. The expenditure around broadband in Ireland is obviously a very contentious issue. It is hard for the public to see the physical scale of the demands that are being put on the organisation. In the NBI’s defence, from an opening point of view I want to make clear that from what I saw, the project seems to be as well run as it possibly can be done at this point, particularly with the challenges of Covid-19. I thought, when going out to see the site installation and office set-up out near Citywest, that it was quite impressive, despite the issues raised today and others.

The first thing I wish to raise which made me laugh, was when I got a text message yesterday after telling constituents that NBI was going to appear before the committee. The lady who sent the text was giving out to me about one of the site installations NBI had done in a rural area called Inch. Inch is a very small rural settlement roughly between the towns of Fermoy, Youghal and Midleton.

I am sure Mr. Malone knows the town the Deputy is on about.

Yes, exactly. I must say that I got a bit of a laugh as she explained that the place is in a very isolated area. The text said that she is living in this area with a very poor telephone reception. I understand that in community centres, schools and other public buildings in which NBI has done its intervention, it requires text messages to be sent to the people in that area, in order to access the service with a code. The point she made, which I thought was a very good one, is that she is in an area where there is zero reception. I do not know how she sent me the text but I thought it was an interesting point. Is there something that can be done - I note our briefing documents indicated there is up to €120 million that has not been drawn down from investors yet - in those areas where there is, quite frankly, a blackout in telephone reception, to deal with that or to make the system to some degree more accessible? That is a concern and is very simple question. Is it something that NBI can look at?

Mr. Peter Hendrick

We are working with a mobile and broadband task force. Within that task force set up between the Department of the Environment, Climate and Communications and the Department of Rural and Community Development, we are looking at black spots. The challenge with mobile networks is that you might put up a base station but if you have no way to get the traffic back from that tower or base station, where typically it was a line-of-sight wireless link, you cannot put a base station in an area and that is why you get a black spot.

Bringing fibre to those base stations enables the provision of mobile coverage as well. We are engaged in that task force and also with the three mobile operators concerning providing the infrastructure to facilitate mobile coverage.

I will not reveal the lady's name, because we know how identifiable people are in small communities. Let us call her Ms W. Unless she is going to be doing cryptocurrency mining from Inch community centre, which is highly unlikely, I would like to see that facility becoming more accessible. I refer to there being no need for a text message, for example. I understand there is a cybersecurity concern in that regard, but such a move would improve-----

The Deputy can tell his constituent that he has engaged with NBI and, hopefully, brought about a change in policy.

She will be WhatsApped the clip of this part of the video.

Mr. Peter Hendrick

If this is specifically to do with the broadband community points, then we will follow up as well with Vodafone, which is the retail operator there.

Apologies for being so parochial, but there is an issue-----

That is what it is all about.

Mr. Peter Hendrick

Regarding the broadband community points, we have seen that issue as well because we have almost 500 across the country. The team has engaged with Vodafone in that regard, so we will see where that stands and then respond to the Deputy.

I appreciate that and I can relay the message to Ms W.

An important general point is that many employers with operations in rural communities are contacting me. One recent inquiry concerned a large employer at Rathcormac, which employs more than 150 people. I highlighted this case to representatives of NBI before. There is a concern about the prospect of waiting two to three years for installation. Every business has operational capacity constraints, and that is particularly the case with a complex project like that being undertaken by NBI. Large employers, however, need a more urgent intervention. It is being done successfully in the isolated rural communities I spoke about earlier. It is good to see that happening, but I am concerned about the pace at which businesses are being identified in this process.

We all know how important broadband is to our lives. It is especially so for those businesses with users of products requiring a high-speed connection. The current situation is damaging businesses in rural areas. The place I am talking about is called Rathcormac. Perhaps Mr. Hendrick could note it. There are many logistical companies there, including everything from the timber industry to the local mart, which operates as a kind of hub for venue hire and things like that. More must be done in that area. It is easy for me to say that, but I would not like Mr. Hendrick to be under the impression that I am not aware of the demands already being borne by NBI. From a business perspective, however, it would be helpful for NBI itself to plan more work in 2022, now that we are reopening the economy and society. Hopefully, NBI will be working at full capacity. Can Mr. Hendrick say something to alleviate some of my concerns in this regard?

Mr. Peter Hendrick

What we can do is to respond with more details of what broadband community points are close to or in the region of the business in Rathcormac. As we heard from Mr. Malone, our endeavours to accelerate this process are critical. It is really about getting more certainty regarding predictability and sharing those timelines. It is hard to say that we will be able to accelerate one area, because the way the network is rolled out means it is just not as simple as accelerating individual areas. We are focusing on a national level. Mr. Malone described the situation in County Clare. It is an incremental increase in every county. The deployment of more BCPs and the increasing certainty of builds will allow us to give some visibility regarding how that might help.

Very good. Concerning the limitations with exchanges, this issue arises in rural areas especially and particularly with families building on greenfield sites. Prior to going into politics, I was not even aware that there was an issue if a farmer's son or daughter, for example, was building a new property and wanted to get a phone line installed. There are areas, though, and Inch happens to be one of them, where telephone lines are being shared. In one case, a wire is going across a river. What is NBI doing on that issue to ensure that everybody can get an Internet connection into their homes? Is the issue of exchanges outside the remit of NBI in respect of providing direct connectivity to each individual home in intervention areas?

Mr. Peter Hendrick

Eir has a universal service obligation to provide a telephone connection to everybody in the country in the context of the existing copper wire telephone network. If someone orders a telephone line today, then Eir is required to meet that obligation, and that would be a question for ComReg.

If it is not doing so, I suppose-----

Mr. Peter Hendrick

That is the present telephone service. Ultimately, however, those legacy copper wire networks are going to be switched off and everybody will move to fibre networks. We are creating a fully-indexed network, where every premises in the intervention area is mapped and has a dedicated optical port on a pole. We built in additional capacity so we would have spare ports on all those poles to accommodate any new homes built. In addition, we have also built spare fibre capacity to meet future demands for the next 25 to 35 years. Therefore, we will not have this challenge in connecting homes in the future. Every quarter, we get a GeoDirectory update detailing what homes are now in an intervention area and we then add them into our work programme. If an area has already been built and completed and we have moved on to another area, and then someone builds a home in that completed area, the information comes into the GeoDirectory. We then assess if we can connect that house to an available spare port or if we will have to build additional infrastructure. We would have to go out and survey again, because that house was not there when we did the original one.

ComReg has a role here. I did not realise-----

Mr. Peter Hendrick

It has a role under that ambit of the universal service obligation to provide telephone lines.

Okay. That is interesting. We have limited time, so I will summarise my points. This project is important for businesses that are large employers, especially for those rural areas lucky enough to have a company employing more than 100 people. I come from Youghal, where approximately 10,000 to 12,000 people live. We have no private employer with more than 100 employees. Some rural areas in my constituency, however, and particularly around the motorways, are lucky enough to have those types of businesses. I feel this is a problem area for NBI and I would love to see it doing more work on this aspect. I will correspond with NBI on this matter and on the areas that have zero telephone reception, which are quite common, whether someone lives in County Clare or down in Cork East. I would like to see the provision of a more accessible system for those connecting to the Internet through those new community connection points. I compliment NBI once more. The site visit was very helpful. I am sure that we will be seeing Mr. Hendrick and his colleagues soon and I ask them to keep up the good work.

Mr. Peter Hendrick

I thank the Deputy.

I call Deputy O'Rourke.

I thank our witnesses for attending. I did not get a chance to participate in the site visit. The way this place works is that we have a direct clash today, and that is often the way things work. I thank the witnesses for the information they have been providing in recent months. They will be aware, however, that people care most about delivery and connections. Hopefully, we can address some of those aspects.

An issue was raised with me by a local authority official. Are the standards which apply to NBI concerning the erection of poles unique to the company? Is there a particular challenge in that regard compared with other utility providers? If there is, does that pose a challenge for the company?

Mr. T.J. Malone

I will take that question. From when we started looking at this programme, we were considering installing approximately 100,000 new poles across the country. I would say-----

It is not possible to share ESB poles.

Mr. T.J. Malone

No, not now. Where we are in rural Ireland, many of the ESB power lines run on poles erected across fields. In urban areas, those poles tend to be road-bound. As we go beyond urban areas, however, the poles tend to be further out. The ESB's poles obviously carry electricity as well, so different complications are involved in working with them.

Mr. T.J. Malone

We explored using roughly 100,000 poles when we started the project. That number has probably come down as we have developed the low-level designs. The key thing for us was predictability and being able to go into Kerry County Council, for example, and have the same surety that we were going to get our poles granted as we would with any other council, such as in Galway, Kildare etc. The process of setting out what "good" looks like and putting in place a set of guidelines was something we worked on with the local authorities to get. We took that approach because we could not be waiting or receiving rejections all the time, because we would not have been able to predict when we would have been able to do the work. It is different in Northern Ireland, where it is possible to just erect a notice to say that a pole is being erected.

If Mr. Malone has a survey carried out, Eir inspects the poles and finds some of the poles are not up to standard and have to be replaced, is Mr. Malone required to get a licence from the council to replace those poles?

Mr. T.J. Malone

No, not for the replacement of poles. It is just for new poles.

Does the pole go back in the same place?

Mr. T.J. Malone

Yes, they put the new one right beside the old one.

Is Mr. Malone's company required to meet a higher standard of quality for poles than the others are required to meet?

In an 80 km zone, is the pole required to be further from the side of the road, does that bring NBI on the private side, and is that a problem for it?

Mr. T.J. Malone

It is, because we have that set those guidelines. There is no other set of guidelines out there, other than what is agreed locally. We have set those guidelines in conjunction with the local authorities. We worked with the local authorities and the County and City Management Association, CCMA, to come up with a set of guidelines that would be approved on a national scale. It was what was acceptable or not acceptable and there were several iterations.

My question then is, is it workable and is NBI content with it, or is it in practice a problem that is contributing to delays?

Mr. T.J. Malone

It could be improved. There is absolutely room for improvement, Ms Fisher is working with us, on the same committee as me in this regard. Now that we have a number of them up, we can work with the local authorities perhaps to reduce the distance that is needed in certain locations, as Deputy O'Rourke said, in the context of speed. We would have an offset depending on the speed in the zone we are in, but at a particular point or place, traffic might never travel at that speed, such as in an 80 km zone.

In terms of addressing this, is it done centrally or by each local authority?

Mr. T.J. Malone

It is done centrally. We are working with that committee I mentioned earlier where we have the CCMA, the road management office, RMO, and the Local Government Management Agency, LGMA, which are involved in it.

As it stands at the moment, could the requirements on distance and speed zones differ from county to county and from local authority to local authority?

Mr. T.J. Malone

It should not because we have the agreed set of guidelines, but at local level on something specific, they might have their own interpretation of the speed.

Mr. Malone mentioned there has been an improvement in the working relationship with local authorities. On previous occasions I raised the issue of Meath County Council. How are relations with that local authority? Has Mr. Malone the figures for where we are in regard to the roll-out and where we might expect to be in this calendar year, as he had for other counties?

Mr. T.J. Malone

First of all, the relationship has improved. We are on a much better footing. Our local authority liaison team is working very closely and very well with the Meath local authority. We need to keep that momentum moving, and get better if possible. However, we are seeing improvement and movement happening on the ground.

If I put Meath into perspective, from a survey point of view, currently 50% of Meath is surveyed, and by the end of this year, we envisage that 83% to 85% will be surveyed, which is quite a substantial amount surveyed. From a build perspective, within the county about 14% is now commenced. There are approximately 19,000 houses in County Meath that fall into the intervention area, and by the end of this year, we will have 8,310 either built or under construction. This equates to about 45%. By the end of 2022 we will see the first 2,600, or the first 14% of those premises, being built.

What about subsequent years?

Mr. T.J. Malone

For subsequent years, providing everything goes well, in 2023 we should have about 60% built or under construction, and by 2024, 95% will be built or under construction. That is the plan for County Meath, which is probably more aggressive than some of the other counties because of the way the designs work and the locations. It is very much dependent on the local authority working with us. We have seen crossover in different local authorities in the same areas where we are ahead in one and not in others. It is contingent on that.

For my part I will encourage all parties to move with the progress as quickly as possible. To give some comfort to people, there have been reports over some weeks in regard to questions on finances, governance and control at NBI, which are complex matters, and the public wants to know the company is sound, secure and fit to deliver on the project people desperately want delivered. Can NBI give that assurance today?

NBI's presentation stated, "We are seeking to resolve the media inaccuracies and misrepresentations on an ongoing basis." Mr. Hendrick might incorporate that in his response. Clarity is needed around this area. It is hoped this is an opportunity for it. Mr Hendrick might start it in the context of the capital structures, the repayment period of shareholders' loans, the funding being secure, the interest rate being as high as it is, and so forth. Will he give that level of clarity? He has referenced it in his opening statement so now is an opportunity to deal with it.

Mr. Peter Hendrick

Any large infrastructure project is typically complex, whether it is the contract or the corporate structure. The contract runs to 3,500 pages. The corporate structure might look complex, certainly from the perspective of the public. What we have sought to do and shared on our website under corporate governance structures is to explain the corporate structure, the financing structure, how the organisation is set up, the board and the shareholders. We have explained as simply as possible the summary of all those things to give assurance around the funding, our board and our shareholder structure. Every time something is raised, we are always trying to inform further. When we came before the committee in September, there was a request to add our board members to our website. We have done that, and that can be seen on our website now.

We have also looked at the 3,500-page contract to see how we can make that into something that is easier to understand. Not that anyone might necessarily read the 100 pages we have put up, but it certainly is a guidance. If something arises in the future, you can go to the summary of the contract and can see, for example, that is in section 5 or schedule 10 within the contract and understand the reason there are protection mechanisms or clawbacks in place, without having to refer to a 3,500-page contract. We are trying to share the governance and controls we have in place.

In regard to the funding, what we have done is typical of any other infrastructure project. We effectively view the shareholder equity and loans as shareholder funding. There is no committed time in regard to when they get paid dividends or returns on that money. It has gone in as it would in any other infrastructure project. In regard to referencing it being equal to any other technical project, Openreach in the UK, the British telecom fibre network, has expected returns of 12.5%. Other fibre networks range from 12% to 15% return. Other infrastructure projects, such as wind farm projects, that I can talk to-----

What is the interest rate on shareholders' loans?

Mr. Peter Hendrick

The expected return is put in between equity and shareholder loans. Brookfield Infrastructure Partners acquired Bord Gáis Energy and has an expected return of 12% to 15%. Marquardt Fund, which is a fibre investor in France and Italy, gets between 10% and 15% return. It is a typical rate.

In regard to media inaccuracies and misrepresentations, how would Mr. Hendrick classify those?

Mr. Peter Hendrick

What we are doing right now is we have shared the information by putting it publicly on our website, and we have shared it not only with the media outlets that have reported it but all media outlets. We are also inviting journalists and media outlets out to our office.

Was that in recent times?

Mr. Peter Hendrick

It was in recent times. We shared the information before Christmas.

Since Christmas, we have met with a number of media outlets to explain the programme, the project, the 50-odd subcontractors who are engaged with it, and how it all works. We have tried to explain the contract in summary terms, the protection mechanisms that are there for the State, how the clawback mechanisms work and how the funding mechanisms work. We have tried to explain and answer questions so that people are informed. Ultimately, we have put the information on our website, so if anybody has any concerns or questions, they can find it on our website or they can come and ask us.

Are you saying that NBI has nothing to hide?

Mr. Peter Hendrick

We have nothing to hide. Obviously, there is commercially sensitive information in terms of the contract, particularly considering that we are dealing with 50-odd suppliers. We are commercially negotiating with them to try to get the best value for money. Ultimately, we need to flow down any penalties or delays in terms of their performance of the contract. There is commercially sensitive information that we must redact and cannot share for obvious reasons.

I call Deputy Matthews.

I was listening in to the Dáil debate on the same subject at the same time because I am speaking on it shortly.

I hope having the primary source here is more illuminating.

Of course. I welcome the NBI team to the meeting and thank them for the regular updates we receive. They are really useful when we are meeting and dealing with constituents. Naturally, they all ask when they will get their high-speed broadband. Those updates are helpful in that, as was our recent visit to Kilcoole. As I am criss-crossing County Wicklow, I have learned to spot ducts up on poles so that I know houses have been passed. It has been very helpful in that.

I suppose we must think about what we are trying to do here. We are trying to bring high-speed fibre broadband to every premises, household, business and farm in the country. Fibre is the gold standard. There is nothing better than bringing fibre right to the house. It is a massive contract. It is huge. It is a €2.1 billion contract to make sure that everybody is connected. It is a massive job, but it brings huge benefits to everybody who gets connected. It brings an equity in communications that perhaps has not existed in rural areas for a long time, where they were previously not getting their fair share of investment. It seeks to balance that urban-rural divide that can sometimes exist. I have heard it compared to the rural electrification scheme. It is akin to that. It is that kind of level of investment we are trying to make here. It is complicated. NBI is trying to follow existing ducts, networks and poles, which in some ways has advantages but in other ways has disadvantages. Mr. Hendrick has spoken about the learning curve that NBI has experienced. Delays were incurred at the start but NBI has learned from that and expects the momentum to ramp up and speed up the delivery. I am looking at the figures for January 2022, as we sit here, with 54,500 premises currently able to place their order. If we are sitting here in January 2023, with the learning that NBI has done so far, what would Mr. Hendrick expect that figure to be?

Mr. Peter Hendrick

Mr. Malone has talked about the build programme. With orders, we are enabling consumers to pre-order with their preferred retail provider. We have set that as a three-month window because we know we can predict when we will finish a particular ribbon. We may be waiting to get a road-opening licence or licence for the crossing of a railway bridge. We know exactly when we are going to complete a ribbon or a deployment area. We allow a three-month pre-order window. By December of this year, we will accept orders into 2023. It will really start to feed into the 195,000 premises that we have in construction. It will probably be somewhere in the 150,000 range that will be able to place orders. Some of those will have to wait to quarter 1 until we close out deployment areas or ribbons, but there will always be homes that can place orders in advance of our completion.

If NBI gets a lot of pre-orders from a particular area, would that make it consider doing that particular ribbon next?

Mr. Peter Hendrick

I would say there are a lot of pre-orders in every area.

Mr. Peter Hendrick

What it does give is predictability in resourcing. As of this week, we will have around 6,000 homes connected and about 8,000 in total, when you take orders into account. We have 2,000 orders ready to connect on premises that we have allowed to pre-order. At the beginning of December, we released new premises, signalling that we were available to start connecting homes. In two and a half weeks, we connected 1,398 homes because we were able to see the pre-orders. We obviously have to account for homes that order just as we have passed them as well, but we were able to resource up both in terms of materials and our contractors in terms of connecting those homes. All across the country, we are seeing a volume. Typically, right now it is about 30% take-up in the first six months.

I just did a quick calculation. There are about 38,000 homes and 8,000 of those have placed orders. How does that relate to a market take-up elsewhere in the world in terms of new roll-out?

Mr. Peter Hendrick

It is very good.

What is your target?

Mr. Peter Hendrick

Ultimately, our ambition is to get to 85% take-up. Across other parts of Europe on traditional or legacy broadband networks, Ireland today would be at 78% to 80%. In other parts of Europe, they are up at 90%. That is other forms of legacy broadband. With fibre, we believe that take-up will be approximately between 85% and 90%, because it is now the equivalent of a utility.

When this network is finished, and it will be finished, and everybody is passed and has the potential for connection and we have this extensive fibre-optic network throughout the country, is there future planning for the maintenance staff who are going to be required to maintain and keep that network updated and running for the next 20, 30 or 50 years? I do not know what the life expectancy of a fibre cable is.

Mr. Peter Hendrick

Yes, absolutely. With fibre networks, it is a new infrastructure. We are replacing poles and repairing duct. The fibre cable has a carbon Kevlar coating on it. If any damage is done, for example, by trees coming down in storms, it should not be as prone to failure as cooper-based networks. The number of outages or downtimes requiring repair should be smaller. We would not expect a huge workforce to be required to maintain the network. Obviously, NBI will have an operations team supporting the maintenance and connections of homes or the migration from one retail operator to another. In addition to building this fibre network to connect homes, connectivity in general terms is going to increase if we have unlimited capacity across the country in broadband. Hopefully, that will be followed by mobile connectivity as well. The number of devices that we are connecting to the Internet is growing. In future, it will not just be devices that we have in our hand or on the wall at home; every active device will have some form of connectivity.

The service providers are responsible for faults users may have in the home. Are they responsible for the connection to the pole as well?

Mr. Peter Hendrick

No. We are responsible for the connection all the way into the home and for the box on the wall. We have a network assurance and monitoring service, so if something happens to that box we can actually see it failing and we will notify the retail operator. We will know whether the fault is our own or that of the retail operator because of all the diagnostics we have.

That should make fault-finding a lot easier than some of us experience.

Mr. Peter Hendrick

Almost all of it is automated.

The main companies have difficulties in finding faults at the moment. In looking at a project such as this, one should always keep an eye on the future and ask whether it can be expanded somewhere. This is a national roll-out of fibre to the home. I live in an urban area where I thought I had good fibre connectivity, like lots of us did, until everybody started using devices at the same time. I know NBI has its hands full with the areas that are not served at the moment, but will there be fibre to the door of every urban home, or is that being left to the likes of Siro and the other companies? I cannot get fibre broadband to my home, currently.

Mr. Peter Hendrick

The commercial operators in urban operators have announced that they plan to roll out fibre. Siro is extending its programme to add another 200,000 or 300,000 homes, Virgin Media has committed €200 million to swap out its copper co-ax network with fibre and Eir has announced its programme to bring fibre to urban areas. There is a competitive tension between those operators to want to connect homes.

The difference, as we look at fibre and the future-proofing element of it, when consumers move over to fibre, the likelihood of them switching retail operators is probably lower because the service is much more predictable. The challenges will probably be in respect of price, which is where competition between the operators comes in, as well as service, which includes devices that they install in-home around Wi-Fi coverage, whether they offer television services etc. According to the plan between now and 2025 or 2026, based on all the announcements, Ireland will be one of the first countries in Europe to have a full-fibre footprint across the country.

In urban areas at the moment, which are on copper, if someone is getting less than 30 Mbps, NBI will serve them. However, if they get over 30 Mbps, they are deemed to be served. Do you think the mark will become then if someone is on copper, rather than speed, they will be able to get fibre?

Mr. Peter Hendrick

There is enough commercial tension between those three operators that roll-outs will happen. If they do not, the European Commission’s ambition is for 100 Mbps to become the minimum speed that everybody would have access to by 2025. That was an objective or target. I expect that as the broadband speeds increase, there will be at a European level a review of where commercial operators are going with rolling out this infrastructure to hit 1 Gbps by 2030 and if further State intervention would be required.

Right now, based on the announcements, I am highly confident that we will be close to more than 95% having access to fibre. In our programme, we are seeing the number of premises increase. We are at 554,000 premises today versus 537,000 when the contract was signed. That is new homes being built, as well as homes that are designated as being in the blue area where a commercial operator was providing 30 Mbps but they are not getting it. They are being added back into the national broadband plan, NBP.

I do not know where or when a new threshold will be set, but, absolutely, it will be monitored over the next five to ten years.

On the broadband connection points, BCPs, 185 schools have them installed. Is that the full number of schools?

Mr. Peter Hendrick

Some 649 schools is the total number. We have a programme where we are working with multiple operators in terms of the school roll-outs.

Does NBI follow up with the schools after they have had them for a while to see if it has been successful or how it has made a difference to the school?

Mr. Peter Hendrick

Absolutely. Ms Collins will add more on that.

On the public BCPs, is there follow-up on that side as well, such as what difference it has brought to a particular town or part of town?

Ms Tara Collins

I thank Deputy Matthews for his question. We have been producing multiple case studies. If the Deputy takes a look at our YouTube channel, he will see case studies from schools that have been connected in a number of different locations. We did three case studies in different schools, including one in Laragh, County Wicklow.

We also recently announced a schools competition. We are running a competition across all of the primary schools in the intervention areas, which includes up to 700 schools, to get the children involved in imaging the future. We are doing much interaction with the schools. There are some great prizes, including the Promethean whiteboards, which work very well with high-speed broadband and will work offline as well, in the interim period. There is much interaction with the schools.

On the BCPs, likewise we have been going in and finding out what has been happening in the community. We did a case study recently with Obair, which is a social enterprise in Newmarket on Fergus. Again, it is up on our website if the Deputy would like to take a look. It has been able to develop an app for Meals on Wheels as a result of being connected to high-speed broadband. It is the first Meals on Wheels in the country that can now connect with its customers through this app to order meals. The plan is to roll that out across the country as well. We are looking at that and helping them to roll it out across the country.

There are some very good initiatives coming out of the BCP programme and the school programme as well.

I thank the representatives from NBI for their time today. I hope they keep up the good work and keep rolling it out.

How many commercial operators has NBI signed up at this stage? I understand it was something NBI was looking at. I think one big operator has not signed up.

Mr. Peter Hendrick

In terms of retail operators, we have 50 signed up today.

Are they all signed up?

Mr. Peter Hendrick

There is still one that has not signed up.

Is that the big one?

Mr. Peter Hendrick

It is a big one, but it is more urban-based. The largest national operator is signed up and is selling services.

At this stage, how many of the operators are not signed up?

Mr. Peter Hendrick

It is one or two. It is minor, and we are currently going through the sign-up process with them.

How long have they been signed up at this stage?

Mr. Peter Hendrick

Most of these operators are signed up at least nine to ten months.

At this stage, anyone who wishes to get onto his or her retail provider can now connect?

Mr. Peter Hendrick

That is correct. With some of the earlier operators that signed up, we are better at regionally engaging with consumers where they had customers already. With the larger operators, they prefer to market and engage at a national scale. It is only now, as we are operating across the entire country, that we are starting to see more national advertising around our services.

What is the total number of deployment areas?

Mr. Peter Hendrick

We have 227 total deployment areas.

How many are done to date?

Mr. Peter Hendrick

We have six fully completed and we are close to completing ten.

Mr. T.J. Malone

We have more than 60 contracted out at the moment.

By the end of this year, how many of the 227 will be complete or would work have commenced on?

Mr. T.J. Malone

For work commenced by the end of the year, I would imagine it is somewhere in the region close to 70 commenced. We would imagine in the region of anywhere between 40 to 42 being completed by the end of the year.

How does that compare to the target?

Mr. T.J. Malone

That is back in line with what I discussed earlier on.

Mr. Peter Hendrick

In terms of deployment areas, not all deployment areas are equal.

I accept that.

Mr. Peter Hendrick

Midleton would have 9,000 homes, whereas some of the islands we are doing in Donegal, such as Rutland and Eighter Island, we are talking about a handful of homes. However, that is a deployment area.

My first question was the same because I had a recollection that they were not. I listened to the opening statement, looked at the briefing documents and listened to the questions from other members. Therefore, many of the questions have been articulated. The more information that NBI can put out, constituency by constituency, the better.

I have to confess that living in Rathdown, Dublin, we will not be supplying as many customers to NBI as other parts of the country. However, as a Senator, I have a national brief. Therefore, certainly, I am in touch with councillors from all over the country. The work that NBI is doing is very important. It is like electricity or running water; once one has it, one takes it for granted. However, if one does not have it, or if one lives in an urban area and loses power or broadband, one thinks, “How did I live without it?” That is what will happen with this scheme as it is rolled out.

We have touched on the schools. Is it secondary schools as well as primary schools? Or is it just primary schools that NBI is dealing with?

Mr. Peter Hendrick

It is all buildings that are on the premises.

How about in terms of the BCPs or in terms of going out?

Mr. Peter Hendrick

It is predominantly primary schools.

Ms Tara Collins

The acceleration of the primary school programme is up to 700 primary schools in the intervention area. We will, obviously, be connecting all schools and everything and every building.

It is a focus on the primary rather than the secondary at the moment.

Ms Tara Collins

Yes, as part of the acceleration through the BCP programme.

Mr. Peter Hendrick

The rationale behind that is the Higher Education Authority, HEA, provides connectivity to universities and secondary schools today. Typically, that is at a higher speed broadband. It was the primary schools that were, if I recall, a number of years ago were in the 8 to 10 Mbps broadband. The ambition was to bring them up to a higher speed.

That is fine. On the website, there is a lot of information. We got a briefing document this morning of 84 pages of a summary, though it is hard to say that an 84-page document is a summary. However, of a 3,500-page document, I suppose it is. I did not get a chance and I am sure the Chairman also did not get a chance to go through the full document.

We probably need the assistance of Ms Fisher to go through that document.

She was probably part of the process to trim it from 3,500 to 84 pages. At its very simplest, perhaps NBI representatives could tell us some of the figures. I have heard figures talked about at €2.1 billion, €2.5 billion and €2.9 billion, or €2.7 billion because it is not VAT or something. What is the State's exposure in total? What is the worst-case scenario of the maximum cost of this to the State? What is the total predicted cost, in terms of the ratio of the State's money to the non-State money going into the deployment scheme?

Mr. Peter Hendrick

I will try to break it down. Ms Fisher can correct me if I am wrong. The cost of actually building the network is approximately €1.1 billion. We have rental of infrastructure, such as poles and ducts that we are going to use, and that is a cost of circa €900 million. That brings us to approximately €2 billion. That infrastructure rental is over a 25-year period. There is then a contingency of approximately €500 million for things of which we were not aware or which have gone wrong. To date, the reason we are very confident of doing it on budget is that the evidence we are seeing on the bills today gives us confidence in terms of the projection going forward and the overall plan.

There are the rental costs over 25 years and the actual build costs of putting out contractors, replacing poles and doing all the things NBI is doing itself. The State is picking up the tab for most of that, is that correct?

I ask Mr. Hendrick to break that down. There is €1.1 billion to build the network and €900 million to release or rent equipment, which would obviously be with the network through 25 years. That is €2 billion. There is a contingency of €500 million. Mr. Hendrick is putting the cost at €2.5 billion. Who is financing that?

That is another point. The State is somewhere between €2.2 billion, €2.7 billion or €2.9 billion and obviously all the consumers will be paying their way. I accept that people will get their share of the proceeds along the way, that is, the people from whom NBI is renting the poles, but that is in the €900 million. What is the money put in by the investors really for?

Mr. Peter Hendrick

I will explain. The €900 million is for the rental of Eir infrastructure, that is, the poles and ducts. After the network is built, there is an operational cost in terms of the rental of infrastructure-----

That is in the €900 million.

Mr. Peter Hendrick

It is in the €900 million. I refer to the people who are required to operate the network, but also to manage the connections. We are still connecting homes. There is a subsidy for connecting homes as well. My apologies. Within that number, there is a connection subsidy as well. As we connect homes, we get subsidy to connect-----

In the context of the contract as it currently stands, who will fund the €2.5 billion cost NBI will incur?

Mr. Peter Hendrick

Through the 25-year life of the project, we believe the total cost of building, operating and maintaining the network and connecting homes will be closer to €5 billion.

It will be €5 billion.

Mr. Peter Hendrick

Yes. Obviously, our shareholders are meeting the early mobilisation costs of getting the business up and running and so on. The State-----

That was winning the tender-----

Mr. Peter Hendrick

It was effectively getting the business organised, such as working capital and getting all the contractors on board. We collect subsidies only when we achieve milestones. Obviously, it is our ambition to get customers on as quickly as possible to generate revenue to cover our operational overhead costs.

And to recover start-up and set-up costs and so on. I understand that.

Mr. Peter Hendrick

In terms of the capital build cost to which the State has committed, that is, the €2.7 billion the State is capped at, under EU rules, we can only claim up to 92% of all permitted expenditure, which is all the costs associated with building the network. As regards operating and maintaining the network going forward, we have to generate revenues and that is where, ultimately, the shareholders get a return - when we get customers onto the network, generate revenues and it is a viable business.

I do not wish to get too bogged down in this but I am not sure whether anyone else has developed this point. Is it fair to say the State is basically paying for the building of the network and, ultimately, the investors' money is going into making sure there is working capital and a resource there to keep the system ticking over once it has been built? The State is paying for the building of the network and NBI will make its money from the customers who sign up. Effectively, most of the costs are fixed at that point. I presume the variable cost per consumer is relatively low. The beauty of networks, whether a television network or any other kind of network, is that although there is a significant infrastructural cost - the State is funding much of that cost - it is then up to NBI in this case to get the take-up as high as possible to get that back. Mr. Hendrick stated that at this point the shareholders have put in €100 million or €102 million. Is that the figure referenced in terms of-----

Reference was made to €120 million.

It is €120 million. I wish to distinguish between traditional equity compared with debt that is coming in. Is Mr. Hendrick allowed to give us the breakdown of that €120 million in terms of shareholders' equity funds that can be lost compared with repayable debt that comes at a price and in the context of which the shareholders will not share the benefits of the profits in the long term?

Mr. Peter Hendrick

I will hand over to Mr. Kelly, our chief financial officer, to provide answers that might be helpful.

I am not trying to trip up anyone. I am just trying to understand it for my own sake.

Mr. Peter Hendrick

Yes, absolutely.

Mr. Barry Kelly

I am happy to explain. As the Senator stated, €120 million of shareholders' funds have gone in to date. On 9 January 2020, €100 million went in, and a further €20 million went in during December 2021. That is €120 million of the €223 million total committed funds from the investors. From the perspective of the investors and from an infrastructure funding perspective, there is very little difference between investing funds as equity or as a shareholder loan. Both forms of investment are unsecured. It is not like going to a bank and getting a debt over which the bank takes security and if the debt is not repaid, the bank will take-----

To develop the point before I lose my train of thought, there is no bank debt there.

Mr. Barry Kelly

There is no bank debt. These are effectively funds advanced by the shareholders which are put in by way of a shareholder loan note as opposed to equity. They are both unsecured. It is not like a bank loan, where the bank takes security and you then take the-----

Is all that €223 million, of which €120 million has been stumped up so far, if one likes, a loan note, is it?

Mr. Barry Kelly

To date, €120 million has gone in. A total of €2 million has gone in as equity and the other-----

That is pure equity.

Mr. Barry Kelly

It has gone in as equity, or as shares, effectively

What is the practical reason for having €2 million in pure equity and the rest in debt equity that is not secured and can be lost anyway? What is the difference?

Mr. Barry Kelly

There is very little difference, to be honest. It is a fairly common structure in this sort of complex and large-scale infrastructure project for people to split their investment between equity and shareholder loans. What we are looking at here is-----

There was reference to there being 12%, however, in terms of-----

Mr. Barry Kelly

Yes.

The €2 million does not get any return but the rest-----

Mr. Barry Kelly

The return on overall shareholder funds, whether invested by way of equity or shareholder loans, forms part of the overall return to the investors which was agreed up front in the context of the financial model, to which Mr. Hendrick referred, with the Minister. Those returns, whether by way of equity or shareholder loans, are subject to the same sort of protections that are in the contract in terms of claw-backs and timing restrictions. Although the shareholder loan will have a coupon attached to it of 12% and we have to accrue that from an accounting perspective in our year-end accounts, nothing can be paid until the project is successful, sufficient cash flow is generated and there is sufficient return made to the investors.

The loan note shareholders get their 12%. Do they also share in the profits after that or is it the investors of the €2 million who get the surplus profits?

Mr. Barry Kelly

They are the same shareholders; they just happened to spilt their investment between the two different-----

Okay. All the shareholders have a share of the €2 million and a share of the pro rata-----

Mr. Barry Kelly

Correct. The pro rata-----

I do not mean to focus on any individual. It is not that one shareholder has the €2 million and gets all the surplus profits and all the other shareholders get the 12% but do not get the surplus profits.

Mr. Barry Kelly

Correct.

I hope people listening at home have not switched off at this stage, if they were listening in the first place. It is for the sake of the committee that I am asking these questions. I do not think any other member has developed that point. I thank Mr. Kelly.

From the perspective of consumers and public representatives, the most important thing is to have as much data as possible in real time, updated daily or weekly, in respect of every constituency. Our guests referred to 26 counties but there are five constituencies in Dublin, for example. I accept that much of Dublin is not covered by the programme but I saw figures indicating there are approximately 13,000 premises to be passed in Dublin, as there are in Longford. As a percentage of the number of houses in Dublin, it is a small figure, but it is still a significant number of premises, many of which are located in Fingal and so on. It would be useful to have widespread availability of data by constituency or by local electoral area and a timeline for when broadband will be provided in each area. The faster that is done, the better. Those data should not be shared just with the committee; it should be shared more widely. I appreciate NBI has been doing a lot of that. It should be doing as much of it as it can. I hope everybody gets broadband as quickly as possible.

I ask our guests to develop the point in respect of the take-up they expected compared with what they are actually getting. I know that 5,477 premises, or approximately 1% of the total, have been connected, so it is a small sample. What level of take-up did they expect in that regard?

Mr. Peter Hendrick

In the deployment areas we have completed, there is 30% take-up in the first six months. That is ahead of where we originally expected to be, but also ahead of the typical market now.

People working from home has had a big impact, but the demand for bandwidth has definitely increased. Internet usage is up 60% over the past 12 months globally. We know the demand for bandwidth is there.

That is not just more people. It is also the products that people are using online, such as Netflix, which consume much more data than checking emails.

Mr. Peter Hendrick

Absolutely. It is about television content etc. Most services are now delivered, as we call it, over the top. Traditionally, people had a satellite television, but now all of the content seems to be delivered over an Internet connection. After six months the figure is 30%. We have 50 retailer operators selling on the network. Some of those operators have existing customers in these areas who may be currently in contract for another eight or 12 months. In the early stages, we found that operators were talking about migrating customers at the end of their contract term. Now, some operators are deciding to move customers onto the fibre network now and are providing promotional offers such as free installation.

That allows people to see how good the fibre network is.

Mr. Peter Hendrick

Correct. In terms of fibre networks versus legacy broadband networks, consumers are not as fast to look to switch. They believe that if the system works, they do not need to change. A lot of the content and applications they are using are over the top. The only reason they would change is because the service is not good. One of our objectives and obligations under the contract is to measure the performance of the retail operator to ensure that the Internet services it is providing over our pipe works to the 500 Mbps or 1 Gbps or whatever product we go with in the future. Another reason why they might leave is price. As we have enough retail operators selling on the network, there will always be competitive tension around product advice.

There are commercial sensitivities. Retails are taking bigger and smaller margins to get bigger and smaller shares of the market.

Mr. Peter Hendrick

Our wholesale price is fixed. Ultimately, there is enough competition for consumers to decide who they are going to buy from in terms of the retail product.

Volume is what will drive down prices.

Mr. Peter Hendrick

On the European objective of moving everybody towards gigabit networks, Eir has said it wants to switch off its copper network as part of its own fibre roll out. As consumers to fibre on the NBP network, there is a rationale for switching off copper networks. There will be a migration from copper to fibre.

From an urban perspective, is there a risk that the service NBI is providing will be better than the services available in urban areas not covered by the NBP?

Mr. Peter Hendrick

We might find that over the next three or four years as all networks are being deployed some homes in urban areas are at between 30 Mbps and 100 Mbps. That is something that will be assessed. The Department will assess what is happening on a national basis and whether anybody will be left behind. There will be a constant assessment of where the commercial operators are building, where the NBP is being built and whether there is a delta on the 30 Mbps to 100 Mbps where people might be left behind. The percentages should be small, based on the announcements being made by commercial operators.

There are plenty of services in urban areas providing what will now be provided in rural areas.

Mr. Peter Hendrick

That is the plan, as announced by Eir, SIRO and Virgin Media.

They are not there yet.

Mr. Peter Hendrick

They are not there yet.

Are they there for NBI consumers? Of the 5,000 people who have been connected, have some received better services than in urban areas?

Mr. Peter Hendrick

Yes, absolutely. Around 24% of the people we have connected are taking 1 Gbps as their speed. The other 6,000 homes we have connected are going with a 500 Mbps product.

The minimum in urban areas is what?

Mr. Peter Hendrick

The minimum could be 30 Mbps.

The minimum NBI is offering is 500 Mbps. People in urban areas are only using 30 Mbps at the moment.

Mr. Peter Hendrick

Correct.

Okay. I thank NBI for all its efforts and wish it the best with the roll-out.

Mr. Peter Hendrick

I thank the Senator.

We have been given a lot of information in the briefing and statement. We as a committee want the roll-out of broadband. Areas need to be clarified in order to allow everyone to move forward. The cost of building the overall network will be €2.5 billion over a five or seven-year period. It is estimated that the overall cost over the following 25 years will be another €2.5 billion on top of that, which will mean a total of €5 billion. Am I correct with my figures?

Mr. Peter Hendrick

I will ask Mr. Kelly or Ms Fisher to give the Chairman that information.

Am I correct in understanding that the cost of the network will be €1.1 billion? The poles will cost €900 million over a 25-year period. There is a contingency fund of €500 million. The total cost of the scheme over 25 years is anticipated to be €5 billion.

Mr. Barry Kelly

The capital expenditure cost may be about €600 million or €700 million.

The overall cost is €5 billion. Of that €5 billion, the State is contracted to pay up to €2.7 billion. That is the maximum.

Mr. Barry Kelly

€2.6 billion, which is €2.1 billion plus €500 million in contingencies.

Okay. The maximum that will be claimed is, I presume, 92% of the €5 billion. Am I correct?

Mr. Barry Kelly

It is 92% of capital expenditure to pass a home. That is the €1.1 billion. Capital expenditure to connect to homes will be roughly €700 million, or the rentals. The total will be roughly €900 million.

What is the total amount available? I know the cap is €2.6 billion, comprising €2.1 billion and €500 million in contingencies. What total can the State contribute to the €2.5 billion?

Mr. Barry Kelly

The maximum cap is €2.6 billion, which includes contingencies of €500 million. Assuming we do not use those contingencies, the figure will be €2.1 billion. The numbers we have shared here today exclude any variations from our estimate. It is 92% of the total. The €1.1 billion cost of build, approximately €900 million cost of rentals over 25 years and approximately €700 million for connections capital expenditure means a total of €2.7 million.

The figure of €2.7 billion, multiplied by 0.92, is €2.5 billion. That is where the figure is coming from. That is the maximum.

Mr. Barry Kelly

That is the absolute cap.

NBI will incur costs of between €2 billion and €2.5 billion. Is the purpose of the subsidy being provided to NBI to cover the build-out cost €2.5 billion? Is that the logic behind it?

Ms Jenny Fisher

From the point of view of this being a State intervention, the state aid rules are that the Government can contribute to the capital expenditure costs, that is, the build-out of the network, on the basis that but for that State intervention, it would not be possible to recover, on a commercial basis, the investment required to build the network.

The State's investment is for the build-out and not the operation of the scheme.

Ms Jenny Fisher

That is right.

So the €2.5 billion on top, to bring it up to €5 billion, is covered by NBI.

Ms Jenny Fisher

For the operating costs over the life of the project, that is correct.

Under state aid rules, NBI can only get 92% of the build out costs which is 92% of €2.6 billion, or roughly €2.5 billion.

Ms Jenny Fisher

Yes. The subsidy envelope is €2.1 billion plus €500 million. The difference between the €2.5 billion and €2.6 billion relates to €100 million in respect of encroachment in the event that----

On encroachment, what value has been assigned to the subsidies paid to NBI?

Ms Jenny Fisher

The figure is €100 million. It is only in the event of there being a deficit.

It is the differential between the revenue that would be lost from those premises not forming part of the intervention area and the costs NBI would incur in terms of the build.

If any of that €100 million is claimed or paid to NBI, when would it happen?

Ms Jenny Fisher

No claims have been made in respect of that to date. We will assess on a case-by-case basis if there is significant encroachment as to when we would make an application for that. We would have to apply for that to the Department at the appropriate time. There is nothing in the pipeline in that respect currently.

NBI may claim subsidies from the State but what mechanism determines the subsidies that can be drawn down? What level of subsidies have been received since the start of January 2020?

Mr. Barry Kelly

There are two elements that must happen for us to be able to claim a subsidy under the contract. The first is we must achieve milestones and those milestones are independently certified by an independent party under the contract. They can be design, build or connection milestones. Once we have connected, built, or designed, we get that certificate from the independent certifier. We then need to submit that to the Department with sufficient "permitted expenditure", as Mr. Hendrick mentioned. We can only say that we have spent money on all these things, and it is quite a forensic review we go through every time with the Department. We indicate the costs expended on poles, contractors etc. and the Department will review them and indicate if they qualify as permitted expenditure. That ensures we cannot be subsidised for more than we have spent. There is a maximum spend in the numbers and we can only be subsidised to the maximum.

Taking this to the logical conclusion, the State is providing funding of 92% of the cost of the roll-out. That goes to NBI to roll out a network that would not have been rolled out to rural areas without State support. Mr. Hendrick mentioned the next matter in his briefing note. Under project costs, it states:

6.3 Granahan McCourt incurred significant costs during the bid stage, in relation to technical, financial, legal and tax due diligence, project development and related matters. Granahan McCourt was fully on risk for those costs during the bid period. The project agreement envisaged that such costs would be reimbursed by NBI.

That came to approximately €32.73 million, according to what I read in the media. The note continues:

This reimbursement was not funded from subsidy paid by the State. It is ordinary course for successful bidders in procurement processes to recoup bid costs as part of the implementation of the successful bid.

Will Mr. Kelly address that. The media reports are basically indicating these were paid for out of subsidies received from the State. What is the total number of subsidies received by NBI to date?

Mr. Barry Kelly

To the end of December 2021, we received €177 million of subsidy from the Department against €120 million of equity or funds invested by investors.

Will the witnesses deal with this in the context of the requirement for the €100 million that appears to have come in virtually on the same day, 9 January? It was €2 million of equity and €98 million of unsecured loans. We know they are at 12% interest. Will Mr. Hendrick deal with that point?

Mr. Peter Hendrick

Of the bid costs, effectively the financial model associated with the contract had all the costs associated with bidding. We can look at it as if the investors are paying for the cost of all these-----

Is the figure correct?

Mr. Peter Hendrick

Yes. Mr. Kelly has spoken about the subsidies and milestones. The Department and its advisers assess all the invoices we receive from all our suppliers and it goes into a permitted expenditure bucket. When we go to achieve a milestone and collect a subsidy, we can only claim from that bucket. If there is €30 million in invoices that have been audited, we have our own internal and external auditors, the Department has its own advisers assessing, and we have an independent certifier to verify that invoices are appropriate and associated with construction of the network. If we achieve a milestone where we are due to be paid €5 million in subsidy and we have €30 million in permitted expenditure, that permitted expenditure drops to €25 million once that €5 million is paid. If there is not enough permitted expenditure, even if we have achieved a milestone and even if we have spent money, there would be no funds associated with that. There is never a connection between the bid costs that were reimbursed or paid out by the investors with the subsidy or milestone payments.

Was that discussed with the Department and always the understanding?

Mr. Peter Hendrick

During the finalisation of tender, it was always clear what is permitted expenditure, what is associated with subsidy payments and what is not. There is a definition and Mr. Kelly's team and his life is around categorising invoices and costs, and whether things are for subsidy or not.

Was there any question the initial cost could be regarded as equity in NBI as distinct from being repaid to Granahan McCourt?

Mr. Peter Hendrick

No. It was always classified as bid cost being reimbursed to pay all the advisers etc. For four years we had between 80 and 100 people involved with the project. To be fair, it is not just around mobilising the business and the contract. There was preparatory work on the design and the technology in order to define how to roll this out.

That was always the understanding with the Department.

Mr. Peter Hendrick

Yes, it was always the understanding. It was captured within the bid model. It was defined as not being permitted expenditure but a cost for the shareholders to bear. As it is not permitted expenditure, it would never be subsidised.

Under the contract, could any investor funds be used for this purpose?

Mr. Peter Hendrick

Investor funds would be used to pay all the advisers and those costs.

It was never a question-----

Mr. Peter Hendrick

There was never a question about it.

It was not allowed.

Mr. Peter Hendrick

Correct.

I want to get back to where we are now in the roll-out. I am correct in saying, in layman's terms, that the target to the end of January this year was 115,000 premises passed. To date that number is approximately 38,000 and it is expected to be approximately 60,000 by the end of March. It is expected to be 130,000 by the end of this year. Is that correct? Many figures have been bandied about.

Mr. T.J. Malone

Yes. It will be between 100,000 and 130,000.

The number of premises surveyed is approximately 290,000, or more, now. What is it expected to be by the end of the year?

Mr. T.J. Malone

It is expected to be in the region of approximately 380,000 premises surveyed.

That would be 70% of all premises to be surveyed.

Mr. T.J. Malone

It is 70%.

The number of premises under design is approximately 253,000 currently. What is that expected to be at the end of the year?

Mr. T.J. Malone

It will be approximately 365,000 to 370,000.

What percentage is that?

Mr. T.J. Malone

It is roughly 68% to 70% as well.

Is the number for premises under survey and design ahead or behind the target?

Mr. T.J. Malone

They are ahead of the target. Taking the number of premises to be surveyed by the end of the year, the original target was approximately 347,000. From a design perspective, the number was somewhere in the region of approximately 337,000.

That means the target is up approximately 35,000 on premises surveyed, as it is going from 347,000 to 380,000. On the design side, the number is going from 337,000 to 365,000. There are approximately 120,000 premises with a build under way as of 14 January. What is that expected to be by the end of the year?

Mr. T.J. Malone

The number for premises with a build currently under way is approximately 154,000. That is between build complete and builds under way. By the end of the year, we predict that to be somewhere in the region of 220,000 to 225,000.

What is that as an overall percentage? Is it on target?

Mr. T.J. Malone

As a percentage, it is probably 30,000 to 35,000 behind the target for that stage.

We are getting to a point where the project is ahead on surveys and design. Surveys have people looking around and design has people coming back to design what should be done. The physical work of replacing poles and doing the cabling is where the process has fallen behind.

Mr. T.J. Malone

It is where we are behind. We were behind initially on the first two elements, survey and design, as well. We have caught up on the targets and passed them out.

As we stand, is NBI ahead or behind on the premises surveys?

Mr. T.J. Malone

We are just over 20% ahead on the survey. On the design, we are 9% to 10% ahead.

What is the figure for premises with builds under way?

Mr. T.J. Malone

We are about 30,000 behind on the builds, either built or-----

What is the difference between premises with a build under way and premises with a fibre build under way?

Mr. T.J. Malone

It is pretty much the same so-----

So there are-----

Mr. T.J. Malone

Fibre build under way might be later in the programme, when one is actually down. The initial build starts with the Make Ready works, getting prepared and getting the ducting in.

With regard to premises passed, by the end of this month we were supposed to have 115,000. It will probably come in at about 40,000 at the end of January.

Mr. T.J. Malone

By the end of January, the figure for constructions will be about 38,000.

One hundred and fifteen thousand minus 38,000 is roughly-----

Mr. T.J. Malone

About 22,000 off the 60,000.

On the target, NBI is a good bit off. It is probably the bones of about 70,000 off target.

Mr. T.J. Malone

On the completed works.

It is almost half off target. By the end of the year, NBI will be at 130,000, and the-----

Mr. T.J. Malone

Between 100,000 and 130,000.

The target was 205,000.

Mr. T.J. Malone

Yes.

When we look at it, we see that for premises with builds under way and premises with fibre builds under way, there is a catching up. There is still a lag regarding the premises passed. How can that be pulled back?

Mr. T.J. Malone

That all comes back to what we have been talking about. It is a matter of getting the final piece of the jigsaw. Some 85% or 90% of the work is actually done but it is invisible to anybody else. It is under construction; it is nearly done. I am referring to the last aspects the Chairman saw on site himself.

Why can it not be pulled back faster? If all the other areas are being pulled back, why is there such a significant lag concerning the premises passed?

Mr. T.J. Malone

We are hoping we can pull it back faster. We have now worked on getting rapid-response crews onto the road, which we believe will help. We are already starting to see it help. It is just a matter of getting those final-----

That is work that NBI would carry out or contract out.

Mr. T.J. Malone

We would love to carry it out but we cannot, so we have had to negotiate with Eir to put those work crews-----

Is this Eir-----

Mr. T.J. Malone

It is finalising the pieces. In fairness-----

Is it a case of Eir doing poles?

Mr. T.J. Malone

No so much the poles but, rather, the ducting or the finalisation of the ducting. In fairness to Eir, it is moving through the main works at a good clip and is pretty much on target in that regard. I am referring to works that come up late in the day on the site, when issues are encountered on the road that could not have been envisaged-----

It appears to me at this stage that the bulk of the work is done by Eir.

Mr. T.J. Malone

The bulk of the Make Ready work.

Are there issues with Eir that are slowing the process down? NBI has caught up in all the other areas. The bottleneck — premises passed — is obviously the final key element. What is the reason for it? It appears to be Eir. What can we do as a committee to assist in finding a mechanism to speed up the process?

Mr. T.J. Malone

There are a couple of aspects; it is not just Eir.

I accept that.

Mr. T.J. Malone

The first point is that the issue comes up late in the day. We give Eir a design early on and it goes ahead with and completes its Make Ready work on that. When we go out onto the ground to build and find an issue, or when Eir finds an issue, there has to be a redesign and a change. It has been slower to get that work turned around-----

That is where the heavy lifting is done.

Mr. T.J. Malone

It is not just Eir that has to go back. What happens is that we have to go back to local authorities. Eir has to do so also. It has to get new road-opening licences if there are new works etc. We are working with the local authorities to try to speed up the turnaround of what are the equivalent of emergency-type licences. I will not call them emergency licences. We are working with Eir. In fairness to Eir, it has brought a number of the rapid-response crews. We continue to work with them to try to determine how to speed up the process. If we were in control of the self-install part ourselves, we could finish off a lot of that work as it comes up later in the programme. I am not referring to the main part alone because addressing those bits that come up would be a help.

Mr. Malone might come back to us on those items. We are here to help with the roll-out. The gap-intervention areas are important to all of us. We welcome the fact that NBI, at our request, sought to determine whether something could be done.

In rural areas of Limerick, there are cases of individuals who do not have fibre broadband while their neighbours over the ditch do. We need to deal with that. Mr. Malone might update me on the position in my constituency, Limerick City, which covers a portion of north Tipperary that takes in Newport, Ballinahinch, Birdhill and Rearcross. Could I have an update?

Mr. T.J. Malone

I will cover Limerick first, if that is okay with the Chairman.

Mr. T.J. Malone

In Limerick itself, just over 21,000 premises fall into the intervention area. At this stage, 44% of them have been surveyed. By the end of 2022, we will have 63% surveyed. Just over 13,000, approximately, will be surveyed by the end of 2022. From a build-commenced point of view, 30% are under build in Limerick, involving approximately 6,320 premises. From a build-completed point of view, the 6,326 premises will be completed by the end of this year. That covers Limerick, but parts of Tipperary feed into that. As the Deputy quite rightly pointed out, the border areas he covers are accounted for in those figures.

I thank Mr. Malone. I wish NBI well with the work. It will revolutionise rural Ireland. It looks like NBI has all the retailers on board, but it is a question of the last aspect, the premises. The delegates are the technical people but I am commenting on what the layman looking in really wants. The gap-intervention areas are key as well. We will continue to engage with NBI. The delegates can come back to us. We want to assist with the roll-out.

Others have said it was a bit hectic earlier moving from one location to another, but there is probably a fair amount of additional information in the public domain. That does not do any harm, from anyone's point of view.

I have a couple of questions I want answered. I will not labour them greatly. Who or what is UTi Ireland LLC?

Ms Jenny Fisher

Let me go back to the shareholding we described and the fact that Granahan McCourt is in control of NBI. Granahan McCourt manages that through an entity called Granahan McCourt Fund Limited. Through that fund, there are a number of categories of investors that are managed. It includes some minority shareholdings, of which UTi Ireland is one.

Is there further information on the company?

Ms Jenny Fisher

The minority shareholding arrangements are subject to confidentiality arrangements so I cannot comment.

I would not like to have to draw the diagram.

Mr. Peter Hendrick

One way of describing Granahan McCourt, along with Mr. Walter Scott and Walter Scott's family trust, is that they have been building out fibre or broadband networks for the past 30 years. It is effectively those partnerships that comprise the Granahan McCourt fund. What I can say about the parties is that they have long-standing telecoms experience in rolling out networks. Mr. Scott, who passed away last September, was the chair of Level 3 Communications. He was also the longest-serving independent board member of Berkshire Hathaway. Tetrad and the family trust own a significant part of Berkshire Hathaway Energy. Therefore, all those concerned come from a pedigree of big infrastructure programmes and have been partners with Mr. David McCourt for over 30 years.

I cannot expect Mr. Hendrick to comment on the following matter with without careful thought. We want to deal with the broadband. Where does Mr. Hendrick believe the inaccuracies and misrepresentations were in the media? Does he want to comment on that? There is an opportunity to do so here, in a public forum.

Mr. Hendrick said he wants the journalists to engage directly with him.

Mr. Peter Hendrick

A key inaccuracy was that the equivalent of a vulture fund secretly took over the NBP, which certainly was not the case.

It was always there.

Mr. Peter Hendrick

It certainly was not the case. Granahan McCourt Dublin has always been the controlling shareholder under NBI and the structure had not changed. We had informed the media outlet before that was published, but it chose to seek a narrative based on its interpretation or understanding of our annual financial returns even though we explained it, so it has been frustrating. At this point, we share as much information as we can. Obviously, there are confidentiality arrangements with shareholders up the chain. I can give an example. The Irish infrastructure fund, in which Ireland Strategic Investment Fund, ISIF, is an investor, has 24 pension funds in that fund. Although they were party to an investment in Enet, Eircom and other assets in Ireland and I know the team, I do not know what the 23 funds are. I do not know anything about who the investors are in that, under confidentiality agreements. The same applies in any infrastructure project.

That was just one example of the inaccuracies. The other was the bid cost and that the State had somehow paid out money to shareholders. There were inaccuracies there. The State did not pay €32 million. Again, we clarified those inaccuracies, but the headlines did not change. Therefore, what have we done about it? We have tried to explain the corporate structure, the investors' funding, how the project agreement works and how our subsidy flow works whereby we do not get paid until we have achieved certain milestones. There is the contract summary, although it is still a lot of pages. If anything comes up in the future, we are available to support the committee, other Members of the Oireachtas or the media with any questions that arise. We are trying to give a contract summary that shows, if questions are asked about where something is covered in the contract, that it is covered under section 5 regarding governance and controls. The reason we come here as a team is that Mr. Kelly and Ms Fisher are deeply involved every day with regard to subsidy claims, corporate governance, board interactions and the Department interaction. We want to be as transparent as possible.

To get to the nub of it, is Mr. Hendrick, as the CEO of NBI, happy that NBI's financial structure and particularly its capital base and access to capital are secure enough to ensure there will be no hiccups in the roll-out of the national broadband plan?

Mr. Peter Hendrick

I am. The management team is. The board includes independents, including the Minister's appointee. On top of that we have internal auditors, PwC, and external auditors, Grant Thornton, who assess our financial stability. We have an audit and risk committee that meets regularly to assess what Mr. Kelly and the team pull together in terms of our financial planning. We have all of what is normally called the three lines of defence under corporate structures. If you only have one line, you are reliant on the management team. There are three lines - the management team, the audit and risk committee, and the auditors. There are several layers of defence. On top of that we have a Department with 55 advisers who are also assessing our financial stability, the programme and the subsidy flow. In a good, strong, publicly quoted company, normally there are three lines of defence, as we call it. I would say we have five in this project. Personally, and for the management team, we are very comfortable with the corporate structure and the funding of the business.

In fairness, it is good to hear that, because that was our fear. I will be honest - it was the example of the initial paying of the €20 million performance bond that caused people to get worried and to think it was a cash flow issue, but that is not the case.

I wish to return to the question of debt and equity or debt versus equity, for want of a better term. I will move through this quickly. I suppose that is what would have had to have been built into the contract. Mr. Hendrick will probably tell me that this was the case and is how it is done across the world. Why is it not just all straightforward equity? I also understand the idea that it would make sense from an investor's point of view that the investor is getting a payment back on that, so therefore it suits the investor. I am not trying to be unfair here, but this is a layman's reading of it.

Mr. Peter Hendrick

With projects of this scale, or typically any project, it can vary between shareholder equity and loans. The shareholders, particularly anybody in the US today, who are not getting any return on those loans - and it is at risk - have to pay taxes on those even though they have not got any money out of the business. It is just a structure and the way it is typically set up for public private partnership, PPP, type projects.

Mr. Hendrick said something earlier about getting a new investor or new funder that would give NBI the capacity to become a major international telecommunications operator. Would that be fair enough? I suppose that is being done on the basis that Mr. Hendrick does not believe the structure he has behind him is fit to do that business. I am not trying to catch him out in any way. I am just trying to make it clear in my head.

Mr. Peter Hendrick

I would not describe it as a view on necessarily the individual investors. It is about partners. I look at-----

Investors give the capacity.

Mr. Peter Hendrick

I would refer to opportunities of other programmes as well. David McCourt would use the analogy of Berkshire Hathaway Energy, which originally acquired NV Energy in Nevada many years ago. It started with one company and over time it partnered with Berkshire Hathaway. It was not Berkshire Hathaway at the time, but Walter Scott with Peter Kiewit International. Over time they brought in Berkshire Hathaway Energy when they started to acquire other energy companies.

Mr. Hendrick, with regard to this proposal to look for new investors, who will they be? Obviously, you will have to get approval from the Department for that. What is the profile of that type of investor and what will the funds be used for? Is it about the broadband roll-out here or what is the purpose of this?

Mr. Peter Hendrick

The funding does not change. The committed equity by the shareholders does not change, regardless of who the shareholder is. Between NBI and our contractors today we have over 1,200 people working directly on this project; it is probably three or four times that quantity indirectly. When the network is built, one does not need the same amount of people. However, we have built up all the expertise and lessons from rolling out a wholesale fibre network and interfacing with many international operators. The problem with other networks across the UK or Europe today is there are all these altnets with small fibre deployments, but they do not have the integration with big retail operators and they do not have the experience of rolling out national infrastructure. We see an opportunity to take the experiences that we have built here to the right partners. It is about finding the right partners who may have investments in other geographical areas.

Does that compromise it in any way? NBI was set up to roll out broadband in Ireland. If Mr. Hendrick is bringing in additional private investors to invest in NBI as a company or entity and NBI is now going to start doing the roll-out of broadband networks elsewhere in Europe-----

Mr. Peter Hendrick

No, we are talking about years away. This is a shareholder view. NBI is a designated activity company so it can only focus on the NBP.

Mr. Peter Hendrick

If there is a change of shareholders this year, the money that comes in will be focused on that and there will be a board delivering on the NBP project. Separately, the shareholder group - Granahan McCourt, Tetrad Corporation or whoever potentially comes in - will be looking at other opportunities outside Ireland.

Mr. Peter Hendrick

Think about the hundreds of people who are involved in this project today. Once the project is built, where are those people going to go?

With due respect, that is three or five years hence. Why is NBI now looking for new investors?

Mr. Peter Hendrick

In the early stages we are building all the software to make this machine work efficiently. All the designs being done by Mr. Malone's team will be finished in the next two years. If somebody is working in Ireland as a fibre designer and the entire country will be fibred in the next five years, that person will be thinking about his or her future role here. The fibre is done-----

It involves minor redesigns.

Mr. Peter Hendrick

Minor redesigns.

What does this bring to the roll-out?

Mr. Peter Hendrick

Given that fibre is becoming the de facto standard infrastructure and there are many opportunities across Europe for rolling out fibre we believe that experience and the quality of people who are in Ireland can add value to rolling out this infrastructure.

Does the State have any involvement?

Mr. Peter Hendrick

That is about creating opportunities for individuals who will be finished on the NBI network deployment to deliver-----

Mr. Hendrick-----

Mr. Peter Hendrick

No. I am just telling the Chairman why-----

I accept that. Why is that not standalone?

Mr. Peter Hendrick

It would be completely standalone.

Why is Mr. Henrick bringing it up today?

Mr. Peter Hendrick

The reason I am bringing it up-----

The reason is that I asked about investors.

Mr. Peter Hendrick

There are two factors. As to why are we looking for new investors, there is a European opportunity. The investors say they believe if we partner with the right investors there are other opportunities in Europe. It would be completely standalone from NBI.

NBI does not need those investors.

Mr. Peter Hendrick

NBI does not need those new investors. At the same time we want to have investors that are committed to NBI for the long term. Again, I would go back to one of the ambitions of David McCourt and Walter Scott when we signed the contract was that we would bring in a long-term partner at the time when we understood all the risks with construction, take-up and the technology. We are at a point now where technology risk is no longer discussed, we are very clear on the take-up risk, and in terms of the construction risk, we are constructing in all Twenty-six Counties. That is exactly what happened when Walter Scott invested in Nevada Energy and Berkshire Hathaway came in once it understood what the risk was.

It is slightly different, being the devil’s advocate here. The State is basically paying for the roll-out of the establishment of a rural broadband fibre based network. That involves the hiring and training of staff. That is being paid for by the State for the period of the build-out. If those staff are to be used on another project that is unrelated to this one, I must ask the question-----

Mr. Peter Hendrick

They answer is they are not. If Mr. T.J. Malone has done all the designs and he has 50 designers who potentially he will make redundant, the question is whether there is another project they could do, not for the NBI but where they could be employed by somebody else to add value to another project. That is one part of it. The other side of it is this, as we understand all the risks in terms of construction, take-up and technology, it is an appropriate time to bring in a partner who is like-minded with respect to long-term investment in infrastructure provided like this.

Outside of Ireland.

Mr. Peter Hendrick

No, NBI is a standalone.

No, but private investors coming in would not be investing in the roll-out of the national broadband network.

Mr. Peter Hendrick

They would have the same investment obligation and commitment as any shareholder who is here today.

No, I am not saying that, but they are being brought in for a completely different purpose, namely, to take the staff who have worked on the network roll-out, paid for by the State for the roll-out period. I am not denying it is great they will get employment elsewhere, but the question I am asking is why do this now. Why would we do something that may have the consequences of, in some way, undermining the national broadband roll-out here? It would be a different type of investor. Why would David McCourt not go with a completely different vehicle, nothing to do with NBI, and bring in those investors for some standalone project elsewhere? Why does it involve NBI?

Mr. Peter Hendrick

Essentially, any investment or opportunity outside of Ireland is a completely separate structure and entity.

In fairness, Mr. Hendrick was clear that he was talking post this. I accept some of what the Chairman said. Mr. Hendrick said NBI is looking for an investor that would want to invest long term. He might not be able to answer this question but is it fair to say that Oak Hill Advisors or whoever might not be that investor whereas somebody else with telecoms history might be?

Mr. Peter Hendrick

We would go back to the risk profile. When we were in the bid or tender stage of the project many operators and investors were not prepared to move forward on the process because of the risks, whether it was the technology, take-up or construction.

Mr. Peter Hendrick

To be fair, we had long-term investors within our group but in terms of the risk profile, we need partners who understand and are prepared to take the risk. Now that we understand the technology is not a risk, we have measured all the risk in construction and mitigated against them, and the take-up is clear, we are at a point, probably earlier than we thought, where we can say now is the right time where we could bring in a long-term partner.

If NBI brings in a long-term partner, Mr. Hendrick is not talking about that partner going in instead of some of the existing investors.

Mr. Peter Hendrick

We are. Effectively, what would happen is some of those investors we have today would be replaced but they would sign up to the same obligations in terms of funding and clawbacks that are in place today.

It is about NBI then.

Mr. Peter Hendrick

Absolutely, it is about NBI.

It is not about a standalone or about bringing in an investor who would be in a vehicle alongside NBI and when NBI is concluded the staff would go with that vehicle and work elsewhere?

Mr. Peter Hendrick

Correct.

Mr. Hendrick is talking about bringing in a partner who would give the same financial commitment but he is talking about replacing some of the existing partners.

Mr. Peter Hendrick

Correct

Do some of them wish to step out?

Mr. Peter Hendrick

Correct.

Okay. Effectively, with respect to the €223 million to which NBI committed, it is about getting some of these new investors to step into that position. However, Mr. Hendrick believes they will bring added value in terms of their expertise and post NBI finishing, there will be another future with them for the long term.

Mr. Peter Hendrick

Correct.

It took us a long time to get there, but I get it now. When people see investors changing they become wary and one would ask why people are leaving. Are people leaving because they see investment in NBI being too risky? Has NBI had discussions with the Department? How big of a changeover will it be in the funds that have been committed? Some €223 million has been committed and NBI has already got €120 million. Will there be a repayment of some of that €120 million that has been invested to date or how big of a tranche of the €123 million is at stake here? Is Mr. Hendrick at liberty to say that?

Mr. Peter Hendrick

We are at an early stage of the process, which will probably take the next nine to 12 months to conclude. I cannot tell the Chairman exactly what the percentages would be.

The question I am asking is whether there is sufficient commitment on funding to ensure that in no circumstances will the commitment to the €223 million in any way not be in place before NBI makes a replacement with some other investor. Obviously, that would have to go through a due diligence process. I presume NBI has had discussions with the Department to date on it. Has NBI had discussions with the Department on it?

Mr. Peter Hendrick

In terms of the Department, we have not sought any change in shareholders. It is only when we seek-----

Mr. Peter Hendrick

-----a change in shareholder we go to the Department for the Minister’s approval.

I assume David McCourt would continue to be the majority shareholder.

Mr. Peter Hendrick

David McCourt is not looking to exit.

Is it a very big investor that is looking to divest?

That is what they are looking for. They are looking for a major player.

Mr. Peter Hendrick

Again, it is an early stage in the process. I would go back to the point of the equity that is committed is committed, regardless of who the shareholders are.

Is it fair to say that NBI is looking for a telecommunications or broadband partner in the investment area?

Mr. Peter Hendrick

We are looking for a partner who is aligned with our long-term plans for NBI.

Mr. Hendrick believes it will make NBI even more secure.

Mr. Peter Hendrick

Absolutely, not that it is not secure because all our shareholder funding is committed. To be fair, our shareholders are not small shareholders. We are talking about €30 billion and €40 billion.

What would this new investment bring?

Mr. Peter Hendrick

It would bring stability in terms of the long-term owners of the network for the next ten plus years and beyond that it brings an opportunity in terms of partnership for Europe but that is separate from NBI.

That is fair enough. I can see a logic to the profile of some of the investors. The fear was that some of them would not be long-term telecoms investors. I imagine that would need to happen as soon as possible. This point has been answered already but I just want to make it clear.

Mr. David McCourt calls the shots on the basis of his voting rights.

Mr. Peter Hendrick

Correct.

He has the majority. In the contract, it was not necessarily clear whether it was shareholders or whatever. Is it 100% on the basis of-----

Mr. Peter Hendrick

Voting rights within the 51% control of the business.

That is 100%. NBI has put out the figures of 60,000 premises by the end of March and the 130,000 by the end of the year. Will there be a possibility of the latter figure being accelerated by June or is it too early to say now?

Mr. Peter Hendrick

There is a checkpoint in June to evaluate where we are, particularly with the Make Ready programme. Touch wood, we will be at 100% capacity and not have further lockdowns.

I accept that. I am just making sure that these targets are put out there. The Minister said something about the figures for this year. NBI is talking about 100,000 to 130,000 premises, but it will be finalising that figure in the next two weeks.

Mr. Peter Hendrick

Correct. We are engaged with the Department and, by the end of February, we will have targeted numbers-----

Is that a recalibration of everything else?

Mr. Peter Hendrick

For this year. Correct.

We are going to discuss that-----

I will be quick. Please excuse my lack of understanding. The Minister keeps talking about €2.1 billion. I am fed up listening to him going on about €3 billion, €5 billion and all the rest. The State is on the hook for €2.1 billion and then there is a figure of between €400 million and €500 million. What is the story with the contingency? How will NBI draw that down? Is it part of the €100 million in terms of the encroachment?

Ms Jenny Fisher

There are different pots within the contingency figure, so it depends on whether it relates to labour, materials, additional ducting from Eir etc. There are a number of assumptions that were baked into the financial model at the bid phase. If we had not got those contingency pots, that price would effectively have been locked in as part of the fixed price. It was a clever mechanism from the Department's point of view to ensure that those costs would only be payable in the event that they actually arose. Where there are unders or overs, we go through that process with the Department and its advisers and there is an independent certifier who signs off on them. It is only to the extent that there was actual evidence of those costs being incurred that we would tap into those contingency pots.

I get that. Regarding the encroachment, the witnesses mentioned that there was an algorithm that had to be carried out as regards costs. The Minister sounded clear in what he said but from listening to the witnesses, I assume the encroachment scenario is something that, from NBI's point of view, has not been determined yet. Perhaps someone could provide some detail. NBI has disputed the figures that have been put out there. NBI says that, at this point, it is not looking at anything whereas the Minister is saying that NBI has told him it is not going to be looking at anything. Would that be a fair comment?

Ms Jenny Fisher

At this point.

It is to be determined.

Ms Jenny Fisher

Yes.

That is fair enough and makes more sense.

Mr. Peter Hendrick

We do not see there being significant encroachment in the intervention area. The intervention area has grown from 537,000 premises to 554,000.

I would have said it had become more viable for Eir in certain places and that the pickup rate had increased since people started working remotely.

Mr. Peter Hendrick

We are not seeing encroachment. At the same time, Eir has a massive urban build programme, which it has said is its focus. Right now, encroachment is not a change impact or change request that we have made of the Department.

It would have to show a commercial loss to NBI.

Mr. Peter Hendrick

Correct.

I apologise for the multiple questions. Regarding the last percentage-----

No. We cannot go through everything.

I know. I will run through this. Regarding the last percentage where there is the possibility of using something other than fibre, has NBI considered anything? That last part can be the very expensive part. I will ask a short question after this one.

Mr. Peter Hendrick

We have up to 2% of premises where we can look at an alternative technology. We approach this on the basis of cost. Since the costs to date have been within the envelope of what we expected them to be, we have not sought to go with an alternative technology. Over the lifetime of the project, one cannot beat fibre for future proofing. If we went with an alternative technology, could we future proof the end customer connection? Due to the cost of the build being where we expected it to be, that has not been something that we have needed to install.

I understand that NBI will probably only know some of this when it is at the end of the process and on the last mile.

The major part of the acceleration involves rapid response teams. That is to be followed by Eir's Make Ready programme being faster, then the self-install product and anything else that needs to be done by local authorities. The witnesses have stated that, in a perfect world, NBI would want the North's planning system as regards poles. NBI probably needs to make a submission to the Attorney General's review of the planning system. There is probably an onus on us to do that as well. This situation is happening because of planning difficulties. I do not know how anyone would consider undertaking a major infrastructural project across the State like this one-----

Would it be fair to say that the issue at that level is more about the ducting than the poles?

Mr. T.J. Malone

At this stage, it is. We have got ahead of ourselves. One can pretty much predict the poles. In the event that one is short a pole here or there, one can always ask a landowner to give a wayleave or something.

I accept that, but I am asking about two matters: Eir's Make Ready programme being fit for purpose and faster; and giving NBI the facility for self-installs. Regarding the planning problem that NBI has had and others will have, a submission needs to be made. If there is a better system, we should have it. The review is ongoing.

Beyond these two matters, is there anything else concerning local authorities or something else that needs to be sorted?

Mr. T.J. Malone

The final element, which we have probably discussed at a number of our other meetings, is the additional resourcing for local authorities. This has been picked up and is part of the steering committee that I mentioned and at which the various Departments are represented. This matter is working its way through. Our understanding is that the steering committee is nearly at a final point of agreeing what the resource investment would look like. We have made a great deal of progress on it and should be in a better position by the time we next speak to the committee.

Would there be a dedicated person?

Mr. T.J. Malone

Yes, or resources to provide for that dedicated person.

Might I ask one more question?

That is about it. I want to conclude by 4.30 p.m. to be fair to the witnesses.

It will be the tiniest question. The witnesses may or may not have the answer. It has to do with UTi Ireland. NBI was able to give out some information about the owners of this telecoms infrastructure management company. What is the difference with UTi or is there one?

Ms Jenny Fisher

Turning to what Mr. Hendrick said about GMC controlling different categories of investors, he spoke about Tetrad Corporation, which is Mr. Walter Scott's family corporation, and GMC. We also have Oak Hill Advisors. Then there are minority investors and Twin Point Capital. The company the Deputy is referring to is jointly controlled by GMC and Tetrad.

I appreciate that and apologise for the multiple questions. I will engage in the future. My deepest commiserations on that basis.

We are due to conclude. I thank the witnesses for attending. It has been worthwhile. We have clarified a large number of points about the roll-out. NBI has advanced considerably in terms of the surveys, the design and the number of builds under way. The issue is with the roll-out to premises. Perhaps the witnesses will reflect on that and revert to us about what else can be done. We need to get broadband. This is the single-most important project. There is no reason that someone in rural Murroe cannot have fibre broadband as good as someone in the middle of Limerick city or Dublin. We have mentioned remote working. The national broadband plan is a very ambitious project.

It was worthwhile in clarifying other issues that were in the media. That is important.

We will obviously engage with NBI again. The representatives were very open in coming before us. The key thing for us is that they come back to us on the gap intervention areas, where that is at is a significant issue for us, and on what else we can do to enable areas to progress. I thank our guests for coming in. Is there anything Mr. Hendrick wishes to add before we conclude?

Mr. Peter Hendrick

I thank the Chairman and the committee for their engagement over the past year. We will continue to engage on a quarterly basis with updates. We are happy to have as many Senators and Deputies out into the field who fail to understand where we are on the roll-out programme.

I will be honest with Mr. Hendrick; it gave me a certain understanding of the poles. It is something that is very difficult to understand in the abstract. The more engagement the better.

Mr. Peter Hendrick

Maybe one area we lose sight of sometimes is the thousands of people who are benefiting for the broadband today. Sometimes we focus on the problems. From a customer experience perspective, we are way ahead of where the industry typically would be.

In terms of the policy?

Mr. Peter Hendrick

When we are connecting, during that installation piece and in life.

As a final point, Mr. Hendrick spoke about connections but we did not dwell on it. How many are there?

Mr. Peter Hendrick

There are 6,000 connected as of this week.

And Mr. Hendrick estimates there are approximately 8,000 with orders submitted. That bring the total to about 14,000.

Mr. Peter Hendrick

No. That will be 8,000 in total. There are 2,000 in the pipeline.

By the end of the year, what figure does the NBI expect to get to?

A guess on percentage take-up.

Mr. Peter Hendrick

We can probably follow up with a guidance on where we expect to be.

But the NBI looking at 30%.

Mr. Peter Hendrick

After six months from opening up a deployment area, we would expect to see at least 30% take up.

Let us see, in as much as possible, if those figures could be published. I know the NBI will end up in a scenario where there is nothing it does that does not end up on the website, but it does not do any harm. The more information in the public domain, the fewer questions there will bee, even if it is bad news because that can happen from time to time.

Mr. Peter Hendrick

Albeit we have the map, there is more granular data we can provide.

Ms Jenny Fisher

There is a huge volume of information. We published the deployment plan last summer. The website is undergoing lots of different iterations. Deputy Matthews mentioned more constituency level information. We have that information in an enriched deployment file. The Department has a secure portal that we dip into. We share those numbers week-on-week with the Department. We are trying to get them on to the website. It is just a technicality. I can see it happening in the coming weeks that we will have more information that will enable Senators and Deputies to self-serve from the website while still coming to us via representations. That is the stage we are trying to get to whereby we can give everyone all the information on the website.

In conclusion, I thank Mr. Hendrick and his colleagues, Mr. Malone, Ms Collins, Mr. Kelly, and Ms Fisher, for attending today and engaging thoroughly with the committee across a range of areas. Mr. Hendrick brought it up in his statement so I felt it was important that we deal with the issues. In his statement, it looked like he wanted to cover those areas as well. The key focus must be to get the broadband network rolled out. On the 25% reduction in time a year, it would be great if it could be a bit more.

The joint committee adjourned at 4.33 p.m. until 1.30 p.m. on Wednesday, 2 February 2022.
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