Tuesday, 21 May 2019

Ceisteanna (52)

Catherine Murphy


52. Deputy Catherine Murphy asked the Minister for Communications, Climate Action and Environment the number of cost-benefit analyses undertaken before the decision was made to grant preferred bidder status to a consortium regarding the national broadband plan; if the analyses will be published; if the initial investment in the plan by the preferred bidder will be released in one block or in tranches; and if he will make a statement on the matter. [21733/19]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Communications)

The question has two elements to it. One relates to the cost-benefit analysis and if all of the updates to the original cost-benefit analysis have been published. If not, when will they be published? The second aspect asks whether the initial investment by the preferred bidder will be released in one block or in tranches. Is that known at this stage?

To some degree the earlier question from Deputy Stanley covers the Deputy's points.

The original cost-benefit analysis was commissioned in 2015 under the terms of the public spending code and has been published. This was updated over the past four years and the finalised cost-benefit analysis was published earlier this month.

This was done after detailed evaluation and engagement with the bidders. The cost–benefit analysis was carefully scrutinised before it was published.

Regarding the investment by the bidder in the national broadband plan, this will be in tranches in the initial years of deployment when capital costs are highest. While the subsidy to be invested by the State is capped, the bidder's equity will be invested ahead of Government subsidies, thereby placing the bidder's investment at risk first. There are separate subsidies to cover the costs of passing, and then connecting, rural homes. These are paid retrospectively and only on independent verification of the achievement of milestones set out in the contract. The bidder will also bear the risk of additional equity injection requirements over the life of the project if some of those projections are wrong. As I indicated to Deputy Dooley, the commitment of the equity will be dealt with in the detailed contracts that are now being drawn up.

The Minister has a routine of knocking on doors in his constituency, not only at election time, so he must be acutely aware of the concern over the escalation of the costs, the response of the Secretary General of the Department of Public Expenditure and Reform regarding the risk to the State, and the fact that we will not own the infrastructure if the plan goes ahead under the gap-funding model.

Is the Minister concerned that, in its cost-benefit analysis, the Department of Public Expenditure and Reform pointed to the kinds of risks that have been stated on the public record? Has he concerns at all in that regard or over the escalating costs? He must be hearing about them on the doorsteps. We are certainly doing so.

Does he know who is in the consortium? I have asked this at the Committee of Public Accounts on several occasions. As late as this morning, we were told that we could not to get the information at this point and that it was not available. Surely we should know who the beneficial owners are.

People obviously raise the issue with me. When I explain to them that Telecom Éireann was sold 20 years ago and that we do not own the infrastructure and rely on the private sector to deliver for rural areas, they understand our position on providing 146,000 km of fibre to connect rural areas to the network, which is important for our future. I explained to the people that we considered every alternative, as I outlined to Deputy Stanley. We sought to determine whether there were cheaper ways of proceeding. We evaluated the cost at several gateways to see whether there was a cheaper way, and we found there was not. Those are the explanations I give.

With regard to the critique of the cost-benefit analyses, I assure the Deputy that the cost-benefit analysis carried out in 2015, which was published, and that in 2019, which is being published, are absolutely robust. I acknowledge that in the process of verification of the second cost–benefit analysis, there was scrutiny of the benefits, which were reduced, and there was scrutiny of the costs, which were also reduced. That was done, however, with full participation on the part of those concerned, who did the work professionally. That was an example of the system working. It was a matter of making sure that any cost–benefit analysis was subject to due diligence so we would now have confidence in it.

The Secretary General of the Department of Public Expenditure and Reform does not agree with the Minister because he was very forthright in his response on the cost not outweighing the benefits. Would this not, in its own right, prompt the Minister to re-examine the exposure of the State to the cost being talked about in respect of the contract?

I will not enter into a public dispute with the Secretary General of the Department of Public Expenditure and Reform. He scrutinised the figure of 30%, concerning benefits being greater than costs, and challenged the benefits, as is his job. The cost–benefit analysis was robust, however, and it showed the figure was verifiable. The other point I would make to the Deputy is one that is intuitively understood. The assumptions underpinning the cost–benefit analysis were extremely conservative. For example, it was assumed that 4% of white-collar workers in the area would take up remote working. We all know that considerable transformation is happening. The assumptions ignored the benefits of digital education or digital health. We are all aware that technology is coming and the broadband connectivity can allow people to participate remotely in health monitoring and education, which will transform both businesses, homes and participation.

A major part of the reason we are doing this is not just the static benefits one can measure today that are accounted for in a cost–benefit analysis; there is also the belief that digital transformation will be crucial to fair participation by people in rural areas in enjoying the benefits all of us will enjoy.