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Report on an Investigation to Examine the National Broadband Plan Process Thus Far and How Best to Proceed and the Best Means to Roll out Rural Broadband

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Report on an Investigation to Examine the National Broadband Plan Process Thus Far and How Best to Proceed and the Best Means to Roll out Rural Broadband Tithe an Oireachtais An Comhchoiste um Chumarsáid, Gníomhú ar son na hAeráide agus Comhshaol Tuarascáil ón gComhchoiste maidir le himscrúdú chun scrúdú a dhéanamh ar phróiseas an Phlean Leathanbhanda Náisiúnta go dtí seo agus ar an tslí is fearr chun dul ar aghaidh agus ar an modh is fearr chun an leathanbhanda a leathnú amach faoin tuath A leagadh faoi bhráid dhá Theach an Oireachtais 27 Lúnasa 2019 Houses of the Oireachtas Joint Committee on Communications, Climate Action and Environment Report of the Joint Committee on an investigation to examine the National Broadband Plan process thus far and how best to proceed and the best means to roll out rural broadband Laid before both Houses of the Oireachtas 27 August 2019 32CCAE013 Tithe an Oireachtais An Comhchoiste um Chumarsáid, Gníomhú ar son na hAeráide agus Comhshaol Tuarascáil ón gComhchoiste maidir le himscrúdú chun scrúdú a dhéanamh ar phróiseas an Phlean Leathanbhanda Náisiúnta go dtí seo agus ar an tslí is fearr chun dul ar aghaidh agus ar an modh is fearr chun an leathanbhanda a leathnú amach faoin tuath A leagadh faoi bhráid dhá Theach an Oireachtais 27 Lúnasa 2019 Houses of the Oireachtas Joint Committee on Communications, Climate Action and Environment Report of the Joint Committee on an investigation to examine the National Broadband Plan process thus far and how best to proceed and the best means to roll out rural broadband Laid before both Houses of the Oireachtas 27 August 2019 32CCAE013 Report on an investigation to examine the National Broadband Plan process thus far and how best to proceed and the best means to roll out rural broadband TABLE OF CONTENTS Foreword ............................................................................................................ 3 Preface ............................................................................................................... 4 1. Technology ................................................................................................. 8 2. Technical Expertise of “Preferred Bidder” and Governance ................................... 9 3. State Protections ........................................................................................ 10 4. Subsidy .................................................................................................... 11 5. State Investment Risk Versus Private Investor Risk ........................................... 16 6. NBI Governance Stucture ............................................................................. 17 7. Ownership of the Network ............................................................................ 17 8. Gap-funding Model ..................................................................................... 19 9. Rental of Infrastructure ................................................................................ 22 10. Rollout Time .............................................................................................. 23 11. Cost Benefit Analysis .................................................................................. 24 12. eir’s Statement that it could Complete the NBP for less than €1 billion ................... 26 13. Conclusions .............................................................................................. 30 14. Recommendations ...................................................................................... 35 Appendix 1: Orders of Reference – Joint Committee on Communications, Climate Action and Environment Functions of the Committee – derived from Standing Orders [DSO 84A; SSO 70A] Appendix 2: Membership of The Joint Committee on Communications, Climate Action and Environment Dáil Select Committee on Communications, Climate Action and Environment Seanad Select Committee on Communications, Climate Action and Environment Appendix 3: Analysys Mason follow-up information Appendix 4: RISPA submission Appendix 5: Granahan McCourt Responses to Questions raised by the Committee Appendix 6: Department of Communications, Climate Action and Environment additional information Joint Committee on Communications, Climate Action and Environment FOREWORD The National Broadband Plan (NBP) is the Government's plan to deliver high speed broadband services to all businesses, farms and households in Ireland. It aims ensure that everyone in Ireland will have equal access to a high speed broadband service. In May 2019, Government approved the appointment of a "Preferred Bidder". This is the final step in the NBP procurement process before a Contract is awarded and deployment begins in the State intervention area. It means that the Bidder has passed the evaluation process carried out by the Department of Communications, Climate Action and Environment. Some Members of the Joint Committee expressed concerns at the fact that the cost of the National Broadband plan subsidy had increased from approximately €800 million to almost €3 billion and agreed to conduct an investigation to examine the National Broadband Plan process thus far and how best to proceed and the best means to roll out rural broadband. The Committee agreed that this investigation should be concluded before the Government awards the contract in September 2019. The Joint Committee undertook hearings with the relevant stakeholders throughout May, June, July and August and this report sets out a factual account of the discussions that took place. I would like to thank all the individuals and groups who assisted and contributed to our consideration of this subject, including those who made submissions as well as those who appeared before the Joint Committee. Finally, I would like to thank the members of the Joint Committee and the Committee’s Secretariat for their assistance in compiling this report. _____________________________ Hildegarde Naughton Cathaoirleach (Chairman) 27 August 2019 Joint Committee on Communications, Climate Action and Environment Page 3 PREFACE In August 2012 the then Minister announced the NBP. On the 15th July 2015 DCCAE published a draft strategy and map of the proposed intervention area, which included a promise of a 2020 timeline for delivery. In December of 2015 the DCCAE published an intervention map and announced a shortlist of five bidders for the project which included eir, Siro, Enet, Imagine and Gigabit Fibre. In July 2016 three bidders, namely eir, Enet and Siro, proceeded to the next stage of the procurement process. In April 2017 the Minister announced a Government deal with eir to remove 300,000 homes from the NBP leaving 540,000 for the State-subsidised scheme. In September 2017 – SIRO withdrew from the process stating that there was no longer a business case for its continued participation. The DCCAE received detailed solutions from the two remaining bidders, namely Enet and eir, in September 2017. In their detailed solution submissions, both of the bidders that remained in the procurement process projected significantly higher levels of subsidy than the DCCAE’s budget model. The DCCAE, therefore, made the decision to reappraise the project in accordance with the public spending code and asked KPMG to assist. The reappraisal identified a long list of eight options. In January 2018 eir withdrew from the process citing growing uncertainty about regulatory and pricing issues. The sole remaining bidder Enet was joined in its bid by Airtricity owner SSE. In July 2018 SSE withdrew from the lead bidding consortium which was now led by Granahan McCourt. Following eir’s withdrawal from the process, the DCCAE requested that KPMG undertake a review of the available procurement options. The review concluded that the current process should continue. In September 2018 the Granahan McCourt Consortium submitted its final tender document to the DCCAE. Joint Committee on Communications, Climate Action and Environment Page 4 In May of 2019, despite a memo from DPER strongly recommending against approving the appointment of the preferred bidder, the Government announced that Granahan McCourt had been approved as the “preferred bidder” with the value of the contract to be capped at just under €3 billion and requiring the company to build and operate the network for 25 years, with an option for the State to extend for a further 10 years. The network will not be owned by the State after the conclusion of the contract. The Joint Committee expressed concerns that (a) the cost of subsidising the plan had risen from approx. €800 million to almost €3 billion since its original announcement and (b) DPER had made a strong recommendation against approving the appointment of the preferred bidder on the grounds of: Cost and affordability; Impact on the NDP and on projects forgone as a result; Value for money and specifically, uncertain benefits; Unprecedented risk for the Exchequer; and Compatibility with the spatial objectives of Project Ireland 2040. The Joint Committee felt it had no option but to investigate these issues before the final contract is awarded stating that it was vital that it get this process right and at the same time not delay the process unduly. This report sets out an accurate reflection of what transpired at a series of hearings held by the Joint Committee with a number of relevant stakeholders. Joint Committee on Communications, Climate Action and Environment Page 5 Glossary of Terms NBP National Broadband Plan DCCAE Department of Communications, Climate Action and Environment DPER Department of Public Expenditure and Reform Joint Committee Joint Committee on Communications, Climate Action and Environment
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