COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 20 Nov 2008

Chapter 8.1 — National Digital Research Centre.

Mr. Aidan Dunning (Secretary General, Department of Communications, Energy and Natural Resources) called and examined.

Chairman

We are examining the 2007 annual report of the Comptroller and Auditor General and Appropriation Accounts, Vote 30 — Department of Communications, Energy and Natural Resources, chapter 8.1 — National Digital Research Centre.

Witnesses should be aware that they do not enjoy absolute privilege. The attention of members and witnesses is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include: the right to give evidence; to produce or send documents to the committee; to appear before the committee either in person or through a representative; to make a written and oral submission; to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may need to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or of a Minister, or the merits of the objectives of such policies.

I would like to welcome Mr. Aidan Dunning, Secretary General of the Department of Communications, Energy and Natural Resources. I call on Mr. Dunning to introduce his officials.

Mr. Aidan Dunning

I am accompanied by Mr. Ken Spratt, principal officer in the communication division of my Department, and Mr. Cecil Beamish, assistant secretary at the Department of Agriculture, Fisheries and Food, who is joining me in respect of the marine functions which were formerly in my Department but which were transferred in 2007. I may call on him if queries on these issues arise. I am also joined by Mr. Brian Carroll, principal officer in the finance side of my Department, Mr. Martin Finucane, principal officer in the energy area, Mr. Frank Sheridan, principal officer in the inland fisheries area, as well as two colleagues from the Department of Finance, namely, Mr. Dermot Keane and Ms Stephanie O'Donnell.

Chairman

I welcome all the witnesses. At this stage, I ask Mr. Buckley to make his opening statement. The full text of chapter 8.1 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.

Mr. John Buckley

The Department of Communications, Energy and Natural Resources spent €520 million in 2007. A total of €257 million of this went on broadcasting, including grants of €195 million to RTE and grants to TG4 of €32 million. The overall cost of broadcasting is offset by licence fee income amounting to €217 million. Approximately one quarter of the licence fee income comes from the Department of Social and Family Affairs. It cost just over €12 million to collect the television licence income.

Around €60 million is spent on energy, the vast bulk of which went on energy conservation schemes operated by Sustainable Energy Ireland. A further €88 million was spent on the general fisheries area, including inland fisheries. In the course of the year, certain functions were transferred to the Department of Agriculture, Fisheries and Food. The functions included coastal zone management, marine research and development and seafood and fishery harbour development. Consequently, only part of the cost of these activities is captured in the appropriation account that is before members today. A further €36 million is included in the Vote for the Department of Agriculture, Fisheries and Food.

The current statement of strategy of the Department of Communications, Energy and Natural Resources covers the period 2008 to 2010. The strategy notes that the achievement of many of the Department's goals depends ultimately on the efficiency and effectiveness of the State bodies under its aegis. In fact, most of the Department's policies are implemented through State agencies. In all, it supervises 24 agencies, including one cross-Border body, seven regional fisheries boards and industry regulators in the areas of communications, broadcasting and energy.

I now wish to deal with chapter 8.1 of the annual report. The impetus for examining the establishment of the National Digital Research Centre lay in the fact that a predecessor, MediaLab Europe, had ultimately failed. There had been concerns about the oversight arrangements, the non-linking of payments to targets and the lack of access to the records of the company. In addition, the experience with MediaLab Europe led to a change in thinking about the funding of non-directed or "blue skies" research in the area of digital technologies. There was a shift towards investment in bringing existing research towards commercialisation. In June 2006, the Government approved the appointment of a consortium of third level institutions to operate the centre. The objective of the centre is to attempt to translate basic research into practical applications.

The State has committed €25 million to the centre over the next five years, and when account is taken of other projected income, it will have a total budget in the region of €31 million. The purpose of the audit we carried out was to find out whether lessons had been learned from the MediaLab Europe experience. While it is still early days, the audit concluded that the provision for liaison and monitoring arrangements is adequate, and that the Department has access to records of the centre. Since the report has been issued, it has moved to ensure that its records will be open to inspection by my office in all circumstances.

There has been a relatively slow start opening the research work of the centre, which is in part due to staffing issues, but also due to the need to develop processes for the evaluation of project proposals. Some money advanced to the centre in 2007 was returned because of this. I understand that work is taking place on three projects. Arrangements for intellectual property rights will vary, depending on the stage to which the products have been developed up until the point they are taken over. Currently, the share that has been negotiated by the centre for a successful application of research is in the range of 50-60%.

The Accounting Officer will be in a position to update the committee on progress since the date of the report.

Chairman

I now ask Mr. Dunning to make his opening statement.

Mr. Aidan Dunning

Thank you, Chairman. I have already introduced my colleagues to the committee, so I will not repeat myself. Total gross expenditure for the Department of Communications, Energy and Natural Resources in 2007 amounted to €520.509 million, of which €480.284 million related to spending on the sectoral programme. Approximately €217 million of gross 2007 expenditure relates to the distribution of television licence fee receipts and is Vote neutral. Accordingly, net voted expenditure in 2008 was €282.565 million.

The Department's remit includes the sectoral areas of energy and communications. These are areas that are key to competitiveness and to economic and social policy generally. In 2007, the programme spend in these areas was as follows. Expenditure of over €43 million in 2007 was undertaken on communications and multimedia development. Most of this expenditure, over €32 million, was on the construction of phase two of the metropolitan area networks, or MANs. In addition to the 27 phase 1 MANs already completed, 20 phase 2 MANs were completed and operational at the end of 2007, supplying a further 165 km of open access duct and fibre network. A further 40 MANs were under construction at the end of 2007. The MANs are a valuable part of the economic infrastructure of the areas which they serve.

A total of €59.677 million was spent on the energy sectoral area. Over €54 million was provided in grant aid to Sustainable Energy Ireland in 2007. This was for the implementation of energy efficiency programmes and the promotion of alternative energy sources. The greener homes scheme ensured increased penetration of renewable energy in the heating sector, with 8,380 grant-aided systems installed in homes. Under the low income housing programme, energy efficiency measures were applied in 3,000 fuel poor homes, while 5,685 housing units covering 128 approved projects were supported under the house of tomorrow scheme.

Other programme expenditure in 2007 included €257.341 million on broadcasting. Of this, €194.8 million was paid in grant aid to RTE in respect of revenue from the sale of television licences. In addition, grants of almost €31.9 million and of €3.8 million were provided to TG4 and the Broadcasting Commission of Ireland, respectively. Around €10.2 million was transferred in 2007 into the broadcasting fund, which supports new, innovative programming in the public broadcasting area. Almost €31.4 million of this was paid for the administration and operational costs of the central and regional fisheries boards and the Loughs Agency. Just over €11.8 million was paid out in 2007 under the salmon hardship scheme administered by Bord Iascaigh Mhara and the Loughs Agency, representing payments in respect of 976 applications.

Under the natural resources heading, €4.3 million was spent, of which €1.5 million was spent on mine rehabilitation. In addition, almost €1.2 million was spent on various geoscience initiatives supporting sound planning, environmental protection and increased research capacity through the Griffith awards scheme.

Turning to the marine sector, €65.078 million of the total spend represents spend to 19 October 2007 when the marine functions transferred to the Department of Agriculture, Fisheries and Food. The main areas were the Marine Institute grant-in-aid of €19.6 million, and seafood and fishery harbour development of €45 million, which includes a grant-in-aid of €25.1 million to Bord Iascaigh Mhara. Some €4.2 million was expended on the national seabed survey — the Infomar project — which remains under the aegis of the Department of Communications, Energy and Natural Resources.

With regard to internal audit, I confirm that my Department has an internal audit unit which operates in accordance with a written charter. Its annual audit plans are approved by me and by an independent audit committee. These audits may cover any area of activity involving public funds within the remit of the Department. The audit committee's written charter has been signed by me as Secretary General and by the chair of the audit committee. The audit committee is headed by an external chairman from the private sector, with two other external members and two internal members. This composition complies with the recommendations of the Mullarkey report. Internal audit reports are circulated to the Comptroller and Auditor General and representatives of the Office of the Comptroller and Auditor General meet the audit committee annually.

The audit committee considered 18 audit reports in 2007 in the following areas: marine-fisheries, nine; corporate, five; communications-broadcasting, three; and natural resources, one. In 2006, the committee considered 17 audit reports in the following areas: marine-fisheries, five; corporate, six; communications-broadcasting, three; and natural resources, three.

The Comptroller and Auditor General raised a number of issues in relation to the National Digital Research Centre, NDRC, in his annual report, notably the circumstances giving rise to the refund of €1.725 million by the NDRC to the Exchequer, the arrangements for safeguarding intellectual property rights and the arrangements for the inspection of the NDRC records. As I indicated in my response to the Comptroller and Auditor General, the primary factor behind the refund was the slower than anticipated start-up of the activities of the NDRC. I am pleased to report that four research contracts have now been signed and that an additional five are expected to be signed shortly. It has also now been formally agreed that the Comptroller and Auditor General will have access to the books of the NDRC. The NDRC has also incorporated intellectual property rights into the collaborative research agreements with sponsoring bodies in accordance with the relevant national codes of practice.

I have circulated to the committee in advance of the meeting the 2007 objectives and outputs of the Department based on our 2008 annual output statement. I believe these show a solid record of achievement across the important areas for which the Department is responsible.

Chairman

Thank you. May we publish your statement?

Mr. Aidan Dunning

Yes.

Deputy Deirdre Clune

I thank Mr. Dunning for his presentation. The National Digital Research Centre, NDRC, was established in 2005 and there is a commitment to funding for five years at €5 million a year in two tranches of €2.5 million. When did funding begin?

Mr. Aidan Dunning

The first funding was paid over in late 2006 and in 2007. The concession provided for €2.5 million in two tranches each year. This was based on the expectation that it would be operational pretty quickly. However, as I said, it was much slower in getting up and running because it is a unique institution and needs a unique focus in terms of staff for translational research. It took a long time for it to be staffed so, when we came to look at the situation at the end of the 2007, we were of the view that it was over-endowed, so to speak, in terms of its funding relative to its need. Therefore, we took back €1.725 million.

Deputy Deirdre Clune

Do research projects need to be in place before funding is given or does the Department simply provide it in the hope the NDRC will develop research?

Mr. Aidan Dunning

What was provided in concession agreement was that it would get €2.5 million a year. In the first instance, that was adhered to. To be fair, it would have needed start-up costs to get itself up and running. The expectation was that in early 2007 it would have had these contracts ready. This had been agreed. What happened in practice was that for various reasons, things did not move as quickly as we had hoped. We considered the situation and we did not judge it proper financial procedure for the centre to have that substantial sum of money on hand.

Staff are finally moving in. The Department brought in outside evaluators because we wanted to be assured the quality and type of research the centre was doing was of the nature we wanted for this unique venture. It is now in a position where three contracts have been signed and four are in the process of being signed and it still has funds on hand in regard to moneys already advanced to it. We will be considering what additional funds should be given to it between now and the end of this year, taking account of its commitments. Going forward, we will then engage with it on that basis.

It seems this was initially done in a rigid way in that it was just told it would get two tranches of €2.5 million in one year. As the Deputy correctly implies, we should be taking more account of how the work programme is progressing.

Deputy Deirdre Clune

The funding should follow the work programme that is in place rather than——

Mr. Aidan Dunning

In fairness, it needs advance funding. We will be liaising with it on that. Under the Government decision establishing this body, there is provision for an annual review of the centre's performance. Falling out of that review, funding can be examined. We will be doing that.

Deputy Deirdre Clune

An impressive array of third level institutions are involved in the centre, including DCU, Dún Laoghaire Institute of Art, Design and Technology, the National College of Art and Design and Trinity College. Who was chosen to evaluate the projects?

Mr. Aidan Dunning

We brought in independent evaluators from outside the country to look at the projects it put forward.

Deputy Deirdre Clune

Obviously, the quality of the research was important but the objective is to transfer that research into a commercial reality, if possible. Are any of the projects at that stage?

Mr. Aidan Dunning

Absolutely not. While I would not use the term "slow burner", this will take a while. The NDRC has only recently signed the contracts and the work has yet to commence. This will be a collaboration between the NDRC and the contracting parties. Three of the contracts that have been signed are with the consortia which are running it, such as the universities to which the Deputy referred. There have also been calls for contracts outside of this milieu from other research bodies. That is being finalised at present.

With this type of translational research, it will be some time before we can indicate or verify that it has been translated into a commercial product. The reality is that in some cases this may not happen. There is a degree of risk.

Deputy Deirdre Clune

Is the NDRC working with industry on the type of products that——

Mr. Aidan Dunning

The members of the board of the NDRC include industry representatives, such as from Google and Microsoft, who keep an eye on matters. The annual review that will be conducted by Science Foundation Ireland and the Higher Education Authority, in which we will be involved, will for future years be focused to a considerable degree on whether this body meets the targets being set for it, both in terms of getting the work done and, more importantly, strategically in terms of translating the research into commercially viable products.

Deputy Deirdre Clune

I understand it must be given some space but it is important the overview would be in place. With regard to the intellectual property rights concerning anything that is developed, has the ownership been finalised?

Mr. Aidan Dunning

The NDRC will own the intellectual property rights. So far, it has engaged in contracts with universities, which are within the State system. A division has been agreed on the intellectual property rights between the NDRC and the universities of approximately 50% to 60% of the commercial value of the research. My understanding is that they operate very much within the same framework as research in general. Research is a broad church, involving Science Foundation Ireland and Enterprise Ireland. It is important the NDRC conforms in its rules with what is the case more generally. This was laid down by Forfás some years ago in terms of how the State should protect its rights. We are satisfied in that regard.

Deputy Deirdre Clune

Is Mr. Dunning satisfied the NDRC will retain the intellectual property rights?

Mr. Aidan Dunning

Yes, but there is a provision for sharing some of those rights with the person who came up with the concept in question and who will work on its implementation.

Deputy Deirdre Clune

It was initially envisaged that this programme would have a timeframe of five years. Is that still the case?

Mr. Aidan Dunning

That was the initial agreement but it is subject to an annual review.

Deputy Deirdre Clune

Will the Department review it in 2010 or sooner?

Mr. Aidan Dunning

The Government agreed a timeframe of five years, with annual funding of €5 million adding up to a total allocation of €25 million. However, that is subject to an annual review of the performance of the NDRC. We hope this will prove to be an outstanding initiative. The area of digital research is an important aspect of the knowledge society on which we hope the economy will be based in the future. The projects have been selected on the basis of what were deemed by experts as areas with growth potential. Although it does not represent a huge investment, we hope it will prove to be an important niche initiative in a key area, with a view towards commercialisation. The NDRC is based in the digital hub where much good work is ongoing in this area. It represents the future of the economy.

Deputy Deirdre Clune

In comparison with MediaLab Europe, is it fair to say that the difference with the NDRC is that its focus is on commercialisation rather than research for the sake of research?

Mr. Aidan Dunning

MediaLab Europe was before my time but the problem with that project was that it was badly affected by the dotcom bubble and there was a link with the United States which did not work out well. We hope lessons have been learned from that and, as the Comptroller and Auditor General said in his opening comments, that the governance and supervision process we have in place will fulfil its purpose. However, it is important to note that we do not want to be looking over these people's shoulders. They are professionals and we want them to get on with the work and deliver the output.

Deputy Deirdre Clune

On the Vote, Mr. Dunning referred to the development of metropolitan area networks, MANs, and the roll-out of broadband throughout the State. Will he update us on the current situation? This time last year, €10 million was taken from the allocation for broadband provision and transferred to the greener homes scheme. Did that delay the roll-out of broadband? We are not dealing with the 2008 figures but I am interested to know whether this shortfall was addressed in the Estimate for this year.

Mr. Aidan Dunning

There was a funding problem in 2007 in regard to the greener homes scheme. As it happened, we were able to accommodate those pressures by viring funds from several areas, including the MANs project. Nevertheless, there has been good progress in terms of the construction and commencement of operation of MANs. All 27 of the phase 1 MANs are finished and most are operational, and more than 60 of the phase 2 MANs are close to completion. By the end of the year, there will only be a small number of those remaining to be finished. To make the phase 2 MANs operational we will have to engage in a management service entity contract. We have an agreement with E-net for the operation of the phase 1 MANs, and 22 are operational. Some of the phase 2 MANs, including some in Cork, are already operational through an interim process. We must engage in a process of procurement to put in place a management service entity to operate the remainder.

In regard to MANs in general, we published a value for money review earlier this year. It indicated both positives and negatives in terms of the impact of the MANs to date. Overall, it was strongly positive in its recognition that a state-of-the-art fibre-optic infrastructure represents an investment in the long term, even though the demand has been somewhat disappointing to date in some areas, except for the larger centres of population. Almost 90 MANs will be in place by the end of the year, representing a valuable economic and infrastructural investment given that the switch in broadband to next-generation networks is based on fibre-optic.

Even though the usage of the MANs in terms of the revenue being generated by e/net may not look significant, we see it as an investment for the future. Nevertheless, we have paused capital investment on future MANs until we decide on our overall policy on next-generation networks. The Minister issued a consultation paper last July in this regard. There are other important elements which will help to address some of the shortcomings in regard to the MANs. As I said, almost 90 MANs are constructed or close to completion. However, in regard to usage, the figure is far lower. To get the phase 2 MANs in use, we must have a management service entity to operate them.

Deputy Deirdre Clune

Does the Department plan to appoint an operator?

Mr. Aidan Dunning

We will engage in a procurement process which will take some time.

Deputy Deirdre Clune

Mr. Dunning referred to a lack of uptake. Is that because there is no interest locally?

Mr. Aidan Dunning

There is good uptake in larger urban centres. The vast bulk of E-net's revenue is from areas such as Cork, Limerick, Waterford and Galway, because there is a demand in those locations. Many smaller towns have alternative mechanisms of broadband available to them, whether copper-based, wireless or otherwise, which they find is adequate and cost competitive in terms of their needs. At this juncture, they may find that the quality available via the MANs through the fibre-optic network is not of a type they need. There is no doubt that the cost of connecting to the MANs is expensive. People are taking commercial decisions and concluding that, at this stage, they do not need to avail of the MANs.

I attended Oireachtas committee meetings when I worked in another Department. An issue that frequently arose was the importance of advance provision of infrastructure for regional and rural development. This is a classic case where we have provided in advance and at reasonably good cost a state-of-the-art infrastructure that will enable towns throughout the State to be in a strong position in terms of broadband provision to attract both indigenous industry and foreign direct investment.

Deputy Deirdre Clune

What areas are not covered under phases I and II?

Mr. Aidan Dunning

Some areas may not be covered but nevertheless have broadband provision through a platform other than MANs.

Deputy Deirdre Clune

Is it not the case that the reason for proceeding with the MANs project was that we needed to ensure the provision of broadband in areas where it was not being provided by the private sector?

Mr. Aidan Dunning

It has driven competition quite well. I can provide the committee with figures in regard to broadband in general, indicating that there has been a tremendously impressive penetration record in the last year or two. The MANs project has helped at regional level to drive investment by other service operators, including the incumbent. The number of gaps, in terms of towns without any form of broadband provision, is now quite low. Several service operators are now operating broadband throughout the country across a range of platforms, whether fixed line, cable, fixed wireless or wireless. The MANs had a role to play in inducing that level of service.

The key issue about the MANs is that they are fibre-optic and will provide functionality for the future. They facilitate the development of a knowledge economy that will require sufficient levels of high-speed broadband provision throughout the State. However, there are other issues that must be tackled. One of these is backhaul, which is the backbone connection from the towns back to the server. There are proposals in the consultation paper which the Minister issued last July in terms of trying to utilise State assets to bring that forward.

Deputy Deirdre Clune

When this issue was discussed at the outset, we spoke about the €10 million that went to the greener homes scheme. Was this because the scheme was over-subscribed?

Mr. Aidan Dunning

Yes. What really happened is the scheme proved to be a greater success than people had predicted and the level of commitments coming through for payment in 2007 was in excess of what originally had been indicated would be the case. By the middle of the year, it was quite clear that a potentially major problem was emerging in respect of payments under that scheme. Although one option was to close it down and stop payments, the view taken was this would be a tremendously retrograde step because the scheme is very important from the point of view of renewable energy in the heating sector. Consequently, as I stated, we were able to transfer money from the metropolitan area networks, MANs, because construction on the second phase MANs projects was a little behind schedule, and from part of the energy subheads. This enabled us to keep the scheme open in order that payments could continue to be made to those who had installed the renewable technologies. Had the payments not been made, it would not have been fair to them and we were able to take those steps.

A number of tweaks also were made to the greener homes scheme, which is continuously evolving. We now have excluded new homes from it because the new building energy regulations require that a house must have high energy efficiency or one will not be awarded the best certificate. Consequently, there will be no need for a greener homes heating grant in such situations in the future. However, the main purpose of our actions in 2007 was to keep the scheme open and to keep the impetus going in order that the technologies that are being developed on foot of the scheme will continue to be developed.

Deputy Deirdre Clune

I wish to raise a perennial topic of interest, namely, the television licence. I wish to focus on evasion and the level of collection. A survey carried out in 2002 estimated the evasion rate to be approximately 12%. Six years later, can an update on this figure be provided? All members are conscious of the advertising and the emphasis therein to collect licence fees.

Mr. Aidan Dunning

Yes. The Deputy has referred to the survey, which I believe was carried out by the Comptroller and Auditor General a few years ago, and which showed an evasion rate of 12% to 15%. I do not have an update in this regard.

By its nature, evasion of course is particularly hard to quantify. However, the Department has entered into a new service level agreement with An Post, which is the agent that collects the licences. An element of this agreement is that An Post is to show a 1% improvement in payment each year that we can verify pertains to it actually tackling evasion. We also have asked it to produce for us more general reports on its assessment of the evasion position, the first of which will be produced in 2009. I believe RTE takes a view that evasion is along the lines suggested by the Comptroller and Auditor General or perhaps even higher, which clearly is unacceptable.

Deputy Deirdre Clune

A rate of 12% means one in eight.

Mr. Aidan Dunning

Yes, it is very high, particularly as RTE is facing into a difficult period in respect of its commercial revenue. The Department is concerned to ensure it does all it can. We are working with An Post and, as best we can, have tried to incorporate into the service level agreement that it should tackle this issue more. I hope we will be in a better position in this regard on foot of the report it will present to us in 2009. We also have set up a group comprising our Department, the Department of Social and Family Affairs, An Post and RTE to consider this general area. It is receiving proactive attention at present.

Deputy Deirdre Clune

More so than previously? Is this a matter of which the Department is highly conscious?

Mr. Aidan Dunning

This is a matter about which one should be conscious at all times and I cannot state it did not receive attention previously. Understandably, however, this matter exercises RTE in particular as it depends so greatly on the licence fee for its revenue. The Department is determined to do all it can. I have mentioned the new process we have put in place, which we hope to see bear some fruit. Clearly, we also need to do some more empirical work, along the lines of that done by the Comptroller and Auditor General in 2004, to try to better quantify this issue. The Comptroller and Auditor General took the number of households, related it to the census, made certain assumptions about commercial licences and came up with a figure. This work should be updated and I hope we can proceed in this respect.

Deputy Deirdre Clune

The non-collection of licence fees has been an issue for many years. As for those who evade fees, I believe I have seen advertisements since I was a child such as those appearing on television at present, with the man knocking on the door. I would have thought a great deal of information is available from the census on the number of housing units, many of which have more than one television, as well as on second homes, that could have been acted on before now. Mr. Dunning spoke in terms of "going forward" and how he intends to deal with the issue, rather than having dealt with it historically.

Mr. Aidan Dunning

Despite all the campaigns, we do not appear to have had as good an outturn, in terms of an improved situation, going forward. In the future, however, through the various processes we have set up, we will try to improve the position. Another issue is that in modern society, there is greater fluidity in respect of households moving and so on and it may be more difficult to keep track of the licence situation against that background. However, I agree with the Deputy's comments. It is a serious issue about which we need to be somewhat more proactive.

Deputy Deirdre Clune

Mr. Dunning mentioned the Department intended to ensure that An Post's returns increased by 1% every year. Is this measure in place?

Mr. Aidan Dunning

It has only been agreed very recently as part of the service level agreement. I understand the first year for which it was in operation was 2008 and we will be able to validate this in respect of its 2009 report, which it will produce early next year.

Deputy Deirdre Clune

Is there an incentive for An Post to increase the returns?

Mr. Aidan Dunning

Yes, an incentive has been built into the concession it would receive in that regard.

Deputy Deirdre Clune

Will the incentive apply if it exceeds a certain level?

Mr. Aidan Dunning

Yes.

Deputy Deirdre Clune

I believe my next question probably should be directed at Mr. Beamish, as it pertains to a marine issue that may be under the aegis of the Department of Agriculture, Fisheries and Forestry. Arising from figures provided for members, I note that expenditure in 2007 on coastal protection fell by approximately 47% from the amount spent in 2006 figures, which, as I come from a county with a very long coastline, struck me as being disappointing. Although I never served on Cork County Council, having spoken to many people in this regard, Deputy Jim O'Keeffe also probably would agree, it is clear that expenditure on coastal protection is always high on the agenda. The allocations for coastal protection management in 2006 and 2007 were €3.78 million and €1.98 million, respectively, which constitutes a fall of approximately 47% to 50%.

Mr. Cecil Beamish

The coast protection function has been the subject of efforts to develop an overall national coast protection strategy. The Department has been preparing and conducting research on a forward-looking national strategy on coast protection and has been putting much work and effort into this for a number of years. This work is coming to fruition and the Government now has decided that from 1 January next, the coast protection function will be transferred to the Office of Public Works. It carries the national flooding functions regarding estuarine and river basements and will have an overall integrated approach to flood protection. However, rather than seeking to use this funding on a wide range of small projects, a significant amount of the available funding went towards work to develop a national strategy as to where were our key priority areas and where were the risk areas in respect of sea level rise, erosion, coastal funding, etc. This work is coming to fruition and when the function transfers to the Office of Public Works, it will be able to integrate it with the overall national flood protection strategy.

Deputy Deirdre Clune

Expenditure on coastal protection fell significantly.

Mr. Cecil Beamish

The money that was voted was spent and a rather long list of projects were carried out. While I can go through them, it is a rather long list.

Deputy Deirdre Clune

I am sure every local authority submitted expenditure requests in respect of various projects.

Mr. Cecil Beamish

There are many requests for spending. On funding prioritisation, local authorities were asked to submit their top priority projects in descending order and Ministers would allocate funding on the basis of their submissions. Demands would significantly exceed available funding. If the risk related to public infrastructure or health and safety, the relevant project was given a higher priority. By and large, funding was not provided in areas where there were risks to private property rather than public property.

Deputy Deirdre Clune

Is Mr. Beamish saying that a national hierarchy will be established?

Mr. Cecil Beamish

The Department's marine engineering service has been conducting a range of surveys to map the coastline digitally to determine where the baselines and high and low water marks are and what is receding and accreting, as the coastline tends to be neutral overall. From these surveys, the service will identify the locations of future risks of flooding and damage to public infrastructure. Since erosion occurs slowly, one must plan what actions to take instead of reacting to an emergency, for example, a road falling into the sea.

Deputy Deirdre Clune

That must be done also.

Mr. Cecil Beamish

Yes.

Deputy Deirdre Clune

Where are we now with that?

Mr. Cecil Beamish

It is a multiannual project and, on 1 January, will be handed over to the Office of Public Works, which will integrate it with the office's overall flood prevention role in terms of river basements and intertidal areas.

Deputy Deirdre Clune

It will be passed to the OPW.

Mr. Cecil Beamish

Yes.

Deputy Deirdre Clune

I thank Mr. Beamish.

Chairman

Arising from a question put by Deputy Clune on the greener homes initiative, a demand-led scheme, there was an overspend of approximately €12 million.

Mr. Aidan Dunning

Approximately.

Chairman

The money was taken from the broadband capital programme. My mind may have drifted, but I did not hear the response on the implications of the transfer of funds for that programme. From time to time, we encounter the transfer of funds from one subhead to another, particularly in respect of health services. Was authorisation obtained from the Department of Finance before the transfer?

Mr. Aidan Dunning

I shall answer the Chairman's second question first. It was a Supplementary Estimate moved in the Dáil.

Chairman

I apologise. Mr. Dunning is right.

Mr. Aidan Dunning

Space was created in the MANs 2 capital construction costs, which did not move at the expected pace in 2007. Money in the subhead was available for use to rectify a serious situation in the greener homes initiative. There was also an underspend on the energy research side of the energy subhead. Between the two, we were able to keep the greener homes scheme open.

Chairman

Why was the Broadcasting Commission of Ireland's allocation reduced from €6.4 million to €3.8 million and what were the effects on the BCI's activities? Does the Comptroller and Auditor General have access to the BCI's accounts?

Mr. John Buckley

Yes.

Mr. Aidan Dunning

The BCI had some funds on hand in its administration fund. An audit of the BCI's 2006 accounts by the Comptroller and Auditor General highlighted that moneys in respect of administration expenses had not been drawn down. Measures were subsequently put in train by the BCI to recoup these moneys for the years in question. This resulted in a commensurate once off reduction in direct grant aid drawn down by the BCI in 2007. Since the BCI had funds on hand from another source, it did not need the draw down provided in the Estimate. Consequently, the outturn was between €1.5 million and €2 million below the amount provided for in the Estimate. It is my understanding that this was done because the BCI had non-voted funds on hand at the time.

Chairman

The BCI is responsible for the licensing of the radio and television sectors, but it also has responsibility for licensing certain new digital television services and for the development of programming and advertising standards on television and radio. Is Mr. Dunning implying that it was not doing its job?

Mr. Aidan Dunning

No, this is more of a technicality. It was doing its job, but it did not draw down its administration expenses. Since they were consequently at its disposal, it did not need to draw from the Estimate. Savings also arose due to the BCI's costs being less than anticipated, particularly in respect of legal expenses. As a regulator and licensing body, it is regularly challenged in the courts and legal expenses are unpredictable. A budget was provided for a significant level of legal expenses in that year that did not arise. I apologise for the confusion.

Chairman

That is good news.

Deputy Edward O’Keeffe

On energy, what percentage of the gross expenditure was spent on wind farms and what is the Department's policy on wind farms?

Chairman

We cannot ask about policy as such.

Deputy Edward O’Keeffe

What was the expenditure and where will we go from here?

Mr. Aidan Dunning

The Exchequer does not directly invest in wind farms. The investment is done by the wind farm investors, be they private or State companies. However, a price support is in place for renewable wind energy whereby providers have a guaranteed price for their product when it is sold into the electricity pool. This gives them certainty on their investment because capital investment in wind farms is quite high, even though wind is free. To allow them to raise the necessary funds, a price guarantee has been provided. The overall electricity pool comes from a range of sources, such as fossil-based generating stations. The Exchequer does not directly invest in wind farms.

While I will not stray into policy, the Government views wind as an important part of the effort to increase the penetration of renewable energy in the electricity market. Recently, the Minister announced an increase in the penetration target from 33% to 40% by 2020. A strong policy is in place and is supportive of wind generation, from which there are a number of benefits. For example, there are no carbon emissions to affect climate change, unlike fossil fuels. There is a security of supply aspect. We are highly dependent on fossil fuels for the generation of electricity. The extent to which we can diversify to an indigenous resource will be beneficial.

Policy is positive towards wind energy. Clearly, we must keep an eye on its meaning for the price of electricity and energy generally. Price support is in place. It has not been utilised in recent years because the price of fossil fuel-generated electricity has been at a level above the price of wind. There has been no expenditure or support under the refit scheme. There has been no expenditure by the Exchequer directly on wind and price support, which has not been activated in recent years but is in place as an important insurance for investment in the area. Particular emphasis must be placed on the development of the industry by the Government and the Minister.

Deputy Edward O’Keeffe

What percentage of electricity is generated by wind energy? What is the target?

Chairman

Before Mr. Dunning answers that, I recognise the presence of officials of the public accounts committee of the Ugandan Parliament. We do not usually recognise those in the Visitor Gallery but we should recognise their presence today.

Mr. Aidan Dunning

There is currently 950 MW of wind capacity installed. Renewables are now at 10% of generation, the vast bulk of which is wind. Our objective is to get to 15% by 2010 and 40% by 2020.

Deputy Edward O’Keeffe

Does this refer to our national requirement?

Mr. Aidan Dunning

Yes, of electricity. Some 15% of total electricity generated would come from renewables, primarily wind, in 2010 and 40% by 2020. These are the targets. We think we are on course to achieve that. The CER is the key body in respect of regulating the market for generation. The CER operated an opaque system, referred to as a gate system, which allowed wind generators onto the grid and it has enough offers and connections in place to reach the 2010 target of 15%. The CER has started the gate 3 process, which initially envisaged 3,000 MW of wind being accommodated under that process. That has increased to 3,900 MW on foot of the Minister's announcement of the 40% target. This is in the longer term and there is much work to be done to facilitate it. This includes investment in the grid to accommodate wind energy. The target is totally feasible technically but planning issues must be resolved. We are on course to meet the targets.

Deputy Edward O’Keeffe

Is the Department providing assistance and advice to those who want to set up wind farms?

Mr. Aidan Dunning

Our Department is not but Sustainable Energy Ireland, SEI, a dedicated agency to promote sustainable energy in its widest form including promotion of renewables for generation of electricity and energy efficiency, is able to do so. It is a highly active and efficient body. We have received good feedback from those who have engaged with SEI. Those who seek advice on investment in wind should contact SEI.

Deputy Edward O’Keeffe

What is the relationship between those who supply electricity to the market and the wind farms? Is there a bad relationship there? Are the officials of the Department of Communications, Energy and Natural Resources aware of controversy? Is there reluctance to avail of the energy available? I refer to the ESB and EirGrid.

Mr. Aidan Dunning

All of the agencies are working together co-operatively. Implementational issues will arise and when connecting wind farms to the grid, one must ensure that it is done in a way that does not upset the overall system. That is what happened and what will happen. EirGrid is responsible for the management of the grid. I am not aware of major issues in that regard. If the Deputy is aware of instances, he can bring them to my attention.

Deputy Edward O’Keeffe

I read something in the newspapers but that is another matter.

I come from a rural area. I am a backwoods Deputy because we do not have a fibre-optic connection for my office in rural Ireland. The officials referred to copper and fibre-optic. Using copper, broadband will only run for three miles from the nearest exchange. There are many industries in rural Ireland apart from Dáil Deputies. There are few rural Deputies left and I am one of the last.

What plans does the Department have to service rural areas? Not all rural areas are out of touch. There is much industry in rural areas that was not there before. People are encouraged to go to rural areas to develop their activities, including retail developments. Many such people are suffering. The delegation is aware that there is a substantial friction loss in copper as it passes the three or four mile mark. Three miles is the limit on copper and all rural areas are serviced with copper because they were upgraded in the late 70s or early 80s.

Mr. Aidan Dunning

I can talk briefly about the national broadband scheme, which is undergoing the procurement process at the moment. We see the onus as being on the service providers. They have fixed lines and are not State service providers but in the private sector. They should be investing in copper and in the networks to rural areas so that the provision can be applied. It may not be commercially viable to do so. There are a number of alternatives. Wireless broadband has become a solution that is suitable to rural areas. The growth in wireless broadband has been phenomenal in recent years, from a base of zero to over 200,000 subscribers. They find that this particular type of broadband, based on masts, is particularly useful.

We hope to launch the national broadband scheme shortly. It is particularly aimed at dealing with gaps in rural areas. It is at the procurement stage at the moment. The idea is that the scheme will provide a service in those areas which are unserved.

Deputy Edward O’Keeffe

Many rural areas have high tension wires and telephone masts. This interferes with the wireless system. There is quite an issue for wireless areas. What will the Department do with the upgrading of these areas to copper lines? Fibre-optic cable is the way forward. There may be a cost factor but is there a plan?

Mr. Aidan Dunning

At present, there is no State broadband company per se. We are not in the business of providing, except where there is market failure. This is where the national broadband will come into play. We have mapped the country and found the areas not served by any form of broadband. We will provide broadband in those areas through the service provider that wins the tender under the national broadband scheme.

More generally, I accept that broadband investment is more difficult in rural areas. There are technical and commercial reasons.

Chairman

Deputy O'Keeffe has a point. There was a dispute between one of the companies in areas where wireless broadband could not reach. Eircom was seeking subventions for providing a service similar to what was extended to rural areas in Northern Ireland.

Mr. Aidan Dunning

The national broadband scheme meets that situation. Where there is no service, we step in. Where a service is in place, a question is raised with regard to whether the State can step in to subsidise a particular service at the expense of another. This would involve state aid issues apart from possible cost issues. Our focus in the national broadband scheme is very much on those rural areas which have nothing. The areas mentioned at least have a service albeit one not provided by the State. It is provided by a service provider and the onus must be on the service provider to invest in it to improve the quality of the service. Apart from whether the EU would allow us to subsidise, the State has limited resources at its disposal and if we become involved in subsidisation the demographics of Ireland, which is a strongly rural country, it would mean a high cost.

Deputy Thomas P. Broughan

Is it not a fact that the Northern Ireland authorities tendered out——

Chairman

Can we keep to the point?

Deputy Thomas P. Broughan

On this point Northern Ireland got almost 100% coverage with BT and we are still only talking about it.

Mr. Aidan Dunning

We expect to announce the winning bidder for the national broadband scheme within the next month.

Chairman

This is the point made by Deputy Ned O'Keeffe. There are areas which are served by neither wireless nor cable. Surely the Department or whoever gave the licences to these companies should have ensured that they had a responsibility to provide the service and where a service is not provided, as set out by Deputy O'Keeffe, surely the Department has a responsibility to assist. If, as Deputy Broughan stated, it is happening in Northern Ireland, why is there a difference in attitude here?

Mr. Aidan Dunning

The national broadband scheme will extend coverage dramatically to those areas not served at present and this is its purpose. It requires coverage for everybody in the NBS area who cannot get a service.

Deputy Thomas P. Broughan

They could get wireless but the problem is that it is far too expensive.

Mr. Aidan Dunning

The Deputy is talking then about a subsidy. We would have to make a major capital contribution.

Deputy Edward O’Keeffe

Many people would avail of wireless but it does not work. More progressive areas have high tension wires and more telephone masts and it does not work in this atmosphere. I do not want to repeat my point that many rural industries cannot avail of broadband and it is an impediment, particularly in difficult times, because people cannot communicate quickly with them. I would appreciate something more definite on this issue.

Mr. Aidan Dunning

I fully accept the importance of broadband in urban and rural areas from a competitiveness point of view and from the development of industry point of view. The Minister's policy is to focus on trying to eliminate the gaps whereby people have no service. This is what the national broadband scheme is about. People do not even have access to wireless or fixed line. Beyond this, rolling out a sophisticated scheme everywhere and with high speeds might involve EU factors and high costs.

Chairman

Deputy O'Keeffe was discussing a basic service.

Mr. Aidan Dunning

I hope the national broadband scheme will meet this concern.

Chairman

Is Mr. Dunning stating that it definitely will do so and we will have no black spots?

Mr. Aidan Dunning

This would be the intention.

Deputy Edward O’Keeffe

The Department has responsibility for An Post. To date, how many post offices have closed voluntarily and how many have been closed through policy? This is an issue in my part of the world. I come from an extremely rural area.

Mr. Aidan Dunning

An Post operates as a separate State body with its own commercial mandate. We do not have responsibility for the policy it has on post office closures. It is aware of the general Government view which is that there should be an extremely widely available postal service throughout the country. This is reiterated to the board and management of An Post at every meeting we have with them as part of our corporate governance.

Chairman

I must defend what Deputy O'Keeffe stated. The Department has a responsibility to ensure An Post fulfils its social obligations and delivers an adequate service to the public. I am aware of a post office which closed recently without any notice. Elderly people such as pensioners and nursing home residents were left high and dry and told to travel five or six miles to a city centre to pick up their pensions. No explanations were given and the top boys in An Post did not answer calls. Surely the Department has a responsibility to these people when An Post does not fulfil its social obligations.

Mr. Aidan Dunning

There is a difficulty here. Clearly, An Post has a commercial mandate. It is in a difficult business and it will get more difficult. We will have postal liberalisation and An Post will face a great deal of competition. It must look after the commercial side of its business. The Department and Minister continually make it aware that it is Government policy, as set out in the programme for Government, that there should be as wide a post office network as possible. However, we do not ask An Post to come to us to ask whether it can close a post office. This would be inappropriate.

Chairman

I agree with Mr. Dunning. However, having stated that, it should have a sense of responsibility towards the community and respond in a reasonable way to people who have concerns and public representatives who represent people with concerns but this does not happen.

Mr. Aidan Dunning

I agree with the Chairman. If the Chairman has any particular instances he would like to bring to my attention which I can bring up I would be more than happy to do so. This would not be acceptable.

Deputy Edward O’Keeffe

Moving on to subhead E which concerns fisheries, the total expenditure last year was €42 million and there was an overrun of approximately €4 million attributed to essential capital works. What were these capital works? An amount of €4 million is a substantial percentage of €42 million.

Mr. Aidan Dunning

The main capital additional spend in 2007 arose primarily from responsibilities placed on the fisheries boards on foot of work in conservation, stock rehabilitation and habitats. A great deal more activity takes place in this area because of the EU and this requires that the boards are proactive in terms of enforcement and protection activity, particularly after the closing of the commercial salmon fishery. A need arose for additional funds to be made available to the fisheries boards to enable them to ensure this was implemented. This is the main reason for the overrun. A regime of EU conservation requirements means we must resource the fisheries boards to enable them to police it.

Deputy Edward O’Keeffe

Are payments under the salmon hardship scheme and the community support scheme complete?

Mr. Aidan Dunning

Applications are closed but payments can continue to be made. Some fishermen agreed to payments being phased over three years and this is operating. Some were paid lump sums upfront on the basis that they would no longer operate commercial drift-net fishing. We will require a provision for this area in 2009. However, this will not be for any new commitments but for an overhang for phased payments.

Deputy Edward O’Keeffe

Mr. Dunning is under orders from Brussels to modify various weirs in rivers throughout the country for salmon pass. This falls under inland fisheries. How many rivers are involved?

Mr. Aidan Dunning

We have only one case which relates to the river——

Deputy Edward O’Keeffe

Is Fermoy one of the cases?

Mr. Aidan Dunning

Yes. Clondulane is the other case near Lismore, County Waterford. These are the two cases with which we have been threatened with infringement proceedings by the EU and we must act on them.

Deputy Edward O’Keeffe

What kind of dialogue has taken place between the Department and the community in Fermoy?

Mr. Aidan Dunning

There has been very active dialogue recently. Officials from my Department have attended two meetings, which took place yesterday and some weeks ago. We set out our position on the matter. We believe the work can be undertaken with the OPW in a way that does not have a serious impact on the weir in the town. If the work is not undertaken, there will be implications. The Department and the OPW engineers explained this to the community. If we do not undertake the work, the taxpayer faces daily fines.

Deputy Edward O’Keeffe

I am aware of the principle involved, but tampering with the weir in Fermoy will reduce the level of the river by one foot. I am not a hydrologist or an expert in that field but it will destroy the rowing club's activities, which are a very important part of the heritage of Fermoy. The weir in Fermoy was built in the ninth century by the Franciscan order. It is a part of the heritage and landscape of the town and the proposed changes are a sore point and a major issue. A sizable protest on the issue took place yesterday. My information is that people are not satisfied with the handling of the matter by the Department officials. Let us call a spade a spade. This will cost a good deal of money. We are in an age in which we want young people involved in sporting activity and other activities outside of the family. Will there be another meeting to explore the possibility of further compromise on this matter?

The weir brings economic benefits to the town by way of funding and money. I understand Fermoy is one of the few towns in the country with such a facility. Many years ago Dungarvan was a similar town to Fermoy with a rowing club and similar changes took place. I am aware of and accept the importance of salmon to the river, the fishing industry and to inland fisheries. I understand salmon must travel upriver to Mallow and Rathmore where the Blackwater rises. However, I hope there can be a better accommodation. There is a cost factor and expenditure is involved. The job may need to be done again. Other reasons might be found such as humanitarian grounds or reasons relating to the salmon or for the rowing club. I call on the Department to examine the matter in a different light. Is the proposed expenditure part of subhead E in the Estimates? Is there funding for this project?

Mr. Aidan Dunning

There would not have been in 2007 because the issue did not arise at that stage. The money will be provided in future.

Deputy Edward O’Keeffe

The money was provided in 2007 to carry out those works.

Mr. Aidan Dunning

No.

Deputy Edward O’Keeffe

Money must be found to carry out the works.

Mr. Aidan Dunning

There will be money provided in 2009 for the work. We have agreed with the Office of Public Works which has agreed to facilitate the building. It is carrying out the major and beneficial flood works.

Deputy Edward O’Keeffe

Yes, that is ongoing.

Mr. Aidan Dunning

I am not an engineer, but our engineers indicated there could be a fish pass to allow safe passage for the fish while retaining the weir without any significant impact on the amenities enjoyed by the local population or the rowing club and this is being put in place. This is in the design.

Deputy Edward O’Keeffe

The Blackwater is the second largest river in Ireland. It is a famous river and sometimes called the Irish Rhine. If the level of the river is dropped by one foot or 12 inches it will be a catastrophe for boating and leisure in the town as well as for the rowing club. I am reliably told as much. I am obliged to listen to all sides of the debate and I am listening. However, I must defend the existing arrangements based on heritage, the historical situation which I outlined, and the future needs of the town and its young people who are so committed to rowing as a sport.

Mr. Aidan Dunning

I appreciate what the Deputy said. Our advice is if we do not do something, the adverse impact mentioned would result from just building the fish pass.

Chairman

Will Mr. Dunning explore the issues raised?

Mr. Aidan Dunning

Absolutely and we have been very proactive in consultations. We sent officials to the town twice in recent weeks.

Chairman

I am not from that constituency, but I am aware that the rowing club has produced Olympians, including Mr. Gearoid Towey who was at the Beijing Olympics.

Deputy Edward O’Keeffe

I forgot to mention that. Well done.

Chairman

As a former Minister with responsibility for sport I was involved with that individual and that club and it would be tragic to see that club disappear.

Mr. Aidan Dunning

We certainly do not wish to see that.

Chairman

Will Mr. Dunning take these comments into consideration?

Deputy Edward O’Keeffe

I am not an engineer or a hydrologist, but if the river level is dropped by one foot, which is 12 inches, it will be unsuitable for boating and rowing.

Chairman

That is a point well made.

Deputy Edward O’Keeffe

I do not know whether that is needed. There were changes to that river several years ago, as the Department is aware. It has been historically involved with the river. The weir was broken in flooding by a beech tree. It was obvious the river dropped by that amount and created a problem until it was corrected by the local authority.

Mr. Aidan Dunning

As the Chair said we will engage in further consultation.

Chairman

Between the salmon leaping and the boatmen rowing we will not have a row about it.

Deputy Thomas P. Broughan

I return briefly to the matter of broadband and I wish to follow up on some of my colleagues' questions. There is still a suspicion that the metropolitan area networks, MANs, project is a white elephant. The Secretary General claimed a value for money report was carried out. I do not wish to refer to party politics but this point of view used to be put from the Opposition benches by the current Minister.

Chairman

The Deputy should refrain from such comments.

Deputy Thomas P. Broughan

I wish to ask about the finances. A value for money audit has been carried out on the MANs. What is the total cost to the State of installing the metropolitan area networks? How much money has the company running the project, namely, e/net, made for the State? What has the expenditure and income been for MANs?

Mr. Aidan Dunning

Under phase 1, the total cap on spending has been €75.94 million and €76.9 million for phase 2 to date. We estimate the final cost of phase 2 will be €82.62 million. This will lead to a total cost of approximately €157 million in capital over several years.

Deputy Thomas P. Broughan

I understand e/net is a Limerick-based company. Since it got the contract how much money has it earned from the MANs project?

Mr. Aidan Dunning

I have some figures on its most recent position. I presume I can provide these figures and that they are not commercially sensitive. In the year ended 30 April 2008 the turnover for e/net was €7,189,000, which is an increase of 32% on the previous year. Its gross profit was €2.2 million, an increase of 40% and the operating loss was €1.261 million. It incurred a loss after tax of €1.8 million, a 15% improvement on the previous year. The revenue was up from €5.4 million to €7.2 million. Of the 27 phase 1 MANs, the main revenue earners were Cork, Limerick and Galway making up €4.2 million of the €7.2 million. I mentioned the operating loss of €1.8 million for that period, which is a decrease from the previous year. The chief executive of e/net expects it will become profitable in operations by October this year and that it will start generating cash by December.

Deputy Thomas P. Broughan

Effectively, for this very significant investment so far there has been a completely negative rate of return. There has been very little to show for it. I do not know how many hundreds of kilometres have been laid. Did Mr. Dunning provide a figure of 329 km under phase 2 to Deputy Clune? Whether it is 300 km or 500 km, how much of the fibre optic cable is lit right now?

Mr. Aidan Dunning

Under phase 1 of the 27 MANs, some 22 are lit and in use. In phase 2 some have not yet been completed and we have not yet put a management services entity in place for these. Therefore, only a small number of those projects in the Cork area are lit at this stage.

Deputy Thomas P. Broughan

Most people would agree about fibre optic to the home. Seoul and Tokyo have it with very fast, even instantaneous, broadband including television and documents. Going on those figures is it not a sustainable charge that five of the MANs in the first phase, which have been completed a good while, are still not lit and we are not making anything out of the project? Deputy Edward O'Keeffe and the Cathaoirleach can rightly say big chunks of the country, including the west and the midlands, have very poor or non-existent broadband services. Is this not still a disaster? I recently looked up the European Competitive Telecommunications Association, ECTA, league table. In the premiership of broadband the Netherlands and Denmark are top of the league, and we are still down there towards the end at 19%. We are in a Sunderland or West Bromwich Albion situation; we are barely trying to hang on.

Chairman

The Deputy should not insult Sunderland.

Deputy Thomas P. Broughan

I apologise. I am a Manchester United supporter. We are barely hanging on trying to stay in the Premiership. Is this not still the charge after all these years of effort?

Mr. Aidan Dunning

We are doing better than my team, Sheffield Wednesday, which is not in the Premiership.

Deputy Thomas P. Broughan

I hope we do not end up like Sheffield Wednesday, in the second division or wherever they are.

Mr. Aidan Dunning

Enormous progress has been made recently on general broadband and while we are still at an unsatisfactory position, we have moved up the OECD table. The latest OECD report includes data up to June 2008. Ireland was ranked as having one of the strongest per capita subscription growth, ranked fourth out of 30 countries. There are legacy issues regarding previous investment and we know that is the situation but we have taken off dramatically. At the end of June broadband penetration in Ireland was 24.37 subscribers per 100 inhabitants, including mobile where we grew by 400% in the year to June 2008. The mobile offering is proving very suitable for many people, particularly these in rural and regional areas.

Deputy Thomas P. Broughan

Is it reasonable for this committee and the Comptroller and Auditor General to keep this expenditure under review? The Department is in a unique situation due to public policy matters that were not to do with the Department. The root of the problem is the fact that we sold off our national communications infrastructure, which, it appears, will be sold for the fifth time. The former Minister for Communications, Marine and Natural Resources, Deputy Dermot Ahern, decided to go with the MANs to provide an alternative to Eircom. Given all that, does Mr. Dunning think it is fair that we keep this under close invigilation? Although I know the person who runs e|net and with the resources he has, he does a very good job, we should keep it under invigilation.

Mr. Aidan Dunning

As the owner of the infrastructure, the Department is very concerned. One must see this as infrastructure for the future. The value for money study showed that in small areas of population the MANs are not suitable. They work much better in the larger areas and that is reflected in the fact that such a high proportion of e/net's income is from the three large cities covered by it. We want to move this to the next generation network field. We want to be in that space. MANs will be an important part of being able to be in that space, although not the only part, as other deficiencies must be dealt with. We will have almost 90 fibre optic rings in all these centres in Ireland. In one way this is a unique resource to have.

I accept Deputy Broughan's point that if one examines it only in terms of where we are today, not much of it is being used, but where it is being used, it is being used by many service providers and this is a growing number. It is a very valuable asset to the people using it and the feedback is good. The trick will be to try to ensure the second phase of MANs is lit in a cost-effective way and we must do that. There is an issue about some of the towns clearly on a business case in those second phases. There may be a greater demand there. Some people in smaller towns are very happy with the product at their disposal, which may be copper, wireless or cable based. All these options which were not available a few years ago are available. I agree that everybody has to keep this under review.

Deputy Thomas P. Broughan

A few days ago I got some very good news from the Minister on something about which Deputies have had profound complaints for a long time, namely misuse of mobile phones by people who offer premium rate services, engage in bullying, illegal activities, mis-selling and all the things that happen when people misuse mobile phones. That area is not looked after by ComReg — which it should have been from the beginning — but by Regtel, an industry regulator, which has not worked. I recently heard major complaints about a competition run by TV3 where a number of participants who tried to answer the questions received a high telephone bill. The Minister, Deputy Ryan, said Regtel will be taken over by ComReg. Is that the case? Is the Department working to make that happen and could it happen tomorrow? This premium rate and cyberbullying area is open to grave abuse, particularly with vulnerable young people. ComReg has never had a handle on that. There was no statutory role. The industry regulated itself and did not do a very good job. Is that policy and what will be the implications for ComReg? I notice ComReg is not directly in our account. Is that because it is totally self-financing?

Mr. Aidan Dunning

Yes, what the Minister said is correct. Regtel will be incorporated into ComReg but that will require legislation, which will be advanced with all haste in our Department. I imagine it will be enacted next year.

Deputy Thomas P. Broughan

Last week we had the Department of Justice, Equality and Law Reform in and there was reference in the accounts to expenditure on Garda supervision of the Corrib work. Some very informative information comes from the Department, for which I commend it. What is the position? The Department keeps us informed, with other people, on the progress of Corrib. Given that Corrib has such a fundamental role in the medium term independent energy needs of this country, on what date does the Department expect gas to be flowing through Mayo, the midlands and all the way to Cork and Dublin?

Mr. Aidan Dunning

The State is not in charge of the gas pipeline, but Shell and its partners. They have said their objective was to have the first gas coming ashore in 2009. That will depend on the progress that can be made on the issues arising there. Because of the ship, the offshore pipeline did not proceed this year and there is work to be done on the onshore planning. The two Ministers, Deputies Ryan and Batt O'Keeffe, have established a forum in north Mayo in light of the situation there and this has good potential to create a better atmosphere on the issues relating to the Corrib project and the general economic and social issues in that pretty deprived area of the country. That forum will have its first meeting next month and we hope it will do a good job on the atmosphere. When the first gas will come ashore is primarily a matter for Shell. It must go through the planning process regarding the onshore pipeline and the offshore work remains to be done. I understand the targets remained for 2009.

Deputy Thomas P. Broughan

On a final point on broadcasting, under H1 the RTE licence fund is €195 million but is the rise in the figure still based on an inflationary approach by the Department? Given the vibes coming from RTE at the moment, is the broadcaster in any kind of discussions with the Department on the difficulties it looks to be facing as we go into 2009?

Mr. Aidan Dunning

We are in ongoing liaison with RTE on a range of matters. It is in the public domain that no more than other media bodies or the economy in general, it is being hit by the economic downturn. Its commercial revenues have been down significantly in the latter half of this year. In fairness, it has put together a package of cost measures which will ensure its objective, which is to break even this year. It is incumbent on it to do so.

In regard to the licence fee allocation, the amount provided any year in the Estimate is based on the current licence fee and the estimate of the number of people paying it. Decisions on licence fee increases are not for the Government. The 2009 amount does not include a provision for a licence fee increase; it takes the current fee of €160.

Deputy Thomas P. Broughan

Concerns were expressed recently by the UK Government and our counterparts in the British public accounts committee about the kind of contractual arrangements some broadcasters had with the BBC. Broadcasters like Pat Kenny earn more than €1 million, Gerry Ryan earns €600,000 and Ryan Tubridy earns perhaps half of that. They are very big salaries by any measure from a body that is largely State-funded. The concerns expressed in Britain concerned a broadcaster who had a basic contract for one programme for £6 million. Are there any similar concerns in the Department about the lavish range of emoluments which contractor-type broadcasters seem to earn?

Mr. Aidan Dunning

The Department does not have specific concerns. It is an internal matter for RTE and it must decide the matter within the resources at its disposal, the work programme, the commercial mandate, programming it wants to produce and market share it wishes to retain and increase. It cannot assume there will be a particular level of licence fee increase as it is a separate matter. Contractual arrangements between RTE and its employees are a matter for the company itself.

Chairman

They will all be caught by the 3% levy.

Deputy Thomas P. Broughan

If they operate as companies, will they pay the levy? It is a valid point.

Chairman

Does Deputy Clune have a question?

Deputy Deirdre Clune

I am fine.

Chairman

Will Mr. Buckley make a comment?

Mr. John Buckley

To reflect on the discussion I will touch on two issues, the digital research centre and the metropolitan area networks, MANs. With regard to the MANs, the Department clearly has a delicate balancing act. It is in a position where it is providing infrastructure that is trying to create the future. As Deputy Broughan has indicated, there is however also a case for keeping it under review and seeing whether that objective is being balanced against the need to achieve some sort of long-term payback for the infrastructure.

On the National Digital Research Centre, that is now moving into its operational phase. We have heard that lessons have been learned from the MediaLab Europe experience. Investment is now being directed to projects that have a prospect of commercial research, which is underpinned by external evaluation in determining what projects are selected and so on. Arrangements are in place for liaison with the Department. The concern about access to records has been addressed and there is access for both the Department and ourselves. At an appropriate time we will review the extent of successful exploitation, the income generated from that exploitation and the application of State funding.

Chairman

I thank Mr. Buckley, along with everybody else, for contributing. Is it agreed the committee now notes Vote 30 — Department of Communications, Energy and Natural Resources and disposes of chapter 8.1 — National Digital Research Centre? Agreed. There is no other business.

Next week we will have a meeting in private session and have our usual meeting on Thursday at 10 a.m., when we will resume our sessions with FÁS. I thank members.

The witnesses withdrew.

The committee adjourned at 1.05 p.m. until 10 a.m. on Thursday, 27 November 2008.