National Broadband Plan: Statements

I thank the Seanad for providing time for statements on this matter. This is a really important investment for the future of the country. Since Telecom Éireann was privatised 20 years ago, we have been totally dependent on the private sector to deliver the telecommunications services we need. It has been very successful and, for 75% of the population, a very good service will be rolled out. It is on track to be delivered. Recent announcements indicate that it will be in the form of fibre to premises in urban areas. However, the other 23% of the population amounts to 1.1 million people. They are on 56,000 farms which account for 68% of all farms in the country; in 44,000 businesses, including small enterprises; 764 schools; and 540,000 premises, whether homes or businesses. It is a significant segment of the population. Given the impact of the digital transformation on our society, access to high speed broadband will be as essential as rural electrification was many years ago. It is really important that significant parts of the community, particularly those living in more rural parts, not be cut off from full participation in the opportunities digital transformation will provide. Worse still, there is the risk that such communities will be hollowed out as activity moves towards the centres that are properly served. This is an important commitment which has been at the heart of the Project 2040 strategy to deliver compact, sustainable but connected development. We want to move away from the high concentration on Dublin city and see other parts of the country grow and thrive with strong and vibrant centres.

Since Telecom Éireann was privatised, the total spend by the State on telecommunications infrastructure has been the €400 million spent on the metropolitan area networks, MANs. From 1985 to 1996, before telecommunications services were privatised, investment by the State was running at €2 billion. We have only spent €200 million per decade in the intervening 20 years, one tenth of the earlier figure, not taking the deflated value into account. This contrasts with the level of investment in other areas in which we have rolled out significant investment. We have €11 billion in water services and close to €40 billion in road construction. We recognise the need to connect many parts of our investment strategy to make sure all parts of the community will be treated equally. It is important that we adopt this position on future participation in the use of one of the most powerful technologies.

Because state aid is involved we have to give the private sector every opportunity to carve out the parts it wants to serve. The State can only intervene in those areas where the private sector will not provide a service. Members will recall that Eir decided, after the initiation of the national broadband intervention concept, to carve out 330,000 homes and premises to which it would deliver service, which was entirely its entitlement.

With reference to evaluation, many people talk about why the gap-funded model was chosen. It was done after very careful evaluation of the alternatives. Essentially, the reason the gap-funded model was considered to be the optimum was we wanted to recognise there was a core service - it is now privately owned - and to build out from it 146,000 km of fibre that would be connected to the core, to be done in the cheapest way possible. The cheapest way possible is using the existing poles and ducts of either the ESB or Eir in most cases and the MANs structure. That clearly meant the asset we were going to create was going to involve the rolling out of fibre, predominantly on rented infrastructure from the existing provider.

The other factor that bore very heavily was not just the cost factor but also non-financial performance capacity, that is, the capacity to deliver it in a way that would be sustainable and meet the growing needs of the rural community we were seeking to serve. The very strong result of the evaluation was that it was much more preferable to have the entity that was designing, building and operating the scheme also responsible for ensuring there would be a very high take-up and that the technology and infrastructure would be future-proofed and that we not have the investor allowing the infrastructure to be run down in anticipation of a date at the end of 25 years when it would be handed back and it would no longer have influence over it. They were very important features that led to the choice of using a gap-funded model.

Nonetheless, many people ask whether there was sceptical scrutiny. We have seen, as it is in the public domain, some of the sceptical scrutiny in the Department of Public Expenditure and Reform. It was entirely its entitlement to engage in such sceptical scrutiny. A system needs that scrutiny to ensure it is robust. However, I can assure the House that, whether it was about costs, affordability, uptake projections, risks, the single bidder process or the alternatives considered, every one of those concerns was considered in triplicate. As I recall, five options were considered in 2015, while ten were considered in 2018 when, for the first time, we saw a market-tested cost emerge. Even this year, a further three options were evaluated by the team that has been doing the work. It is not the case, therefore, that we have not looked at the alternatives. We looked at the alternative technologies and ownership models, including those that would involve rolling out the service slower or breaking it up into smaller parcels. All of the options furnished have been evaluated, including the option of either using the ESB or a State agency.

It is worth saying because a lot has been suggested about it that the ESB entered the tendering process. It was one of the three bidders which went through the first phase. However, at a certain point, it decided that it would not proceed. Clearly, in a fair and equitable tendering process one cannot, with one tenderer having dropped out, go back to that tenderer at a later stage as it would not be fair and equitable to those who had continued. Therefore, one would have to end that process before one could consider the ESB. Having ended the process, it is very clear under state aid rules, that one would be obliged to initiate a fresh procurement process. It is not open to the State to allocate a state aid package of any sort to an economic entity, certainly not one which is a commercial State-sponsored body operating in the marketplace. One would have to have a fresh procurement process. As to the outcome at the end of such a procurement process which would take two and a half to three years, we would not know who would win - it could be the ESB or some other agency - but we would have lost considerable time.

The other point is that the ESB went a fair distance with its application; therefore, we know a fair amount about its cost structure. There is no reason to believe the cost structure being delivered by the ESB would be cheaper than that offered by Eir which continued on in the competition or Granahan McCourt. Both Eir and Granahan McCourt made comparable bids in terms of cost.

If Senators wish, I can go into the system of evaluation of the alternatives and the review of costs. I should also comment on the issues of risk which have been raised. We have adopted a novel approach to risk in this area, which I believe is prudent. Under the contract, the core cost figure we have negotiated is €2.1 billion, but we have recognised that there are certain risk factors. Through a number of elements of the contract, we have contingency funds agreed to which are capped from the State's point of view. They cannot exceed €480 million, excluding VAT, and can only be drawn upon in the event that audited events occur that trigger the drawdown. Therefore, we have been very careful to ensure that, unlike on other projects that have been subject to criticism, the State will in no way be exposed to any escalation in cost or any disappointment in the take-up of the scheme.

Some commentators have suggested take-up might be very low. First, I have no reason to believe the take-up in rural areas will be lower than in urban areas. It is very important to make the point that should it happen, the risk will be entirely carried by the provider, not the State. By contrast, if the take-up is better than projected, the State will claw back 60% of the extra profits earned. What we have done in the contract is we have gone through the risks with a very fine tooth comb. That was absolutely appropriate when there was only one bidder remaining. We have looked at international benchmarks, evaluated each cost element and each risk and negotiated and nailed down the limits of our risk on the project.

It is also worth saying that at the end of the project we will have a relatively small private company. If it hits its projections, the company will have a turnover of €150 million in 25 years' time. Therefore, it will be less than one tenth of the size of Eircom which already has a turnover of €1.3 billion and is growing significantly. This will be a very small player. That puts in context some of the commentary on the initial equity and the responsibilities of the company. The successful bidder will be responsible for meeting €2.4 billion of the overall cost of designing, building and operating the scheme. The State is committed to providing €2.1 billion in a good outcome or, in the worst case, €2.6 billion. Of course, some of the €2.4 billion will be delivered by its initial equity - €175 million - and its working capital - €45 million - but the balance it will have to provide either by putting in more equity, raising further loan capital or earning user fees. It is very important to note that it will have that exposure. If there is disappointment on the cost or take-up front, it is the company which will carry the risk. It is important to put the matter in context.

This will not be, as some have described it, a monopoly company operating in a way in which it can rip off the public. This company will be confined to being a wholesale provider and, therefore, it cannot enter the retail market and compete with others. It will be obliged to provide open access to the networks so any one of the existing private providers will be able to go on to this network and deliver services. The company will have a capped fee. It only can earn, from those who subscribe, €100 for a connection and €30 per month for usage. That is a control fee based identically on the ComReg control fee that applies in urban areas. The company will operate in a very regulated market.

In addition, we are putting in place a very detailed governance arrangement to which it has signed up. We will have access not only to the detailed cost returns where the State will ride shotgun to ensure that the €480 million contingency fund is not drawn upon except in entirely justifiable circumstances - we will police that - we will also have information about the operation of the company. We will have an appointee to the board. The work of this company will be to deliver on a Government contract. This is unlike other scenarios where a public interest director has been put in place. There has been some concern about the role of a public interest director, for example, for a bank because a bank's role is to make a profit for its shareholders. This company's role is to deliver on a Government contract.

There are additional protections for the State. We only pay on completion of the roll-out. We will pay in arrears so we will only have paid whatever sums are drawn down from the €2.1 billion as and when the homes or premises have been passed and connections have been made. We do not pay upfront. We will not give out money to a private company. We will pay for the verifiable rolling out of fibre on the network, as required. As I have mentioned, we have built up clawbacks. Not only will there be a clawback on profits there will be a clawback in the event that its terminal value is greater than expected or that it is sold at any point before the 25 years are up.

The reason we have chosen this model is that while the State is stepping in to make sure that the 146,000 km of fibre are rolled out to those 1.1 million people, importantly, we want to do so in a way that leaves this network able to stand on its own two feet at the end of the process. This company is committing not only to run the service during the 25 years when there will be State support but also for ten years beyond that without State support. That is an indication of its commitment.

The advantage of that model is being seen in that the minimum contract that we specified was a 30 Mbps service. This company will start on day one with 150 Mbps service and will, by year ten, deliver 500 Mbps of service. The private sector is recognising that if it is to operate this network successfully then the service will have to be future-proofed and it will have to deliver it to the highest standards that are required.

Some Senators may also be interested in the benefit-to-cost ratio that has attracted some commentary. The ratio has been established on the most conservative of assumptions about the time savings that people will make based on their existing activity on the Internet, and the existing level of remote homeworking, which is 4% for white collar workers. The ratio is based on small numbers as follows: less than 10% of farmers adopting digital technology to improve the operation of their works; a small proportion of sole traders using digital technology to transform their business; and a low assumption about the job creation potential that will come from those 100,000 enterprises in the area and the potential new enterprises to come. Those elements have been conservatively measured and, even so, the benefit exceeds the cost by 30%. The reason we are doing this is not to sustain remote working at 4% or existing levels of activity on the Internet. We are providing this scheme in order that remote working can grow and people can have a better lifestyle and use remote working more. Multinationals will only allow their workers to work remotely if they have secure access such that fibre provides them; they will not do so over a wireless network.

We are looking at a future where digital education, remote diagnosis and remote monitoring of a person's health condition will be available online. This could be a valuable way for people to improve their lifestyle as a result of having technology of this nature. This decision is much like many of the visionary decisions that were made in the past that were opposed by the Department of Finance such as free second level education introduced. Let us also recall the benefits that were yielded by free second level education by a visionary Minister and Government who was not a Minister of my party. These were visionary decisions, which were rightly taken by Government in the face of criticism from hard-working public servants, including probably one of the best public servants that the country has ever seen in Dr. T.K. Whitaker. However, Governments have to make decisions based on what they believe is best.

There has been some commentary that it will take seven years to roll out the scheme but that is based entirely on an objective evaluation of the contract and the capacity of the network to be prepared to roll out the 146,000 km in an efficient way. If I had stood over something that was not contractually underpinned, Senators would rightly accuse me of trying to present a rosy picture. By contrast, we have in this roll-out a situation where if the company fails to meet its obligations, it will face financial penalties in failing to meet milestones. Indeed, at the three important checkpoints - 30%, 60% and 100% roll-out - the company could forfeit its entire ownership of the scheme if it falls behind by 12 months.

I came to office with a fresh pair of eyes last October to examine the scheme anew. Based on my considerable experience not only in politics but in my former profession, if we want to achieve the goal of universal access to high-speed broadband, the only cheaper alternative is to leave some people behind and decide we are not going to provide the service universally. All the alternatives either impose greater cost or higher risk. We have forensically gone through this using an arm's length evaluation. All of the evaluation was not conducted with political involvement. It was done by experts brought in to assist the Department to make this decision. All of the evaluations were done objectively and were not based on any political evaluation.

Finally, this involves a large sum over 25 years. It will represent at peak perhaps between €300 million and €400 million in the highest year and then trail off. It is a significant investment but it is an investment that is intrinsic to the vision that has been set out in the national capital plan and Project Ireland 2040. Our decision to provide for this project will not in any way encroach on the delivery of the other projects listed in the national development plan.

I thank the Minister for his comprehensive statement. I call Senator Gerry Horkan who has eight minutes.

I thank the Minister for his comprehensive opening statement, which lasted 23 minutes. Unfortunately, I have only eight minutes to respond.

I beg the Senator's pardon.

There is no need for the Minister to be sorry.

To be fair, I did not realise the Minister has only been in the Department for Communications, Climate Action and Environment for seven months. He has gained an expertise in the area. I have benefitted from his contribution today, because he did not stick to the script, which was quite useful, as it showed he has a great deal of knowledge, much of which has not been in the general public domain, as to how the commercial operations are working or may potentially work.

I will try to be as quick as I can. I attended the Joint Committee on Communications, Climate Action and Environment, as a substitute for my colleague, Senator Terry Leyden, for whom I am covering this afternoon. Fianna Fáil supports the roll-out of the national broadband plan. However, as my colleague, Deputy Timmy Dooley, said in the Dáil, this promise is to deliver the broadband plan to one third fewer homes; to take three times as long to do so as previously envisaged; at six times the original price and at the end of it all, we will not own the network that has been built and paid for or very significantly subsidised at least by the taxpayer. Certainly, it can be argued that the decision has been rushed to generate positive headlines ahead of the local and European elections next week, in spite of genuine and serious concerns raised by the Department of Public Expenditure and Reform. I take the Minister's point about the introduction of free education and I thank him for complimenting my party and the then Minister, Donogh O'Malley, for doing so.

The previous Government of which Deputy Bruton was a member set up the Department of Public Expenditure and Reform to monitor public expenditure and reform. It has advised and given direction not to proceed in the way that is being done. The Department has raised specific concerns on the grounds of cost, affordability, value for money and risk. The cost benefit analysis on which the Government has based its decision has been labelled by the Department of Public Expenditure and Reform as not credible. An error of €1 billion was found in the cost benefit analysis just weeks before the project was approved. The cost benefit analysis over-estimated the benefits of the plan by €1 billion immediately afterwards. That hardly inspires confidence. The Department's documents also indicate that it was concerned about the level of risk on the part of the State versus the remaining bidder. I listened carefully to the Minister's comments and I will come back to that, but the documents from the Department of Public Expenditure and Reform indicate that Granahan McCourt will have completely recouped its investment within the first eight years. The Minister has outlined some of the money issues but we need clarity on the amount of money Granahan McCourt will be investing and making on the deal for the initial outlay of €220 million, which is for infrastructure and working capital. In the context of the Department of Public Expenditure and Reform's quote of "unprecedented risk to the Exchequer", the decision to push ahead with this plan to win a local election borders on farcical.

Fianna Fáil has a number of serious concerns that must be answered regarding: the credibility of the cost benefit analysis of the plan, which was later queried by the Department of Public Expenditure and Reform; the burden of financial and social risk carried by both the bidder and the State regarding the plan; whether this project is in line with the public spending code; and the impact such a plan will have on the national development plan in general. We question the role of Frank McCourt, the financial supporter of Granahan McCourt and his attendance at a meeting that took place in New York. My colleague, Deputy Timmy Dooley, has written to the secretariat of the Joint Committee of Communications, Climate Action and Environment requesting an investigation be carried out. This morning I attended a closed meeting of that committee and it is positive to see there will be a short, timely investigation and examination of where this project is going which will be concluded by the middle of July.

The Fianna Fáil Party is focused on ensuring that national broadband is delivered quickly and for a price which represents value for money to the taxpayer. Our position has been clear throughout. We believe a State-owned company, such as the ESB and I acknowledge the Minister's comment about state aid rules and so on, is the best option for the delivery of broadband to rural Ireland. Deputy Dooley wrote to the former Minister for Communications, Climate Action and Environment expressing his preference in 2016 and we tabled a proposal in the Dáil, which was supported by a majority in the Dáil in February 2018 and yet the Government failed to examine that option. Documents released by the Department of Communications, Climate Action and Environment have raised issues regarding the use of the ESB but have not ruled out the use of a new entity. No costings of alternative proposals have been published by the Government and none of the documents released indicates that such costings exist.

We are awaiting answers to questions to confirm that the Government did not cost alternatives. Fianna Fáil remains convinced that the State ownership of the infrastructure is possible and will be beneficial for the circa 400,000 to 540,000 premises which the Government believes will sign up to the plan. An additional €1.5 billion will have to be found in the national development plan over and above the €800 million already allocated for the plan on top of the additional funding of €385 million required for the children's hospital in the next three years alone. There is no provision anywhere for this funding. Some €500 million has to be found between 2019 and 2022, right when the roll out is meant to start. How is that meant to happen without funds being allocated?

I take the point the Minister made that no other plans will be affected by it, but they must be at least delayed by it, because if one only has a certain amount of money and a load more has to be found for this, a whole lot of other projects will have to be at least delayed or shelved. The Taoiseach has said that there will be no budgetary impact in 2019 and a minimal impact in 2020 but he confirmed there will be a budgetary impact from 2021 onwards. He said the Minister for Finance, Deputy Paschal Donohoe, will indicate in the summer economic statement how that funding will be provided for. It is surprising and indeed incredible that the Government thinks it is appropriate to announce it will proceed with the plan without saying how it will be paid for. We also do not know, which the Minister acknowledges, how many homes will be connected in the first phase. The Taoiseach had said that only 10,000 out of 442,000 homes will be connected in the first year. The Minister may have said that it will be 133,000 homes in the first phase-----

In the first two years.

-----connected in the first two years. I am not having a go at the Minister when he is only seven months in this particular role, nor am I being party political, but it is reasonable to say that there are serious questions. I have been out canvassing with local election candidates. I am surprised because generally people do not talk about national issues, but broadband is coming up, as is the ability of the Government to manage projects of very significant capital cost generally, such as the national children's hospital, broadband and others. I think 20 of the last 23 health projects in the past seven or eight years have all overrun on budget.

Senator Horkan has one minute remaining.

I acknowledge that this is as transformative as rural electrification. My father worked for a while in the ESB on rural electrification. He was in Gorey, County Wexford, at the time and he saw the absolute transformative effect of it. I acknowledge that the Minister is trying to do that. He is new to the job and he has many other roles, such as dealing with climate change, post offices and so on. I wonder how post offices are going to thrive in the long run when everybody gets broadband and they can do everything online. That is for another day.

I wonder about the impact of newer technology coming on stream. I know people who rewired houses for CAT 5 cables, and wireless came along a couple of years later and they did not need it. I live in Dublin but as a Senator I represent the whole of the State. I know that people from Dublin go down the country and their children will want to use Wi-Fi when they are on holidays and want to be able to get their emails and so on. It is very important that we have national broadband but we are looking for value for money. I am concerned that the network could be sold on to somebody else, the profit share element of it. It seems that the wins go to the company and the risk rests with the Government. I was chairman of the Southern and Eastern Regional Assembly when we discussed the issue of broadband in 2014, half the room was happy because they had broadband, half the room was crying out for broadband. In 2014 the thinking was that it was going to be rolled out within a year by the then Minister, Alex White.

We need broadband. I acknowledge the Minister's efforts but we are concerned about the cost of it, the risk share and the profit share. I thank the Minister for his very comprehensive statement. I wish him well, but I think there are valid concerns about the project.

Senator Craughwell has eight minutes.

I thank the Chair. I welcome the Minister to the House. He was given the poisoned chalice seven months ago, and I wish him well with it. Happy days, things were never better.

As the Minister knows, I was president of a trade union during the worst time the country went through, one could not employ a teacher unless one had permission from the Department of Public Expenditure and Reform. One could not fill a post in a hospital unless one had permission from the Department of Public Expenditure and Reform. In fact one could do nothing unless the Department of Public Expenditure and Reform sanctioned it.

Happy days, we have €3 billion for tax rebates to the workers; we have €3 billion to put into broadband. We have €1.7 billion to put into the national children's hospital. We have another €3 billion plus that was mentioned for the Cork transport system. I am sure there is another €3 billion or €4 billion somewhere else that can be used for another project. I am becoming deeply concerned as the life of this Government progresses that there are announcements being made that all of us in this Chamber know are unlikely to proceed or to get up and running before the end of this Government's term.

Rural broadband is badly needed. No one in this room will disagree with that. I turn now to the technology issue which my colleague, Senator Horkan, spoke about. I taught computer technology for 25 years. It was a poisoned chalice because I spent every summer upskilling as the technology moved on. I remember my first computer had a 20 MB hard drive and the day I got it I thought I would never fill that space. I used to wonder what I would do with it. A few years later I have several terabytes of storage on my machine and I wonder if I will have enough to maintain the things we do with our technology today. We use it for everything from photographs to video editing, the list is endless.

There are people criticising the Minister, questioning why he is supporting the installation of broadband through fibre and maintaining he should adopt a plan to put in 5G. They ask what the status of fibre technology will be in ten years time. I am not sure I agree with that argument. I do not want to see a plethora of masts and regeneration stations at every turn. That is not a solution as far as I am concerned. A mix of both approaches may be a solution, where we could have 5G in densely populated areas, but that 5G technology will still require fibre to feed to it at the base station.

I am, however, deeply concerned about the issue of ownership. Senator Horkan spoke about rural electrification. Would we have electricity in every house in Ireland today if a private company had been running that entire process from day one? I do not like the term "preferred tender", by the way. It is the last and only tender the Minister has. Let us be straight and honest about this. Nobody else is willing to take on this project. Senator Horkan referred to the "remaining tender" and that is probably a more honest way of looking at it. Who in their right mind would bring in somebody to build a property for them and put €300,000 into the project themselves versus the builder's €200 only for the developer to then state he or she owns the house and rent will have to be paid?

The provider of the fibre link we will be putting around the country will retain ownership of the infrastructure for at least 25 years. While a regulator may be put in place to control the cost of access, the provider will have control of the tap and, therefore, control of the provision of services. Internet access can be turned off if the provider is unhappy with developments. As technology moves on, we have no idea how many things will be dependent on this broadband infrastructure. Who would have thought that it would be possible for us to stand on a beach in Spain accessing our bank accounts in Dublin to transfer funds from one account to another to make up a shortfall?

Let us look at how things have changed in the last five years. We have no idea where technology will be in five years' time. One of the fantastic things about technology is that it is always moving forward. I do not believe it is possible to future proof other than with fibre, which is what is being done. I compliment the plan and everybody in rural Ireland will be delighted with it. A man told me the other day that in his heart of hearts he wants this plan to work but his head is telling him that something about the entire process is rotten. We are putting €3 billion of our hard earned tax moneys into something we will not own when complete. A commentator recently queried whether that matters given that it is only a few cables. It is an awful lot of cable and an awful lot of people are depending on it.

Neither the Minister, I nor anybody else can control the timeline. If this goes wrong, it is going to go so seriously wrong that it will not be funny. We have seen national infrastructure projects repeatedly going wrong. I refer to national projects of all types, from the famous voting machines that cost us €54 million, that we sold eventually for €9 each, through to motorways that were meant to cost €5.4 billion but cost something like €16.8 billion by the time they were finished. Major infrastructure projects like this never run smoothly. We are stuck with one supplier. We are putting a fortune into this project while that supplier is putting in a tiny amount of money in the grand scheme of things. That supplier will then own the network and access to the network when it is complete.

I ask the Minister to correct me on my next point because I am not 100% certain about the details. Details are being bandied about suggesting that in some of the most rural locations in Ireland, it could cost somewhere between €12,500 and €40,000 to connect up a very remote house. If that is true, it will be possible to get to the front door of a house with broadband and offer it to the householder only for that person to then state he or she does not want it. That will leave a broadband connection outside of that door that will never be used. Have we taken the time to go around and find out who wants this service?

I remember as a young man being with my father putting in gaslights in a modern bungalow up near Scarriff. We were putting in gas lights because the people who lived in the house could not afford to pay for the electric poles to bring electricity to their house. We are now going to bring broadband to the same area and it is going to cost nothing. I am deeply concerned about this project. I wonder how much of it is dragging us closer to an election and having happy days as we go in to it. It is the first time, I think, since the Department of Public Expenditure and Reform was established that a Government Department or Minister has brushed aside its advice.

Except in education.

The Secretary General of the Department has been clear-----

I ask the Senator to conclude now.

I will finish on this point. I have been very clear on one thing. The Secretary General has prepared himself for his next appearance before the Committee of Public Accounts. Nobody can accuse him of not setting out the risk we are facing. I wish the Minister well with the project but I am not sold on it.

I welcome the Minister and acknowledge the lengthy statement he made on the national broadband plan. He has covered the main issues. This topic has been debated in the media and other fora in recent weeks. This project is about trying to ensure we have equality of opportunity for rural and urban dwellers. That is what we are trying to promote when we promote broadband. There are about 75,000 properties in my county that have no broadband. That is a major issue in that area and I am one of those people. A lack of access to broadband has a major impact on how society develops and how these communities will develop.

The key reason we put this national broadband plan together was to ensure equality of opportunity for rural and urban Ireland going forward. Let us turn to the matter of the "intervention zone". It is given that name because the private operator running telecom operation since the late 1990s will not expand to those areas where it is not financially viable. That is why the Government has to step in and provide a subsidy to ensure we get that equality of opportunity for those who dwell in rural Ireland. There have been calls for this national broadband plan to be put in place for a long time. Fianna Fáil has been repeatedly calling for this announcement in the last six to eight months. When the plan was announced two weeks ago, that party then ended up not wanting it. That is a bizarre scenario. We need to acknowledge the political game that is under way here.

We are trying to move forward with the plan to ensure the opportunity to which I referred exists for the rural dwellers.

There has been a great deal of talk about the significant cost of the plan to the State and the significant investment involved by a private entity. However, for householders and businesses throughout the States, the cost of the service, at some €30 per month, is feasible and practical. That cost will be controlled by a regulator, making the service cost effective and accessible for everybody. Senator Craughwell spoke about the prospect of poor take-up in rural areas. If that issue does arise, the liability will not fall to the State but to the private operator providing the service.

The objective of this initiative is to help us to move forward as a society in a sustainable way. We could, as Fianna Fáil is proposing, postpone the project and put it out to re-tender. However, we heard at a meeting of the Joint Committee on Communications, Climate Action and Environment this week that a re-tendering process would take 37 months to complete. If I were to go back to my constituents tomorrow and say it will be 37 months before we can move forward with a proposal, which might turn out to be the exact same as what is currently proposed, I can imagine the reaction I would get. The contract with the operator is complex and runs to more than 1,500 pages. It includes provisions to ensure there is equality of opportunity for everyone in society. It will help us to ensure Project Ireland 2040 is delivered, that we have a counterbalance to the east coast, facilitate the development of rural and peripheral areas, give people the opportunity to work from home, and enable smart farming, self-monitoring of health and so on. Broadband is a vital, changing medium that will bring speeds up to 500 Mbps. We are engaged in the coming six weeks in an exchange of views at the communications committee in an effort to achieve clarity on this matter. Next week, in particular, the attendance of the Secretary General of the Department of Public Expenditure and Reform should clarify several issues. It is important that we have this debate, after which we must move forward together. The last thing people in rural areas need is political squabbling in place of action to implement equality of opportunity.

I thank the Minister for coming to the House. It is important to reiterate that everybody wants to ensure there is broadband provision for people in rural areas. There are important issues to be discussed about how we achieve that, but to claim that people on this side of the House do not want broadband provision extended is juvenile. We have been asking for this provision for years. The problem is that the Government's national broadband plan represents a disaster for taxpayers and for all citizens, each one of whom pays VAT. I commend the 12 year old girl in County Mayo, Aoibheann Mangan from Hollymount, who challenged the Taoiseach on the issue this morning, outlining to him the broadband problem and the associated inequalities. People across the board are concerned about inadequate broadband provision but also want to ensure its extension is implemented properly.

The plan the Government has put forward is based on a failed tendering process and a flawed-cost benefit analysis and does not represent value for money. The taxpayer will not even own the infrastructure after investing almost €3 billion in it. We saw the same thing happen under a Fianna Fáil Government when Eircom was sold off and left in the hands of Australian and French billionaires to asset-strip it. The Minister indicated a span of 25 years for the project. Will it be possible for the system or any part of it be sold off within that period? Does the contract include clauses for affordability or could the operator end up charging what it likes? In Britain, there is an ongoing discussion about public ownership and the possibility of re-nationalising many essential services. There are few services more essential than broadband, which has an impact on healthcare delivery in respect of X-rays and so on, job opportunities and many other issues. We saw with JobPath what can happen when we hand the delivery of services over to the private sector. We keep querying the €159 million cost associated with that but have not been able to get the full information. Again, we are seeing attempts to hide behind the notion of commercial sensitivity. The broadband project is being removed from the people, but they should have a say over such a vital element of infrastructure.

All parties say they are willing to look at all options and that the political will exists for us to move forward. I do not want all of our time here to be used up in looking back at what was done wrongly or the many missed opportunities over the years to provide rural areas with a communications infrastructure that is fit for purpose. Today Sinn Féin launches its plan to have the ESB, by way of ministerial direction, roll out the national broadband plan. With the right political will, the solution we have put forward to solve the current debacle would ensure an almost immediate start to work on the roll-out of the infrastructure. I expect the Minister will reject it out of hand with reference to the state aid rules. However, my colleague, Deputy Pearse Doherty, firmly put that issue to bed on "Pat Kenny's Big Debate" last night. Under the European Commission's 2013 communication on state aid rules for the deployment of broadband, it is clear that where it can be demonstrated that a private investor is not in a position to provide adequate broadband to all citizens within a period of three years, then state aid measures may be used. The matter seems straightforward and I ask the Minister to address it directly in his reply. The state aid red herring should not be raised repeatedly whenever broadband is discussed.

It is possible to select ESB as broadband operator using one of two options. First, there is the negotiated procedure without prior public notice, which could be used to choose ESB where no suitable tenders have been received from a previous open competition. We have had an open competition for broadband and it has demonstrably failed. Therefore, we are confident that the nomination of ESB can be justified to the Commission. Has any advice been sought from the latter in this regard in advance of making such a serious decision? The second option is the restricted procedure whereby any company may request to participate in a call for competition but the State may invite only those it deems suitable. The ESB meets that criterion. Under restricted procedure, the State can set a time limit of 60 days from the request to respond to a call for receipt of tenders. In other words, we are not talking about months or years. In fact, the process could be wrapped up within a few months with the right political will. Sinn Féin's plan arises from our arguing, researching, negotiating and lobbying on behalf of people in rural areas for many years. It was my colleague, Mr. Matt Carthy, MEP, who was alert to the Government not making the request under the EU's TEN-T core map review process.

We are making our announcement one week before the local and European elections because it is our view that we are on the wrong pathway in seeking to ensure adequate broadband provision for all. It is not about delaying the project but it does require further analysis. We have shown clearly how it can be done in a timely manner. We will strongly regret going down the path down which the Government seems adamant to proceed and in which it is supported by Fianna Fáil. I urge the Minister not to reject the Sinn Féin plan simply because we are eight days from the elections and he is trying his hardest to fulfil a promise the Government made to people in rural Ireland more than eight years ago. We must stop and think before proceeding. We absolutely need adequate broadband provision.

We need it to have full coverage and be affordable. I do not believe the private sector will deliver it in the way an organisation such as the ESB could.

Like many others who hail from rural Ireland or represent rural communities, I have mixed feelings about what is going on. On the one hand, after decades of announcements and broken promises, we should just get on with it and start to deliver a quality broadband network to rural Ireland. I believe the majority of the electorate in rural areas feel this way. On the other hand, it is difficult to overlook the huge cloud. The Government has boxed people living in rural Ireland into a corner. It is like asking which illness would someone prefer to have. The cost of €3 billion is 14 times the entire allocation Ireland will receive in 2019 from the European Agricultural Fund for Rural Development which amounts to €220 million, which is the same amount Granahan McCourt will invest in the entire project.

In a way, this controversy illustrates everything that is wrong in Irish politics. We have the usual ingredients of a national infrastructural project beset by delays and paralysis at political level; a Government that seems to be more interested in spin and electoral considerations than in achieving good policy outcomes for taxpayers; and Opposition parties that, I have to say, huff and puff to achieve their own electoral ends but that have absolutely no intention of voting down, cancelling or doing anything that might make them unpopular. We could apply these three rules of thumb to virtually every plan announced over the lifetime of the Government. If this is new politics, we should have none of it.

The earliest reference I could find to the need for a national broadband network in the Official Report for the Dáil and the Seanad was back in 2001, or 18 years ago. To paraphrase Charles Dickens in Bleak House, children have been born and grown into adulthood in the time it has taken the political system to even sign contracts for the provision of such a network. The national broadband plan announced by the Minister last week was the sixth such major plan announced by the Government in that time. It is difficult, therefore, not to be cynical about its approach. After years of delay and three years into its term, the Government is insulting the intelligence of every taxpayer when it states announcing the plan in the middle of local and European election campaigns is anything other than a vote getting exercise.

Three simple facts were known to the Government in advance of the announcement. The first is the terms of the strategy appeared to be very favourable to the preferred bidder, Granahan McCourt. The second is Granahan McCourt was to contribute a very small amount in meeting the overall capital cost, now known to be €220 million. Why was there such reluctance to speak about what the investor was to put in? I would have thought once the taxpayer was putting in a cent, all information would be on the table. The third fact is serious concerns were being expressed at a high level in the Civil Service about the achievement of value for money. However strongly we feel about the need for a rural broadband network, this is something that has to be taken very seriously.

These facts were all guaranteed to emerge sooner rather than later and made it certain that the plan would be controversial. If it was any other issue, the Government would not have touched it with a barge pole during an election campaign, but safe in the knowledge that there is an urgent need for broadband and a huge demand for the plan and that it would be well received, for electoral reasons it chose to ignore the huge issues and problems and proceed with the announcement. It would have made sense for the plan to be announced after the upcoming elections, when the details could be debated and discussed in a more calm and rational environment. That would have done justice to the homes and businesses that have been waiting 15 years for progress, instead of insulting people's intelligence and treating them like patsies.

The biggest issue with the plan appears to be that ownership of the asset, essentially the critical fibre-optic wires, will transfer into the hands of a private sector entity after 25 years. Senator Craughwell has spoken eloquently about this issue. The justification for it is that it will be of little value to the State after 25 years and that at that point the private sector is more likely than the State to invest in it. I accept that KPMG states this model provides the best value for money, but I find it difficult to believe. Could the same point not be made about the road network or the rail network? They also need to be renewed and upgraded after a period of years and the solution is never to transfer their ownership lock, stock and barrel into private hands. Instead, the State invests more money in upgrades over time. Why does the same not apply to the broadband network? It seems more likely that the Government is essentially being corralled into doing this by virtue of the fact that the tenders from Eir and SIRO, the joint venture between the ESB and Vodafone, were withdrawn. With Granahan McCourt remaining as the only bidder, it has, unsurprisingly, led to it assuming relatively little risk but all of the reward. For the umpteenth time, we get the impression that the taxpayer has been short-changed.

Correspondence from the Department of Public Expenditure and Reform makes for extraordinary reading. The trenchant criticism of leading civil servants of the cost benefit analysis is very serious. There is also the most extraordinary revelation that there had been a €1 billion overestimate of the costs arising for the operation of the network, as well as a €1 billion overestimate of the benefits flowing from the contract. This only emerged in the past three months as a result of a PwC audit. This fact alone should surely have given cause for thought.

At the end of the day, I have to say people living in rural Ireland have waited long enough for the project to begin. There are towns and villages throughout the west, in particular, that are crying out for it. During our debate a number of months ago on the regulation of gambling I mentioned that the one business that seemed to be thriving in every town was the local betting shop. It is high time to do everything we possibly can to make sure other businesses with a greater social utility will have every opportunity to thrive also. Broadband forms part of it. While I accept that we cannot delay, we could certainly have delayed until after the elections to make the announcement.

I am gravely worried that we will be sitting here in 20 years's time regretting implementing the plan, as it stands. It is now widely accepted that we would not be where we are on the broadband issue if a previous Government had not made the disastrous decision to privatise Telecom Éireann in 1999. I have spoken several times about the disaster that is the handling of the national children's hospital project, a decision that will perhaps cost the State more than €2 billion and may end up costing children's lives. A large number of experts believe it is simply located in the wrong place and that it is not just a matter of money. I hope we will not end up ruing the decision to proceed with this project as planned and that we can finally deliver to people living in the west and elsewhere in rural Ireland the connectivity they badly need. I do not believe history will be kind to the Government for the way it has handled this issue.

I thank the Senators who contributed. I hope I can reassure Senator Horkan. The plan does provide for a lower figure, but that is absolutely due to state aid rules. Originally, it was projected to cover 750,000 homes, but once a private sector operator put up its hand to take on provision in part of the area, there was an obligation on the State to carve it out. That is the reason for it and it is a condition of state aid provision, as Senator Conway-Walsh indicated. That is why the area is smaller.

Senator Horkan is right about the cost. The cost of rolling out fibre over 96% of the land area is not greatly reduced. There will be fewer connections, but it does mean the cost will be higher. However, they will certainly not be six times higher. The figure of €500 million to which the Senator referred was the cost of the project envisaged to bring fibre to 1,100 villages, but there would have been no service to homes or premises. It was a very different project.

When we had the tender process and a competitive dialogue, it was because we did not know what the cost would be. It was not a costed operation. At that stage a €1 billion estimate was made, but it was simply to fulfil the requirement under the public spending code, that prior to starting the exploration of a competitive dialogue, we needed to have some indication of the cost and that was the figure indicated. It was at a time when there were many more homes to participate. There is an explanation for it, but it will not take three times as long. It will be completed within seven years. The earlier project was to have been completed in five years.

A number of Senators repeated some of the comments about the Department of Public Expenditure and Reform and I am pleased to have an opportunity to deal with them. The benefit-to-cost ratio was dragged left and right through a very detailed verification process and challenges were made to all elements of it. The verification process was part of a robust tendering operation. Reductions were imposed on some of the benefits and elements were identified that had been overlooked on the cost side. This was the system working. It was verification of the benefit-to-cost ratio and showed that it was credible. It went through the most stringent verification process a benefit-to-cost ratio could undergo. It is very important to bear this in mind. It was not a political benefit-to-cost ratio. It was done based on objective tested rules that were extremely conservative. Many Senators would blanch at some of what was excluded such as the opportunity to provide for a greater level of remote working. We all recognise that this could be healthy. We could see rural people being able to stay in their communities and multinationals being more willing to move into regional areas if they could be assured that workers would be able to work remotely.

All those future opportunities are staring us all in the face. Anyone who reads any material about where the technology is heading will recognise that. The options were all ruled out and it was said they could not be considered. The 30% benefit-cost ratio is ruling out all these elements, which is really the reason we are doing what we are doing. We want to afford people the opportunities in question.

On the issue of recouping investment, of course the company aims to recoup its investment. It is not a charity, no more than any other business that tenders for a PPP project or any other project. It wants to recoup its investment but, as I said in my opening statement, it carries the risk. It will recoup its investment only if it is successful. If it fails to roll out the network on time, it will incur penalties. If it fails to achieve the take-up, it will incur penalties. It carries the risk and has the obligation to deliver on take-up.

It is also important to bear in mind the size of the company. In 25 years, it will have a turnover of €150 million, based on paying a regulated fee on the basis of its expected take-up. Investing €175 million in equity initially and €45 million in working capital must be considered in the context of a company whose turnover in the long term is projected to be €150 million. What the company is doing is undertaking to design, build and operate and to roll out the 156,000 km of fibre for us on existing poles and through existing ducts. It will run the service. It will be a small company, one tenth the size of Eircom. It will be a wholesale company delivering open access at a regulated price. Some talk as if this company will be ripping us off. It has a very tight mandate. That needs to be borne in mind. There was no breach of the public spending code. That is very clear.

Members are entitled to raise the meetings of the former Minister, Deputy Denis Naughten. The conclusion is that he did not have any access to the decision-making, evaluation, tendering or standards that needed to be met. The assessor, Mr. Peter Smyth, found he did not have that access and could not have had an influence. What is more, Mr. Smyth found that, by stepping down, the former Minister removed even the hint that the process was in some way prejudiced. That has been evaluated. While people are certainly entitled to raise the matter, it is fair to say that it was evaluated.

In that case, was the former Minister unfairly treated?

I am not going to comment on that. He made a mistake of meeting someone who was tendering in a process. People have acknowledged that was a mistake. In the event, when the matter was evaluated, it was found that while the Minister made a mistake, he had, by removing himself from his position, removed the potential for the allegation that the process might have been tainted. The verdict of the evaluator was that he did the right thing.

With regard to Fianna Fáil and others preferring the ESB, it is important to recognise that one cannot give state aid to an economic entity unless there is a procurement process. Senator Rose Conway-Walsh is correct that if the private sector cannot deliver, one is entitled to provide state aid. That does not mean, however, that it can be given to anyone. It has to be given in a fair and objective way based on the circumstances and based on a procurement process that is fair to others who might also want to avail of it. That is very clear in the state aid code. This was confirmed by the European Commission on numerous occasions. One could set up a body from scratch, as was the case with Irish Water. There are those who are advocating this. One could set up a State company that would set about procuring for the rolling out of the fibre. We saw all the trauma involved in starting up Irish Water and getting it to the current point. Having set up a company, one would have to start a procurement process associated with identifying how to roll out the 146,000 km of fibre. This would cause a delay. At the very start of the process, this option was considered. It was considered again in respect of the costs. On every occasion, the option was ruled as being less reliable and more costly, and it was said it would not deliver for us. It is not that those options were not considered. We gave them very careful consideration.

The Senator asked whether we costed the alternatives. I have heard people ask why a cost-benefit analysis was not done of every one of the alternatives. When we examined the alternatives, we examined the essential ways in which they would be different from the existing project. Consider the option of going wireless, for example. We considered what a wireless-based service would do in terms of cost and performance. We did not go back and re-examine the benefits of the regime. We simply considered all the elements that would be changed if we opted for the alternative. With that, we found it would be more costly to reach 100%, and that the network would be shared. In other words, if someone else is using it, I am losing my capacity. There is a fixed amount and the greater the number of users, the more the capacity reduces. It is not like fibre where everyone has full capacity.

It is still contingent on fibre.

Exactly. It is shared. It is essentially a shared network.

There is no comparison between this project and the national children's hospital. One might believe the project is expensive but we made no commitment before we knew the absolute capped cost. The complaint about the national children's hospital was that commitments were made to go ahead with the project and, those commitments having been made, the costs rose. One might not like the cost of implementing the broadband plan but we are making no commitments until we decide on the preferred bidder. It will not be finalised until we sign the contract. This is not like the national children's hospital but one might not like the cost.

I had to smile at Senator Craughwell's slightly nuanced version of what the Department of Public Expenditure and Reform brings to the party at times.

He was referred to as Senator Trump this morning.

I see. The Department of Public Expenditure and Reform is doing its job, which is to be sceptical about every investment ever considered. As the Senator will know, it was particularly active during the very difficult years, and it continues to be active, but it does not have the final word. We have set up a system whereby, like it or not, 15 Members are elected by the people to make these decisions. The advice was considered by the Government, including the Minister for Finance, and it rejected it. That is the reality. We have made a decision much like Donogh O'Malley and the Government of which he was a member made a decision, namely, that this was something worth doing. This represents the system working. No Department gets it right every time. Every other Department submitted views strongly in favour of the project. My Department, which did all the analytical work, as the Senator knows, is very strongly-----

The Minister should not get me wrong. I admire decision-making. I am not criticising it but just saying it is rather unusual to go against advice.

It is unusual. It does not happen every day but that does not mean one automatically assumes that the critique, which is the job of critics, is always right.

On the issue of the ownership model, the Senator's analogy might lead him astray. We are not asking someone to build us a property that we are going to rent. We are asking someone to lay fibre on rented poles and to operate the fibre network thereafter. We do not want, in 25 years, to have to replace the fibre. We want it to stand on its own two feet. This goes back to the Eircom decision. Senator Ronan Mullen does not like it, with some considerable justification. We sold the crown jewels, or whatever one likes to call them, so the network is not in private ownership. It is working well but it is a privately owned network. We want to extend it to reach 1.1 million people. We want it to continue to work on the very same basis as it would for an urban dweller, such that customers would have the same connection charge and receive the same service and options. That is what we are giving state aid to achieve. We are not seeking to run a company to create a new telecommunications company that is running just at the margins of the core. There is no sense in the State running just at the edge of the system.

We want the system to be integrated and to be capable of supporting itself in the long term. We also want those who have it to continue to reinvest in its service. That is the backdrop to why the ownership model was chosen.

This company cannot just switch off the system and walk away because if it fails to complete it, the system will revert to the State. At that point, we will have what we paid for. If it is halfway through, half of all of the homes will be passed and the connections that have taken it up will be made. We will have an asset at that point and we will have paid for the elements the company has delivered, so we will not be stranded. This is a valuable network. If it is fully built, it will obviously achieve the objective we all set but even if it is only half built, it will have delivered to significant parts of the country. That light will not go out because the company fails to move ahead.

The issue of very remote premises is the reason we have left flexibility in the model. This will allow the company to deliver 2% and, indeed, more than that on our say so. Once it hits the quality mark, it can deliver 2% by wireless other than by means of fibre. We have built in that flexibility and we do not anticipate that those more remote homes will have to pay extra because of that flexibility.

I agree with Senator Lombard. If we abandon or delay this and go back to the drawing board, it will be 37 months before the State company, the ESB or whatever entity is involved, comes along. We know a great deal about the ESB's capacity because it was a player in this tendering process. It is not as if it has some magic formula and can suddenly deliver this in a cheaper way than when it was involved in the tendering process previously. Let us be objective about the evaluation. These are not new ideas; they were evaluated at the beginning, in the middle and at the end. They are not ideas that are coming-----

Did those involved examine the possibility of running data through electric cables?

Not through the electric cables but they did look at using the electricity network as a basis for rolling it out. That was the alternative SIRO model. There are difficulties, in the context of health and safety, with using an electricity network as opposed to a telephone network. It is not a straightforward option.

Regarding Senator Conway-Walsh's point that it cannot be sold on, it can be but it would be sold on while it continued to be governed by fixed price and it would have to meet all the terms of the contract. This does not in any way dilute the contract. I or my successor must approve the buyer so it cannot hollow out the company in some way to remove equity or the funding base of the company in order to fulfil its capacity. If there is a profit from the sale, we, the taxpayers, get a clawback from that. A great deal of thought has been put into protecting the State in that regard.

Senator Mullen stated that this is Irish politics for you. I do not accept that. I have been under sustained pressure - in the Dáil and everywhere else - to ensure that we explored every option before I brought a recommendation to Government and to bring that recommendation forward as quickly as possible. The Taoiseach indicated that he wanted it by Easter. I brought it forward as close to that deadline as I could. From the debate, we can see that this is not a big campaigning issue. There are as many people who are unhappy with it as there are happy with it but, unlike the Senator, I am strongly of the view that 25 years from now we will look back at it as being more like free second-level education. How could anyone say that introducing free second-level education was not a good thing to do? In 25 years' time, people will ask how anyone could have thought that providing 146,000 km of fibre - something that can carry information at the speed of light - was a bad decision, particularly if our aim was to have balanced regional development.

I would not be as reverent as Senator Craughwell when it comes to the views of the Department of Public Expenditure and Reform. It is entitled to

provide advice but that advice is among a series of advices that the Government must evaluate and make a decision on the basis of. Regarding the reflection that the decision to privatise Telecom Éireann was wrong, it may have been. Many other states took the same approach at that time so the decision was not unique. In retrospect, to have sold the spine of a service as important as that relating to telecommunications was a mistake but that is where matters stand. We must use state aid judiciously to deliver the service to which people in rural Ireland are entitled. It is not just rural areas in Cork. I know that there are many remote places in Cork but there are 10,000 people in Dublin who will benefit from what is being done. There are remote areas in every county, so this is not about rural Ireland versus Dublin. There are people in every county who are affected.

Another of my responsibilities that is even bigger than this is talking about how we build a sustainable country that can decarbonise. This is one of the infrastructures that will underpin our capacity to decarbonise our economy because if we can do business remotely, including diagnostics and education, and do not have to have all those trips into the city or to the chemist, for example, we will have more sustainable and better communities. That is a side of this which, obviously, does not enter the cost-benefit ratio that was analysed but it is a reality of why we are doing this sort of thing.

I thank everyone for a very constructive and instructive debate and the Minister for his very thorough responses. When is it proposed to sit again?

At 2.30 p.m. next Tuesday.

The Seanad adjourned at 3.15 p.m. until 2.30 p.m. on Tuesday, 21 May 2019.