COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 17 May 2012

Chapter 25 - National Broadband Scheme

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

Chairman

I remind members, witnesses, those in the Visitors Gallery and members of the press to turn off their mobile telephones. The interference from mobile telephones affects the sound quality and transmission of the meeting.

I wish to advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give the committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the House, nor an official, by name or in such a way as to make him or her identifiable.

Members are 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 a Minister of the Government or the merits of the objectives of such policies. I welcome Mr. Aidan Dunning, Secretary General in the Department Communications, Energy and Natural Resources and ask him to introduce his officials.

Mr. Aidan Dunning

I thank the Chairman. I am joined by Mr. Stjohn O'Connor, Principal Officer in the energy division of the Department of Communications, Energy and Natural Resources, Mr. Brian Carroll, from the finance unit, Mr. Dave Hanley and Ms Finola Ross from the communications section, Mr. Éanna O'Conghaile from the broadcasting section and Ms Stephanie O'Donnell from the Department of Public Expenditure and Reform.

Chairman

I ask Mr. McCarthy from the Office of the Comptroller and Auditor General to introduce the 2010 Annual Report of the Comptroller and Auditor General and Appropriation Accounts, Vote 30, Communications, Energy and Natural Resources, Chapter 25, the National Broadband Scheme.

Mr. Seamus McCarthy

The Appropriation Account for the Department of Communications, Energy and Natural Resources shows the Department spent a total of just under €500 million in 2010. A little over half of the expenditure was in the area of broadcasting, including a grant in aid to RTE of €195 million. The grant in aid to TG4 was €34 million. Expenditure on sustainable energy programmes amounted to just over €100 million. A clear audit opinion was given on the account.

The Comptroller and Auditor General reported on a review of progress and delivery of the objectives of the national broadband scheme, which is funded under the Vote. The provision of high speed broadband is considered to be a key competitiveness issue for the State and the EU as a whole. Objectives set at EU level include ensuring that all Europeans have access to basic broadband services by 2013 and that by 2020, all Europeans will have access to minimum Internet speeds above 30 megabits per second. The national broadband scheme was conceived as a key element in achieving full national broadband access. Using wireless technology, the scheme aimed to deliver broadband services to the 10% to 15% of the population of the State that would otherwise not be able to access the service, typically those living in peripheral areas and regions of low population density, where private service providers were unable or unwilling to deploy broadband infrastructure on a commercial basis.

Following a competitive tendering process, the Department of Communications, Energy and Natural Resources entered a contract in 2008 with a commercial service provider, 3 Ireland, which undertook to deliver a service to agreed standards in specified areas until 2014. In return, the Department committed to paying a subsidy totalling just under €80 million to the company. By the end of 2010 the Department had paid approximately €72 million under the contract and the balance of approximately €8 million is payable to 3 Ireland at the end of the contract term. The scheme secured European Commission approval under state aid rules and EU co-funding for the project was approved. The Department expects to recoup €36 million from the EU in respect of the scheme.

A total of 1,028 electoral divisions were included in the scheme area, which is approximately one third of all the electoral districts in the State. A wireless technology mast system was installed by 3 Ireland throughout the selected area and this was supplemented with a limited reliance on satellite technology. As it generally provides a lower quality service, the use of satellite technology was capped in the contract. In a high proportion of the premises served a repeater unit is required to boost signals. Under the terms of the contract 3 Ireland is required to test and report monthly on the broadband service provided. It carries out tests at 90 randomly selected locations within the scheme area. Test results indicate that it met the specified contract standards on each occasion. At the end of 2010, only 1% of locations tested were found to have average broadband download speeds below the minimum threshold of 1.6 Mbps. The average download speed for all locations tested in the second half of 2010 was 3.5 Mbps. The company was also found to have met the other service targets in the contract, such as those relating to the number of customers using the system at the same time, which is known as the contention rate, and the maximum monthly download allowance per customer.

Ultimately, social and economic value is only achieved from a broadband service when it used. One measure of use is customer uptake. The examination noted that targets for service uptake were not set as part of the contract. In the business case prepared for the scheme, the Department estimated that the scheme area contained approximately 200,000 premises which were capable of being serviced with broadband. The cost-benefit analysis of the proposal projected a broadband penetration rate of 63% by 2014 but this was not adopted as a scheme target. Shortly after the scheme commenced the projected 2014 penetration rate was reduced to 34%, or 68,000 customers. The examination found that there were 35,500 customers by June 2011, which was 15% below the projected level for that stage of the scheme. The Accounting Officer will be in a position to provide the committee with an update on the level of customer uptake.

An implication of the lower than projected uptake of the service is that the State's average contribution per subscriber is likely to be greater than originally expected when the business case was developed. There is also a risk that the projected socioeconomic benefits of the investment will not be fully achieved. The report concludes that it would be useful to conduct a look back analysis to establish whether and to what extent the cost-benefit outturn matched the projections.

Finally, 3 Ireland is obliged to monitor the quality of the service it provides. It does this through periodic customer satisfaction surveys. Two thirds of respondents reported that their expectations of the service provided by 3 Ireland were met but one fifth expressed dissatisfaction with download speeds and service coverage. Inevitably, customer service surveying is a subjective process because customers' expectations of service quality are difficult to measure. Furthermore, the views of those in the scheme area who decide not to subscribe to the service were not canvassed. This could be a useful additional source of feedback on the quality of the available service and the broadband needs of businesses and households in the target areas.

Chairman

I invite Mr. Dunning to make his opening statement.

Mr. Aidan Dunning

As requested by the committee, I provided a briefing paper in advance of today's meeting. I will, therefore, keep my opening statement brief. I will begin by commenting on the chapter of the Comptroller and Auditor General's annual report for 2010 concerning the national broadband scheme, NBS.

The NBS was mandated by the Government in 2007 and the contract with the service provider, 3 Ireland, was approved by the then Minister and noted by Government in 2008. The scheme was a policy response to persistent representations to successive Ministers regarding poor availability of broadband in large parts of the country, particularly in rural areas. In acknowledging this market failure, the State took the decision, following state aid clearance from the European Commission, to intervene in the market to ensure the provision of a basic broadband service to targeted rural parts of the country. The overarching policy objectives of this State sponsored market intervention were to widen the availability of broadband, create greater equality and address the socioeconomic disadvantages caused by a lack of broadband services.

By virtue of this investment the homes and businesses located in an area covering almost one third of the electoral divisions of the country now have access to a guaranteed minimum level of broadband service where hitherto broadband services were deemed to be non-existent or insufficient. The overall impact of the NBS is that some 234,000 buildings, primarily in rural areas, now have guaranteed access to a broadband service. The decision on whether to avail of the service is, of course, one for the household or business concerned. The contract under the NBS runs until August 2014. The gross Exchequer cost will be some €80 million, of which some €36 million will be recouped from EU Structural Funds leaving a net cost of €44 million.

Overall, based on the robust network that has been constructed and the availability of services within the NBS area, it is considered that the State's investment has achieved its policy goal. This has been achieved on time and within budget. It is accepted that the number of subscribers to the NBS continues to be below those anticipated at the outset of the scheme. It is important to note that as the Exchequer subsidy is capped and any risk arising from lower uptake and therefore lower revenue, lies with the service provider rather than the Exchequer.

The Department liaises very closely with the service operator in monitoring the implementation of the scheme. We are particularly proactive in ensuring any issues relating to service performance are addressed quickly. We note that in many instances speeds achieved under the scheme are in excess of those contracted for and the contention ratio is significantly lower than that provided for in the contract. The Department will continue to be vigilant in its oversight of the contract and will liaise with 3 Ireland on an ongoing basis in this regard.

More generally at EU level, the combination of private investment and State interventions in broadband provision, such as the NBS, allows Ireland to meet the Commission's digital agenda for Europe target of making a basic broadband service available to all areas by 2013. While the NBS offers a basic product in line with its state aid clearance, the network built under the NBS will facilitate the future delivery of high speed broadband to rural parts of the country. Looking ahead, the delivery of higher speeds up to and exceeding 100 Mbps in Ireland over next generation broadband networks is currently the subject of public consultation following the recent launch by the Minister of the next generation broadband, NGB, task force report. Digital engagement is important to Ireland, both economically and socially, and the roll out of high speed broadband across Ireland is crucial to boosting Ireland's competitiveness. It is intended that the recommendations in the NGB task force report will be drawn on as appropriate, together with responses to the public consultation, in the drafting of a new national broadband plan for Ireland which the Minister intends to submit for Government approval later this year.

I will now turn briefly to the 2010 accounts for the Vote. The total gross spend under the Vote in 2010 was €500 million. There was expenditure of nearly €58 million on communications, multimedia developments and the information society. Most of this expenditure was on broadband development, including the NBS and the Kelvin international connectivity project.

Some €116 million was spent in the energy sector in 2010. The bulk of this was spent by the Sustainable Energy Authority of Ireland, mainly for the implementation of energy efficiency programmes and the promotion of renewable energy sources. Schemes funded include the national energy retrofit programme, the warmer homes scheme and the greener homes scheme. These programmes have now been amalgamated into the better energy scheme, which supports energy efficiency in homes, businesses and the public sector. While not relevant to the 2010 account, for the information of the committee, the SEAI indicated by way of a press release on 24 February that it had identified a number of irregularities associated with one contractor under the better energy homes scheme. The contractor has been deregistered from the scheme. The matter has been referred by the SEAI to An Garda Síochána.

Other programme expenditure in 2010 included €256 million that was spent on broadcasting, of which €195 million was paid in grant aid to RTE in respect of revenue from the sale of television licences. In addition, grants of €34 million and €14.7 million were provided for TG4 and the Broadcasting Fund, respectively. Almost €29 million was paid to meet the administration and operational costs of Inland Fisheries Ireland and the Loughs Agency. Almost €19 million was spent under the heading of natural resources, of which €5 million was provided by way of grant-in-aid to Ordnance Survey Ireland. In addition, €3.3 million was spent on various geoscience initiatives, €3 million was spent on the national seabed survey and over €1.9 million was spent on mine rehabilitation.

The Department's administrative budget has been almost halved since 2007. The total spend in this category was €40 million in 2007, €31.6 million in 2008, €24.4 million in 2009 and €22.5 million in 2010, representing a reduction of 44% over four years. This partly reflects the transfer of some functions but mostly arises from a reduction in the Department's staffing resources from 339 at the end of 2007 to 243 at present, representing a reduction of 96, or 28%. Notwithstanding this, the Department has continued to oversee and implement a wide range of new and existing programmes, undertake certain regulatory functions and provide policy advice across its wide brief.

My Department has an internal audit unit which operates in accordance with a written charter. Its annual plans are approved by me and an independent audit committee. These audits may cover any area of activity involving public funds within the remit of the Department. Internal audit reports are circulated to the Comptroller and Auditor General. Representatives of the Office of the Comptroller and Auditor General meet the committee annually.

Chairman

Can we publish your statement?

Mr. Aidan Dunning

Yes.

Deputy Michael McCarthy

I welcome Mr. Dunning and his colleagues. Can Mr. Dunning update the committee on the progress, if any, that has been made with the introduction of a national postcode system? It was a topical issue for previous Ministers in this Department. Previous Administrations were minded to introduce such a system. Can Mr. Dunning indicate whether it remains a live issue?

Mr. Aidan Dunning

I will update the committee on where the national postcode project stands. I emphasise that I am constrained in what I can say because a ring-fenced procurement process is ongoing in this regard at present.

Deputy Michael McCarthy

I understand.

Mr. Aidan Dunning

Having said that, I want to be as helpful to the committee as I can. The Communications Regulation (Postal Services) Act 2011 provided for the introduction of a postcode system. Ireland is the only country in the EU and the OECD which does not have a national postcode. The Department, with the approval of the Government, established a postcode steering group in 2010. It appointed PA Consulting to assist it with the management and implementation of the national postcode project. The Government had already given its approval for a movement in that direction. The Department, assisted by its consultants, undertook a wide-ranging consultation on the implementation of a postcode system. More than 60 different interested parties were met as part of that process. The Department received a unanimous welcome for the proposed postcode system. It was offered detailed views on issues relating to its implementation, including matters relating to the technical specification, dissemination and commercialisation of the system. There continues to be strong support in the commercial sector, in particular, for the development of a national postcode model to drive competitiveness in the broader economy and, in turn, contribute to a better jobs environment. Government Departments and agencies also see the benefit of postcodes in helping them to deliver services to the public, especially in these challenging times.

The procurement process began on 17 January 2011 when the pre-qualification questionnaire for the appointment of a postcode management licence holder was published. The response to the questionnaire was evaluated by the postcode evaluation team. A number of companies were notified of their success in proceeding to the next stage. The Department, assisted by its advisers, issued an invitation to participate in dialogue document to those companies in July 2010. Information that was gathered as part of the consultation process was made available to the potential bidders at that stage. The next stage of the process - the competitive dialogue stage - involved face-to-face talks between the Department and the team and the companies that had been short-listed in relation to the proposals. The objective of this stage of the process was to assist the Department in defining its final tender requirement and ensuring all bidders were adequately informed of them. Following the conclusion of the competitive dialogue process, which is still under way but is almost complete, a final tender will issue from the Department to the interested parties. Bids made in response to that tender will, in turn, be evaluated by the postcode evaluation team, a preferred option will be chosen and a recommendation will be made to the Government. The final decision on whether to proceed with the implementation of a national postcode system will be a matter for the Government. It will be based on appropriate financial, technical and operational considerations. I have set out where it stands at this point.

Deputy Michael McCarthy

I appreciate that the procurement process is ring-fenced. I do not want to compromise that. Perhaps Mr. Dunning can answer a general question about the cost of the introduction of a postcode system. Is it possible to say what would it be likely to cost the Department?

Mr. Aidan Dunning

Quite frankly, I cannot say at this stage. The tender process will indicate what the cost to the Department, if any, will be.

Deputy Michael McCarthy

Right.

Mr. Aidan Dunning

It will depend on how the system is structured. As I have said, the procurement process is ring-fenced at the moment. It is chaired by an assistant secretary of the Department. All of these issues are being examined. The process of rolling out a postcode system across the whole country is a very complex one. Obviously, it will have to cover every part of the country. It is a national project. In that context, it is clear that the Department and the Government will seek the best value for money in the event that the Exchequer has to subvent some of the expenditure or investment. I am afraid that at this stage, I am not in a position to indicate what the cost will be.

Deputy Michael McCarthy

I understand that. I would like to ask about metropolitan area networks. What was the final outturn in respect of the first and second phases of the metropolitan area network programme? In other words, what were the final usage numbers?

Mr. Aidan Dunning

The numbers are not final in the sense that both phases of the programme are works in progress. I have a briefing note on some of the significant advances that have been made.

Deputy Michael McCarthy

A couple of them are in my own area. Perhaps one of them is not as successful as it should be. I presume it will be successful in time.

Mr. Aidan Dunning

I am aware of that. Some 27 metropolitan area networks, MANs, were constructed under the first phase of the programme. As of now, some 25 of those MANs have been lit. Some 66 MANs were constructed under the second phase of the programme, and some 31 of them are now being used. ENET, which is managing and maintaining the MANs on behalf of the Department, estimates that by the end of this year, all of the phase 1 MANs will be lit and approximately 12 phase 2 MANs will remain to be lit. This is a significant improvement on where we were, particularly in the case of phase 2. Not long ago, just a handful of MANs were lit under phase 2. The demand for the MANs service, and the usage of it in some towns, have led to a significant improvement this year. It is estimated that over 600,000 individuals and business users are benefitting from MANs infrastructure at the moment. I am aware that there are some MANs in Deputy McCarthy's own area.

Deputy Michael McCarthy

There are. Perhaps Mr. Dunning will elaborate on them, if possible.

Mr. Aidan Dunning

The Dunmanway MAN was constructed in 2007 and handed over to ENET in 2010. ENET advised that the MAN is expected to go live in the very near future. In other words, it has a customer in Dunmanway. The Bantry MAN was constructed in 2007 and was handed over to ENET in 2010. I understand it is already operational and is being used by industry in Bantry. The MAN in Skibereen was constructed in 2007 and was handed over in 2010, but while it is available for use, it does not have any connections currently. I understand ENET is proactively pursuing that. The last MAN, the one in Kinsale is under construction.

More generally, the MANs were built at significant cost. I believe the capital cost to the Exchequer for MANs 1 and 2 was €180 million, with 27 installations in MANs 1 and 66 in MANs 2. Half of that money was refunded from the ERDF. The view and philosophy behind the programme, approved by the European Union, was that this was seen as an issue to bring about greater competition in what might be called the last mile of the broadband infrastructure, from the exchange into the town. At the time, there was concern about the level or lack of service by the incumbent with regard to the last mile aspect. It was also a concern to put Ireland in a place where we would have a modern ring infrastructure around major towns and cities. That is the reason the MAN was constructed as a fibre based MAN. As members know, fibre is the mechanism by which high speed broadband can be delivered.

It is quite true to say that initially the take-up of the MANs was disappointing. However, it is clear that there is a major improvement and many of the big service providers are now using the MANs, such as BT, UPC and others. I had a list of users earlier but I cannot lay my hand on it at this minute. However, a raft of foreign direct investors are using the MANs, such as companies like Amazon and EMC. Therefore, the MANs are beginning to prove themselves more and more. I referred in my opening address to the NGB task force. While it is clear that the market will deliver significantly in terms of next generation broadband, it is also clear that for smaller and more rural areas and towns, State intervention will be necessary so that we will not have a gaping digital divide between high speed broadband in urban areas and low speed broadband in rural areas. The MANs can play an important role as a State owned investment in terms of facilitating broadband for these smaller towns and bringing broadband into homes.

Deputy Michael McCarthy

What is the status of the MANs 3 project?

Mr. Aidan Dunning

The MANs 3 project is stalled at the moment. We did a value for money study on the MANs 2 and MANs 1 projects. I admit this study was done a number of years ago now and that is why we may have to look at the MANS 3 project again. That study indicated that while there had been certain successes with MANs 1 in terms of usage - not so much for MANs 2 - the usage was disappointing and was mainly focused in the major areas of population, Galway and Cork in particular. Dublin was not eligible. At that juncture, although we had provision in 2010 to roll out MANs 3, we took the view that we needed to examine whether it would deliver value for money, given the take-up had been so low and that is what we did.

In the context of the national broadband plan the Minister will produce later this year, we will look carefully at the role of the MANs, particularly in light of the policy imperative to move to fast speed broadband in as wide and ubiquitous a way as possible and in light of the fact that we now have the 27 and 66 fibre rings - almost 100 - around these towns that have significant spare capacity to provide high speed broadband. I believe that will be the policy in the national broadband plan. To answer the question, MANs 3 will now be looked at in a wider context, in terms of the composition of the national broadband plan.

Deputy Michael McCarthy

Can I ask two more questions before we move on? The Minister launched a scheme, which began with the western seaboard, to bring broadband to all post primary schools. Is it difficult to co-ordinate that with the Department of Education and Skills and to initiate a such a process across Departments? While I understand this project is beginning with the western seaboard, when will it be rolled out to all schools? In other words, what is involved in achieving the national roll-out? Where does it go to after the western seaboard?

Mr. Aidan Dunning

We started off with a pilot project of 78 schools and we worked very closely with our colleagues in the Department of Education and Skills to pick the schools for the private project providing 100 megabits. to each school. My colleague, Mr. Hanley, chairs the steering group which oversees the project. We have also worked very closely with HEAnet, which has good expertise in this area in terms of rolling out infrastructure. The project was set up for the 78 schools selected and the general consensus is that it has been a reasonable success. This project will take some time to prove itself. Like the MANs and the NBS to a degree, broadband is a long-term investment.

Following implementation along the western seaboard, some 200 schools have been earmarked, through the committee chaired objectively by Mr. Hanley, and the roll-out of the broadband to those schools will commence shortly. I expect they will all be enabled by September of this year. The selection of schools was made in conjunction with the Department of Education and Skills. That will be the first phase of the roll-out. There are approximately 980 second level schools in total and the intention is to move on with implementation. The same process will be used, with the Department of Education and Skills and the HEAnet selecting the schools. We would like to do it more quickly, if we had the resources, but we do not. However, we are moving to the next phase. Our Department pays the capital cost for this and it pays the running costs for the first year. The Department of Education and Skills then picks up the bill for each school after that.

Deputy Michael McCarthy

There was a saving on subhead B1 of €9.6 million, due to delays in submission of retention claims by some local authorities and no explanation on the MANs 3 project. Were these actual savings or just expenditure that was deferred?

Mr. Aidan Dunning

I would imagine that in the case of the local authorities it is just deferral of expenditure relating to MANs. The local authorities were 10% partners in the MANs, so we would have owed them some money. They would have funded them first and would then have submitted their claims. They were late in submitting the claims. We cannot pay until the claims are submitted.

Deputy Michael McCarthy

What is the evasion rate with regard to licence fee collection?

Mr. Aidan Dunning

Evasion by nature is sometimes very difficult to pinpoint. That said, we have carried out studies in the Department. Basically, we have tried to work off census data and have looked at the An Post database and at work done by RTE and An Post separately. We reckon there is an evasion rate of approximately 15%, which equates to approximately €25 million. I would put a health warning on that figure because I would prefer if the analysis behind it was a bit more robust. There is no doubt there is evasion and this is serious from the point of view of those who rely on the licence fee.

Deputy Michael McCarthy

The analog to digital switch over takes place in October. I know it is a Europe wide event, and is not a process we are initiating ourselves. Is that decision based on a directive, based on a decision by the Commission, or is it EU law?

Mr. Aidan Dunning

It is a Commission decision. The spectrum is a very valuable natural resource, not just to Ireland, but to Europe. Using the spectrum for analog purposes is a very poor use of that spectrum. It takes up too much of the spectrum and it does not provide the services. By moving to the digital terrestrial system, DTT, we will use less spectrum and produce a better product. There will be more high definition television and more channels, because it does not take up as much space. Perhaps most importantly, the economic return is very significant, especially for Ireland. Due to the topography and the demographics of the country, we rely a lot on mobile broadband. Releasing spectrum from the analog system and giving it to ComReg to be auctioned to the mobile operators for mobile voice and broadband services, will be of tremendous value because this is of a higher quality spectrum than was there before. We hope it will enable the mobile operators to increase the quality of the broadband services in rural areas. There is an economic return and there is a return on broadcasting as well.

Deputy Michael McCarthy

I understand about 98% of the country will be fine.

Mr. Aidan Dunning

This is on Saorview.

Deputy Michael McCarthy

Yes. Part of the remaining 2% happens to be along the N71 on the south-western seaboard. There is a particular issue as we move further west along the national primary route - the N71 - in areas like Dunmanway, Leap and Ballydehob. What is the Department doing to address that issue? I understand that direct lines are needed for Saorsat, but some householders will have to invest €300 for Saorsat to compensate for this problem. There is an inconvenience and a cost falling back on television viewers in areas through no fault of their own. I put down a parliamentary question on this. It has been raised with the commission and I know there have been discussions between the Department and RTE. What is the Department doing to address that deficit?

Mr. Aidan Dunning

The DTT system will cover 98% of the country in full. The analog system did so as well. There was always 2% of the country that was not covered by analog. As it happens, the 2% in both cases do not completely coincide. RTE has arrived at a solution whereby for the first time in the history of the State, there will be 100% coverage of television. At its own expense, RTE has taken space in the Saorsat satellite. That is the primary mechanism in place to deal with people who will not be able to get the DTT system. That being said, I take the Deputy's point that there would be an expense involved, in terms of the satellite dish and other aspects of installation, which will probably be higher than for people who just have to get a set-top box for €70 or perhaps get a Saorview television for €120.

Our D-Day this year is 24 October, when analog switches off and the screens go blank for anybody who owns analog televisions. We will remain in close contact with RTE on this particular issue, dealing with a small group of people to see if there are local mechanisms which could be put in place that may be of help in situations where the Saorsat operation may not be appropriate. However, I must emphasise that RTE has taken space on Saorsat at its own expense of €1 million per year. The purpose of doing that was to ensure that these people would not be left behind. That is the primary solution which has been put in place.

Deputy Michael McCarthy

The Department is liaising with RTE about the black spots. D-Day is 24 October, as Mr. Dunning said. When can we hope to get an idea of the solution to the black spots, without pushing the financial burden on the householders?

Mr. Aidan Dunning

I do not want to put a timescale on it. All I will say is that we are very attentive to the issue of coverage. We will be engaging with RTE on the issue and will report back on it. I accept that it is a problem for the people for whom it is a problem. It is not a problem for the vast majority of the population.

Deputy Michael McCarthy

That makes the solution more likely.

Mr. Aidan Dunning

We have to engage with the technical people to see if there is a possibility to resolve it in most instances, but not in all. I do not think RTE would be expected to put something in place for one-off houses. If there are scattered communities of houses together, perhaps something can be done.

Deputy Michael McCarthy

As it is a European issue, is there a requirement on the Department to ensure that all areas receive Saorview?

Mr. Aidan Dunning

No, not that I am aware of. I am not aware of any universal service obligation for television, although there is such an obligation for postal services and for telephones. We should bear in mind that under the analog system, 2% of the country never had coverage, although some of them had their own ways of doing things. I am not aware of any European requirement in this area.

Deputy Michael McCarthy

I would like to finish with a quote from the Department's own functions and objectives, which are "to promote high quality telecommunications infrastructure, especially broadband, and to promote high quality public service broadcasting available to and availed of by Irish audiences". I will liaise with Mr. Dunning and the Department in future on this issue, and I thank him for his courtesy in answering the questions that I raised.

Mr. Aidan Dunning

We are at the service of the Deputy.

Deputy Paul J. Connaughton

I thank the delegation for attending. Deputy McCarthy asked a question about the roll out of broadband to post-primary schools. What type of broadband will that be?

Mr. Aidan Dunning

It will be 100 megabits.

Deputy Paul J. Connaughton

How will it be delivered?

Mr. Aidan Dunning

It will be delivered under a number of platforms, such as mobile and fixed line. It will be tendered and a number of different service providers who will deliver it. The one thing the Deputy can be sure of is that it will be delivered.

Deputy Paul J. Connaughton

It will be delivered at that speed.

Mr. Aidan Dunning

Yes.

Deputy Paul J. Connaughton

Will that type of broadband be available within the areas where the schools are located, or is it just for the schools primarily?

Mr. Aidan Dunning

It is just for the schools, and not for the area. We only have the funding for the schools. It is on the HEA network as well.

Deputy Paul J. Connaughton

If funding became available further down the line, would it then be possible to roll out that high speed broadband within that area?

Mr. Aidan Dunning

I would not look at the issue of high speed broadband. This is a very specific project for a specific school. A lot of progress is being made in the nationwide roll out of high speed broadband, although I accept that may not be the case particularly in the Deputy's area, but rather in urban areas. Over 600,000 households currently have access to 100 megabits via cable. We know that the incumbent, Eircom, has ambitious plans to roll out high speed broadband through its system. The task force estimated that by 2015, over 50% of the population will have access to speeds of 70 megabits. That equates to 1 million households. An additional 20% to 35% will have access to 30 megabits by 2018. Clearly then there is a gap of 15% to 30%, and that will be a policy challenge for the Government to ensure equity between people in those areas and people in urban areas, who will find that the market will deliver. The market will deliver most of this over a period of time, so the question is then whether the State has the resources. It is a policy priority because broadband is very important, as it brings significant economic and social benefits to an area. We are all aware of how challenging things are in respect of resources at the moment.

Deputy Paul J. Connaughton

It is a very welcome initiative in working with the Department of Education and Skills. The area I am from is a black spot for broadband quality. Down the line, if it comes to the local secondary school, I can imagine that people in the area would wonder why it was not available to the whole area when it was clearly available in the town.

Mr. Aidan Dunning

That would be an understandable reaction, but no, this is an earmarked scheme. We have stretched our resources to the limit to make sure we can actually do this because we see it as a priority in terms of the digital economy and the knowledge society. If we are going to prepare the workforce of the future to dovetail with what the IDA and Enterprise Ireland are doing in terms of ICT, we need to make sure our students are up to speed, so to speak, on digital skills. That is the policy rationale behind it.

Deputy Paul J. Connaughton

Moving on to the national broadband scheme itself, could Mr. Dunning take me back to the beginning of that process? Were there many companies that tendered for that contract along with 3?

Mr. Aidan Dunning

There were a number of processes. Initially there were a fair number of companies - 15 or 16. Then they were whittled down to four, and eventually we had two.

Deputy Paul J. Connaughton

The initial target was to provide broadband for 166,000 people.

Mr. Aidan Dunning

I want to be clear on this, so the committee is in no doubt about it. We did not set any target in the contract for the service provider. The service operator included a target in its bid, but that was not included in the contract. This was wise because, unfortunately, the number of people who have subscribed to the scheme - about 40,000 at the moment - is below what we had expected. If we had given the service provider a target and that target was not met, the Exchequer may have been asked to increase the taxpayer subsidy for the scheme. As it is, that is fixed at €79.5 million. That was, in my view, good foresight on our part in the interests of the taxpayer.

Deputy Paul J. Connaughton

The initial target was set by 3, the mobile provider.

Mr. Aidan Dunning

Yes.

Deputy Paul J. Connaughton

Can Mr. Dunning tell me the targets suggested by the other companies? Were the figures similar or were they larger or smaller? The point I am trying to get across is that when 3 won the tender bid, I imagine one of the main reasons was its stated target to connect a certain number of people by 2014, but now it looks as though it will come nowhere near it.

Mr. Aidan Dunning

There were a number of factors involved. I do not want to go into the ins and outs of the procurement process, which was quite sensitive. The level at which the company bid was one factor, and what we had available was another. We had to shoehorn this scheme into providing a service using the amount of money we had available.

Another thing was that we were interested primarily in coverage; we wanted to be sure the system that would be established could match the coverage area we had delineated, as needed, so that we could meet the policy requirements. On all those scores we were happy that 3 fitted the bill. What the contract required was that 1,000-plus electoral districts should be provided with broadband by 3. That was specific.

Deputy Paul J. Connaughton

Was it given a specific target in terms of quality?

Mr. Aidan Dunning

Yes.

Deputy Paul J. Connaughton

So it was not just a question of areas?

Mr. Aidan Dunning

As the Deputy heard from the Comptroller and Auditor General already, not only has it hit that target, it has improved on it. We are talking about basic broadband. We had only €78 million to spend from the Exchequer, so we were not aiming for high-speed broadband. Nonetheless, the download speed was 1.6 Mbps at a minimum and, as I understand it, it is achieving twice that on average across the customer base.

With regard to the contention ratio - that is, the number of people trying to use the system at the same time - the contract permitted a ratio of 22, but the actual ratio is five. That means the quality of the connection is better, as fewer people are vying for its use.

Deputy Paul J. Connaughton

How many users are subscribed to the service as of now?

Mr. Aidan Dunning

It is 40,000 plus.

Deputy Paul J. Connaughton

Are they all houses in areas in which no broadband could be received, or are they in areas where people could have received another type of broadband?

Mr. Aidan Dunning

It is a mix. When we came to selecting electoral districts, we examined it down to that level. We did a big job in terms of talking to service providers to find out what level of broadband was available. In some cases - in quite a number of cases, I would imagine - there were alternative broadband providers available in parts of the electoral districts.

Deputy Paul J. Connaughton

Among the 40,000 subscribers, are there many who could obtain another service provider?

Mr. Aidan Dunning

This happened in 2008, and there have been developments, obviously, since then. Other service providers may have moved into NBS areas, as they are entitled to. Eircom may have enabled more exchanges in an area, or other mobile operators could have moved in. There is more competition in the NBS area now, and that is probably a factor - although we cannot be certain - in the fact that the numbers are lower than we would have thought.

Deputy Paul J. Connaughton

Do we have a figure for that?

Mr. Aidan Dunning

Of the 40,000-----

Deputy Paul J. Connaughton

Of the 40,000 who are in the NBS at the moment, how many have access to another service provider or have moved from another service provider to the NBS?

Mr. Aidan Dunning

The vast majority of them, I imagine, have access to another service provider. As I mentioned, the 3 offer under the NBS is quite a competitive one, as I understand it, in terms of price and quality. It is a matter for individuals, but there will be more and more alternative service providers. I am sorry I do not have details, down to that level, of what service providers are in each district electoral division.

Deputy Paul J. Connaughton

Would it be possible to get such details?

Mr. Aidan Dunning

ComReg produces information, but only at a county level, I am afraid. It does not go down to electoral district.

Deputy Paul J. Connaughton

What I am trying to get across is this. The company, 3, set a target. The number at the moment is 40,000, and within that total there are people who were previously with another service provider. Would I be right in saying that not only will 3 not hit its own target, but it is a million miles off it? Its job was to supply broadband to people who had no other access to broadband.

Mr. Aidan Dunning

No. Its job was to ensure the provision of a broadband infrastructure.

Deputy Paul J. Connaughton

For people who could not obtain broadband.

Mr. Aidan Dunning

To provide infrastructure in the area. It was then up to people to decide whether they wanted to avail of the broadband facility. Our job was to ensure that in these 1,000-plus electoral districts where broadband had not previously been available, services were made available through this scheme. We cannot then force people to subscribe to the broadband. It is a matter for individuals.

Deputy Paul J. Connaughton

I accept that, but the point I am trying to get across is that the initial idea for the project was that 3 was going to go into areas of this country where people could not receive broadband and supply it, where possible.

Mr. Aidan Dunning

Yes, and it has done that.

Deputy Paul J. Connaughton

Yes, but it has also gone into areas in which there was already a service provider. What I would like to know is how many of those 40,000 could never receive broadband before, and how many of them could, but changed to the NBS?

Mr. Aidan Dunning

RedC does periodic surveys of customer satisfaction in the electoral districts. It has quoted a statistic that around 50% of NBS customers have switched from another service provider, but that is based on a survey of 300 people, so I have my doubts.

Deputy Paul J. Connaughton

I respect that, and I understand it cannot be an exact figure, but if we were to extrapolate from it, we would find that the NBS has provided broadband to only 20,000 customers who do not have an alternative provider.

Mr. Aidan Dunning

Well-----

Deputy Paul J. Connaughton

Are we getting value for money with regard to the €80 million that will have been spent on this, in terms of the number of people the contract was initially set up for? Does Mr. Dunning believe we are getting value for money?

Mr. Aiden Dunning

We did not set a target in the contract for the number of persons who would take it up. Our job, as mandated by the Government, was to put in place an infrastructure in that area for people who did not have access to broadband. There were already broadband operators in some of these ED areas. The infrastructure has been put in place and it will be possible to scale it up. It is robust and strong. When the spectrum to which I referred earlier may be released on foot of the auction this may be of great use in this area in making higher speed broadband available. For a net cost to the Exchequer of €43 million, we have put in place an infrastructure that ensures broadband access to 230,000 premises in more than 1,000 ED areas. That is a pretty good outcome.

Deputy Paul J. Connaughton

I understand the 3 network set the figure when it was rolling out the service. However, the point I am trying to get across is the 3 network supplied that figure in its bid and we can agree it will not hit that figure. I want to know about the other companies which applied for this tender. Had they set a figure around that level or did they present much lower figures which were more acceptable?

Mr. Aidan Dunning

My understanding is that it was primarily about what they could do about coverage and whether the system would provide the coverage necessary to ensure that the whole of the ED area had access as distinct from the target numbers.

Deputy Paul J. Connaughton

Of the €18 million expenditure, the Department will recoup about €36 million.

Mr. Aidan Dunning

Some €36 million from the -----

Deputy Paul J. Connaughton

What has to be done to recoup that?

Mr. Aidan Dunning

The scheme is up and running. We have submitted claims in respect of the €72 million that has been expended already and we have recouped €30 million.

Deputy Paul J. Connaughton

So there will be no issue with recouping the rest of it.

Mr. Aidan Dunning

We do not think so. However, how the EU operates as regards the structural funds means we have to go through a lot of hoops to ensure that everything is done but the Department will make sure this is the case. I am confident because we did this with regard to the MANs. We have a good record on the telecomms side in terms of recouping EU co-funded moneys. I would expect the same to obtain on this occasion.

Deputy Paul J. Connaughton

What is the plan post-2014?

Mr. Aidan Dunning

The contract ends in August 2014. We had a major job to convince the EU to agree to allow us to run it out to 2014 because the EU wanted it to be a shorter period. It is the view of the EU to question whether the market can provide this service and we were of the view that it could not. By 2014, a very robust and strong infrastructure will have been put in place by the 3 network. I understand that the 3 network has a strong commitment to the country and to investment in this country. In my view, mobile broadband will be playing a very important role in that segment of the population in rural areas, a forecast of 15% to 20%. I would be very hopeful that the investment will remain in place and will still be utilised. In any event, the national broadband plan which the Minister has indicated will be brought to Government and published later this year, hopefully, will certainly address that issue. It was made clear in the task force report, notwithstanding what has been achieved in this scheme, that a total of plus 15% of the population broadband needs will not be met through market interventions at the level we require. This issue will be addressed in the broadband plan. I envisage that this infrastructure will continue to have a role to play post-2014 but we will not be-----

Deputy Paul J. Connaughton

Post-2014, the 40,000 on the scheme at present will not be left high and dry.

Mr. Aidan Dunning

No. I would not think so.

Chairman

I have a question about the payments which were dealt with in the Moriarty tribunal. A payment of €358,767 was made in 2010. What other payments have been made and what is the total expenditure to date by the Department?

Mr. Aidan Dunning

As of 9 May 2012, total expenditure was €3.5 million, of which €2.8 million was spent on legal fees; €435,000 was spent on administration; €289,000 was spent on departmental salaries. A total of €2.8 million was spent on legal fees.

Chairman

What are the rates for those legal fees, such as rates for senior counsel and others? Do they equate to the general rates paid in the tribunals?

Mr. Aidan Dunning

They would have been around €2,200 for senior counsel and then reduced accordingly for others. It was slightly lower than the tribunal because, as I recall, the tribunal costs were €2,250 for senior counsel, €1,500 for junior counsel and €500 for documentary counsel and €670 for junior counsel. It was increased in May 2005. I ask the committee to bear in mind that those figures relate to ten years, the total of €3.5 million is over ten years in which the Department was involved with the tribunal. The legal fees of €2.80 million also relate to the ten-year period.

Chairman

Has the Department finished with the tribunal?

Mr. Aidan Dunning

Yes, the tribunal has finished.

Chairman

I mean the costs to the Department.

Mr. Aidan Dunning

The Government has taken a decision that the Department will not pursue costs for the tribunal. It would be pointless to pursue costs because it would mean taking money out of one pocket and putting in the other pocket.

Chairman

I refer to commentary about the overall costs of the tribunal. Are those figures included here?

Mr. Aidan Dunning

They are separate.

Chairman

It is always the general cost plus the cost-----

Mr. Aidan Dunning

These figures just relate to the Department.

Chairman

The accounts show it was necessary to write off €3.6 million in relation to the replica famine ship Dunbrody. Who owns or maintains that ship now?

Mr. Aidan Dunning

This is a bit of a saga.

Chairman

We hear a lot of sagas here.

Mr. Aidan Dunning

In 2000, the Department of the Marine and Natural Resources gave a loan to the JFK trust which owns the Dunbrody. I understand that the trust was virtually insolvent at that time. The loan was in Irish punts and it was written off in 2010 plus the interest that had accrued. While it was given as a loan it was in reality more of a grant. The reason it was given as a loan was that the Department had a debenture attached to the loan to ensure that certain matters related to the governance of the project and the overall management of the project would be carried out over that period of time. However, no repayments were made over the period. It then transpired that the trust wanted to set up a heritage centre in the New Ross area which would incorporate the ship and also the history of emigration and the Famine. At that time the issue had really moved away from our Department. However, JFK trust along with Fáilte Ireland, wanted to put some investment into that project but to do so the trust would have had to be released from the debenture which was still extant. The Department was given approval by Government to write off the loan, which was really a grant.

Fáilte Ireland has effectively taken over the State's involvement in that project and it is no longer under the aegis of my Department. I understand Fáilte Ireland has given a grant of some €1.9 million for the expanded project, including the boat and centre, and that the trust has also, in lieu of the Department's former debenture, borrowed €800,000 from Allied Irish Banks. The total investment, therefore, amounts to approximately €2.7 million. The State's interest in the project is now protected by Fáilte Ireland's debenture over it.

Chairman

Is the trust responsible for maintaining the project?

Mr. Aidan Dunning

As I said, it is no longer under the aegis of my Department, but that is my understanding of the position.

Chairman

Note 6.3 in the accounts refers to a settlement of €75,000 between the Department and a broadband service provider. Will Mr. Dunning comment on that?

Mr. Aidan Dunning

This payment was made to a broadband provider in respect of a case taken against the Department regarding the maximum level of grant aid available under the economic and social infrastructure operational programme. The view was taken that the onus was on the Department to concede on this point and that we were not in a position to take it to court. In other words, the view was that this level of grant should have been, but was not, made available to the company in question under the economic and social infrastructure operational programme. That is the background to the payment.

Chairman

The Department is responsible for policing rivers. What is the cost of having inspectors in place to monitor activities on rivers, including, for example, ensuring that salmon, in particular, are not fished out of season?

Mr. Aidan Dunning

I can give the Chairman the total cost of the subvention to Inland Fisheries Ireland. It should be borne in mind that there were originally eight or nine regional fisheries boards which, in the spirit of rationalisation, were amalgamated into one centralised body. We were one of the first Departments out of the traps in that respect. Inland Fisheries Ireland does, however, maintain regional offices in order to ensure it can do its job properly. The programme total for inland fisheries for 2011 shows a provisional outturn of some €29 million, of which pay accounts for approximately €1 million. The total for 2012 is €31 million, with pay accounting for some €1.2 million of that. The increase arises largely as a consequence of the additional capital requirement in respect of new premises for Inland Fisheries Ireland.

Chairman

Is it the Department's responsibility to account for expenditure under the total allocated for inland fisheries? For instance, can Mr. Dunning say whether Inland Fisheries Ireland will roll out the promised mobile closed circuit television units in various locations in order to monitor activity?

Mr. Aidan Dunning

I would not normally get into that micro level of detail. Inland Fisheries Ireland has a chief executive officer and a board there and its allocation is dependent on what is available in terms of the overall resource situation. Like every other body, its funding has been reduced significantly in recent years. The board submits a work programme to the Department and we review it. However, it generally has a fairly well devolved responsibility in terms of how it administers its allocation.

Chairman

I receive numerous complaints from fishermen in terms of the policing of rivers generally. It is very difficult to get an answer as to how many officials are involved in this work on the various waterways, particularly those where there is the highest incidence of law breaking. The response one often receives is that mobile cameras are in place or will be put in place. Will Mr. Dunning undertake to obtain from Inland Fisheries Ireland a full programme of its intentions in regard to the policing of rivers, particularly in respect of draft-net and drift-net fishing? I understand such activity is on the increase, which is a cause of concern for fishermen generally. Given that it is their licence money which funds this monitoring activity, they are anxious that account be given of what that money is used for and where it has been used in the past two to three years.

Mr. Aidan Dunning

Inland Fisheries Ireland has its own resources which accrue to it from the contributions to which the Chairman referred. I will ask it to provide the information requested on the number of officials policing the rivers. It is a very important function and we would be concerned if there were an increase in draft-net fishing in particular. Some years ago a scheme was put in place to end that activity in order to ensure more wild salmon could get up the rivers and thus protect our native salmon stocks. Significant compensation was made to draft-net fishermen who agreed no longer to take part in that activity. It was effectively banned from river mouths and offshore. If there is evidence that it is still taking place, that would be a concern, first, from a conservation point of view and, second, from a value for money perspective given the compensation money that was paid.

Chairman

I am asking this question out of interest and based on evidence from fishermen that the fish they are catching have come through some difficulty on their way upriver. If Mr. Dunning could obtain for us a comprehensive response on all of these issues and the expenditure involved, the committee would then be in a position to decide whether representatives of Inland Fisheries Ireland should be brought before it.

Mr. Aidan Dunning

I will do that. For the information of members, I have some up-to-date figures to hand on activity in this area. For example, the number of prosecutions by officers of Inland Fisheries Ireland was 130 in 2006, 191 in 2007, 201 in 2008, 256 in 2009, 184 in 2010 and 169 in 2011. The number of patrol man hours was 19,000 in 2007, 32,000 in 2008, 26,500 in 2009, 29,500 in 2010 and 55,000 in 2011. I cannot account for the magnitude of the increase last year, but it is welcome. These data point to a significant amount of activity in terms of patrols. I will get back to the Chairman with the information he has requested.

Mr. Aidan Dunning: I will certainly do that. I have some up-to-date figures to hand. number of prosecutions each year by the officers of IFI, 130 in 2006, 191 in 2007, 201 in 2008, 256 in 2009, 184 in 2010 and 169 in 2011. The number of patrol man hours are 19,000 in 2007, 32,000 in 2008, 26

Chairman

We would be grateful to receive a comprehensive response as soon as possible.

Mr. Aidan Dunning

Absolutely.

Chairman

Does Mr. McCarthy wish to add anything?

Mr. Seamus McCarthy

Going back to the broadband scheme that was the subject of the Comptroller and Auditor General's report, it is reasonable to observe that technology investments deliver value only to the extent that they are used. In this regard, it is a concern that the take-up of the service is significantly below what was originally envisaged. It may also be that competition and technology developments would have delivered a service in any event and that there may be an element of dead weight involved. I understand that the census of population in 2011 contains information in respect of the number of households availing of broadband. This information should be available by electoral area and that might assist in a meaningful review of the business case for the investment. As a result, and if further investments are contemplated, we will have a better understanding of what delivers value.

Chairman

Is it agreed to note Vote 30 - Communications, Energy and Natural Resources, and to dispose of Chapter 25 - National Broadcasting Scheme? Agreed. I thank the various witnesses for attending.

The witnesses withdrew.

The committee adjourned at 1 p.m. until 10 a.m. on Thursday, 24 May 2012.