Work on finalising contract continues
The Minister for Communications, Climate Action and Environment, Richard Bruton T.D. today (Wednesday 17th of July) updated Government on the progress made towards finalising the contract for the National Broadband Plan.
The National Broadband Plan will ensure that every home, farm, school and business in Ireland will have access to high speed broadband – no matter where they are located. As a result of the Plan, the 1.1 million people living and working in 540,000premises across the country including 100,000 businesses and farms, and over 600 schools, who currently cannot access broadband, will have access to a high speed broadband service.
Those 1.1 million people predominantly living in rural areas will have the same opportunities as urban Ireland and will be able to avail of the range of new opportunities that high speed broadband has and will deliver. Without it, they won't have guaranteed access to these opportunities. It opens up:
- Flexible and remote working
- Smart health with online GP and nursing services and medical monitoring
- Cloud based services and connected devices
- Smart farming opportunities
- Digital learning
- Reliable electronic payments and bookings
Government today noted the significant progress made by the Department and the Preferred Bidder, National Broadband Ireland in finalising the necessary legal and financial documents, since Government approved the appointment of Preferred Bidder on the 7th of May.
Following on from eir's appearance before the Joint Oireachtas Committee on the 28th of June, the Department of Communications, Climate Action and Environment, in consultation with its advisors and with ComReg, have concluded that the high level proposal put forward by the company is not a feasible alternative and has no impact on the decision to appoint a preferred bidder to the Plan.
The objectives of the NBP Strategy approved by Government in December 2015 and signed up to by bidders through the participation in the procurement process, are as follows:
- High speed broadband should be provided to 100% of premises in the country
- There needs to be strong protections for the State with full transparency of where the State subsidy is being directed
- There needs to be equal access for all commercial retail providers to the network
- A future proofed network so that in the future a digital divide between urban and rural areas does not re-emerge; and
- Prices should be affordable for users – both for connections and products.
These, along with the application of value for money principles, have underpinned the procurement process since December 2015.
Eir was one of the final bidders to the National Broadband Plan and under these terms, made a draft bid of €2.75billion (EX VAT) before making the decision to withdraw from the process. The evidence presented by eir both in the Committee and in their subsequent letter to the Department does not meet the above objectives and contains material which has already been raised and dismissed during eir's participation in the procurement process.
In a response sent to eir today, it was outlined that the provision of a State subsidy to any company without competition is not legal under procurement and State Aid rules, nor would it meet the key objectives of the National Broadband Plan.
Government today noted this assessment.
Minister Bruton said,
"Work is progressing on finalising the contract for the National Broadband Plan. It is crucial that we move to sign the contract so that the one million people who today are without access are not left behind. Digital technology is transforming how we live, learn and work. We must make sure the people of rural Ireland have the same opportunities as those in our towns and cities."
Following confirmation of State Aid approval by the European Commission and completion of contract closing requirements, the Preferred Bidder will be awarded the contract for the National Broadband Plan.
It is expected that the NBP Contract will be signed later this year when all of the legal and financial documentation are finalised with roll out commencing shortly thereafter.
Notes to editor
The National Broadband Plan
The procurement process for the NBP culminated in the approval by Government of the appointment of preferred bidder status to Granahan McCourt (which will trade as National Broadband Ireland, NBI) on 7 May 2019 for a maximum, capped subsidy of €2.977 billion over 25 years including VAT and contingency sums.
This can be broken down as follows:
- €2.142 Billion – the subsidy to fund capital related network costs over 25 years;
- €480 Million – Conditional and contingency subsidy relating to 14 specific capped areas of cost and possible commercial operator encroachment where if it is demonstrated that the cost is incurred and was unavoidable, it may be drawn down in specific circumstances; and
- €355 Million in VAT, which is not paid to the bidder but must be accounted for as a transfer between the Department of Public Expenditure and Reform and the Department as part of the annual vote accounting rules.
The letter from eir to the Department put forward that eir's mid case scenario for delivering the National Broadband Plan, without the constraints of the process, was €1.55 Billion. It compares to a sum of €2.75 Billion which eir put forward as a draft bid when they remained in the procurement process, and to €2.1 billion capped subsidy put forward by National Broadband Ireland. All of these numbers exclude both VAT and contingency.
Clawbacks for the State
Where cost does not arise, or where take-up of broadband is higher than expected, there are clawback mechanisms to protect the state. Such claw back mechanisms, under the optimistic scenario presented previously, could reduce the cost to the State significantly over the coming years.
The following clawbacks will protect the state and can reduce the subsidy provided by the state:
- Deployment saving clawback (100% on most costs)
- Excess Profit clawback (minimum 60% of any excess profits)
- Sale of NBPCo (25% share of excess profits) up to year 10
- Terminal Value clawback (40%)
The Final Bid
The final bid provides for a reliable, very high-specification broadband supply in line with urban and international trends. This will provide fibre to 98% of all premises with speeds starting from 150mb/s, rising to 500mb/s in year ten for residential users and much higher speeds available for business.
Deployment of the network will commence immediately once contracts are signed. Over 90% of premises in the State will have access to high speed broadband within the next four years.
Nearly 300 broadband connection points (BCPs) will be provided in Year 1, acting as hotspots providing free Wi-Fi in local communities supporting digital work hubs in every county. The provision of the fibre network will take place in conjunction with these BCPs, with 120,000 premises covered by year 2, and 70,000-100,000 premises each year thereafter.
The Bidder has put together a team with significant Irish experience in large telecoms projects, as well as substantial international, industry experience to deliver the proposal. Collectively the team has:
- built 16 greenfield telecom operating companies
- rolled out 24 national telecommunications networks
- managed or delivered €40 billion in contract/business value
As required under law, Granahan McCourt has incorporated a new Irish registered company to be known as National Broadband Ireland (NBI) to build, operate and maintain the network.
Investment by the State
The procurement process was designed to determine what the total cost to the State would be of delivering high speed broadband to approximately 540,000 premises in advance of the Government making a final decision to proceed, or not, and before any contract was signed.
Subsidy will not be paid to the NBP company until the milestones have been achieved and there are a comprehensive set of protections and legally binding obligations set out in the Contract which include a suite of key performance indicators to ensure the service is maintained appropriately.
The initial connection charge and the monthly charges from service providers to the individual living in rural Ireland will be similar to those paid by residents in urban areas with the ability to avail of services such as voice, broadband, TV from the same service provider.
The state has invested just €400m in broadband from 2002-2016. In the period 2002-2021, €36.9 Billion will have been invested in Roads and €10.8 in water infrastructure.
There are a comprehensive set of protections and legally binding obligations set out in the NBP Contract which include:
- A suite of key performance indicators to ensure the service is maintained appropriately
- Significant penalties to address under performance
- Substantial oversight arrangements to monitor progress, costs and take up etc.
- Extensive monthly, quarterly and annually reporting requirements on NBPco
- Significant checkpoint reviews at various stages in the project
- Standalone Board responsible for the ringfenced operations and day to day management of NBPco with Board required to report to Minister monthly/quarterly and annually.
- Ministerial appointee to the Board.
- Independent audit of accounts
- Charge over the assets of NBI for the duration of the Contract
- Ability to "step-in" to manage and direct build and operations where there are material compliance issues.
The rollout will commence in Q4 2019 with significant pre-mobilisation activities on going over the next number of months. While the majority of premises will be passed in the initial 5 years the overall rollout will be concluded within 7 years.
- Approximately 540,000 premises (plus new premises to be built)
- 1.1 million people (23% population)
- 56,000 farms (68% of national total of farms)
- 44,000 non-farm businesses (mostly small and micro)
- 674 schools
NBI's plan to deliver
- Address 96% of land mass
- Broadband to 23% of premises Nationally
- Circa 540k premises
- any new premises built in the intervention area are included
The NBI network will involve:
- Over 1.5 million poles
- Over 15,000 km underground ducts
- Up to 146,000 km new fibre cable
- Running along 100,000 km of the road network
- 150Mbps broadband product available for consumers upgraded to 300Mbps by year 6 and 500Mbps by year 10
- Up to 1Gbps products for businesses, also upgraded to 2 Gbps by year 11 and incrementally beyond that.
- Primarily FTTH will be deployed, with circa 2% premises via a high standard wireless connection which will also be upgraded over time.