Government Signs Contract for National Broadband Plan

Issued by the Government Press Office

• High-speed broadband for 1.1M people in Homes, Schools & Businesses across Ireland to start within 8 Weeks
• Government Signs Contract for National Broadband Plan
• Biggest investment in rural Ireland since rural electrification
• Rural communities will not be left behind, guaranteed same opportunities as urban areas

The roll out of high-speed broadband for homes, schools, businesses and farms across Ireland will start within eight weeks after the Government today (Tuesday, the 19th of November) signed the contract for the National Broadband Plan.

The government also published a list of approximately 300 community centres, schools, library hubs and local GAA halls in every county in Ireland that will be connected to high speed broadband during 2020, to enable communities to quickly get free public access to high speed broadband.

The contract signing today means all of rural Ireland will get the same access to opportunities offered by high-speed broadband as those in urban areas.

Speaking in St Kevin’s National School, Ballard in Wicklow, An Taoiseach Leo Varadkar said

Signing the contract today, Minister Bruton said

The National Broadband Plan is the government’s plan to rollout high speed broadband to the 1.1 million people living and working in the nearly 540,000 premises including 100,000 businesses and farms, and over 600 schools, where commercial operators will not commit to deliver the service.

The government have today signed the contract with National Broadband Ireland. Work will begin immediately and over 90% of premises in the State will have access to high speed broadband within the next four years, opening up opportunities in:

• 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

Rollout

Approximately 300 community centres, schools, library hubs and local GAA halls in every county in Ireland that will be connected to high speed broadband during 2020, to enable communities to quickly get free public access to high speed broadband.

National Broadband Ireland will pass approximately 10,000 premises by the end of 2020. By the end of 2021, National Broadband Ireland plans to pass approximately 115,000 premises. Approximately 70,000-100,000 premises will be passed each year thereafter with the final premises to be completed in 2026.

State Aid Approval and the National Broadband Map

The European Commission last Friday 15th November approved the National Broadband Plan under State Aid Law and confirmed that the NBP targets areas where no broadband infrastructure offering download speeds of at least 30 Mbps is currently in place, and where no private investor has demonstrated a concrete plan to invest commercially in the near future.

Following the announcement of the European Commission, the Department can now confirm that the final intervention area is now confirmed at 537,596 premises. The following changes to the map have been made:

• 37,000 premises originally identified as being served by commercial operators (the “Blue” premises), have not materialised and will therefore be included in the intervention area and the map has also been updated for approximately an additional 2,000 premises identified in the latest Ordinance Survey Ireland data
• Eir has passed approximately 34,000 more premises than the 300,000 it had originally undertaken to pass with its fibre rural network and SIRO has passed 4,000 premises in the intervention area as part of its wider fibre network rollout. These approximately 38,000 premises have been removed from the intervention area.

Minister of State for Natural Resources, Community Affairs and Digital Development Sean Canney T.D. said

"Its implementation will be transformative for Rural Ireland, which will now be able to move forward with renewed confidence in achieving its full economic potential.

"As chair of the Atlantic Economic Corridor Taskforce and Minister for Rural Affairs, I welcome the investment of €887 million in high speed broadband for the nine counties that make up the AEC.

Investment

The investment being made by the government under the National Broadband Plan will compensate for a historical under investment in broadband in rural Ireland since the sale of Telecom Eireann. Between 2002-2016 €400m was invested in broadband by the State. By comparison, other areas of infrastructure received significantly more capital, including €36.9 Billion in roads and €10.8 Billion in Water in the period 2002-2021, while the private sector has invested €2.75 Billion in broadband in recent years (including €1 Billion in fibre to the home networks).

The maximum possible investment by the state will be €3 Billion over 25 years. This includes €480m for contigency costs, which are only allowed in 14 specific categories of cost, and includes €354m in VAT, which will be paid to the Revenue Commissioners as subsidy is spent. The country will be divided into 110 areas of around 5,000 premises. The subsidy will be paid to National Broadband Ireland in arrears as each of the 110 areas are completed and fibre rolled out.

A series of clawbacks will operate to ensure that the tax payer gets value for money by “clawing back” subsidy in a number of circumstances. These clawbacks include:

• 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 use of clawbacks will be used to reduce the headline €3 Billion investment figure. Where costs are lower, the government claws back the excess. Where costs are higher, all of the risk sits with National Broadband Ireland.

There are a comprehensive set of protections and legally binding obligations set out in the Contract which include a suite of key performance indicators and significant penalties for under performance 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 Technology

National Broadband Ireland will set up a wholesale open access company dedicated to the rollout of a predominantly fibre to the premises (FTTP) network in the Intervention Area, which will be capable of delivering a future-proofed high speed broadband network, initially providing services of 150Mbps to the majority of homes and up to 1Gbps to heavy data users and Small and Medium size Enterprises.

Mobile 5G services are recognised by industry as being complementary to the high speed broadband service that will be provided via the NBP. A mobile network of itself would not be a suitable alternative to fibre to the home broadband, for many reasons as outlined by Comreg and others. Mobile coverage of 30Mbps to 99.5% of the country would require up to an additional 6,000 new masts around the country (double what we have now), would take over 10 years, would have insufficient capacity and signal would be significantly affected by home insulation, hills etc.

Governance

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
• Significant penalties to address under performance
• Substantial oversight arrangements to monitor progress, costs and take up etc.
• Extensive monthly, quarterly and annual 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 the Board required to report to the 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.

Ownership

Since Telcom Eireann was sold 20 years ago, our telecoms infrastructure is almost entirely privately owned. However the commercial sector will not deliver high speed broadband to 25% of the population. To solve this in the most cost effective way, this intervention has been designed to ensure that as much as possible of the network infrastructure will comprise the re-use of existing poles and ducts, which NBI will lease from existing infrastructure owners.

Infrastructure re-use in this manner ensures the State complies with State Aid guidelines, environmental sustainability best practice. It minimises costs and ensures that the network development is integrated into that evolving system. The model subsidizing the rollout out of fibre rather than owning was chosen deliberately to ensure the operator would continually invest to deliver to the highest standard.

Ownership of any other network assets procured by NBI will reside with NBI. NBI will be required to manage these assets over the lifetime of the project, and will be liable for the associated costs where network assets are required to be maintained or replaced. Through the contract, the government will be entitled to a terminal value clawback of 40% of the value of NBI.

The then Minister for Communications, Energy and Natural Resources commenced a public consultation in July 2015 on the Intervention Strategy for the National Broadband Plan, which included consideration of five alternative Ownership options. These options were:

• A commercial stimulus model (Gap Funded model) where public funds are made available to make private investment commercially viable
• A Concession type arrangement where a commercial company designs, builds and owns the networks for the duration of the contract but the asset reverts to the State at the end of the contract
• A joint venture/ equity share arrangement with the winning bidder(s)
• A concession arrangement similar to the concession model except that ownership of the asset resides with the State from the outset
• Public ownership where a new utility type company is set up to design, build and manage the broadband network required for the intervention area.

In December 2015 two possible ownership options were recommended to government, one of which was the gap funded model. An inter-departmental group was then established to recommend the best way to proceed.

The inter-departmental Ownership Sub-Group to assess the most appropriate ownership model included representatives from the Department of Communications, Climate Action and Environment, the National Treasury Management Agency, NewEra, the Department of Finance, and the Department of Public Expenditure and Reform. The deliberations of the Sub-Group were informed by the Department’s financial advisors’ (KPMG) expert report, which provided detailed scenarios of the likely cost to the State of the various ownership options in real and nominal terms. The Sub-Group prepared an ownership report (since published and available on www.gov.ie/nbp). Based on this report the Department recommended the gap funded model, and that it was then adopted by Government in July 2016

The Team

National Broadband Ireland (NBI), an Irish registered company, will build operate and maintain the network. The NBP contract is with NBI, a wholly owned subsidiary of Granahan McCourt Dublin Limited. The equity for the project will be invested by Granahan McCourt/Tetrad and Oakhill (OHA (UK) LLP)

NBI has put together a team with significant Irish experience in large telecoms projects, as well as substantial international, industry experience to deliver the Plan.

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

State Aid

The European Commission approved the National Broadband Plan in the context of EU State Aid rules. The Commission issued the Decision on 15 November 2019.

Commissioner Margrethe Vestager said

The Commission assessed the measure under EU State aid rules, in particular the Commission’s 2013 Broadband Guidelines. The Commission concluded that the scheme's positive effects on competition in the Irish broadband market outweigh potential negative effects brought about by the public intervention. On this basis, the Commission approved the measure under EU State aid rules.

The scheme will contribute to the EU strategic objectives set out in the Digital Agenda for Europe and in the Communication "Towards a European Gigabit Society".

Statistics

NBP stats

• 537,596 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)
• 695 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 approx. 30k

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 in the order of 2% of premises via a high standard wireless connection which will also be upgraded over time.

Table

Breakdown of Premises in the State Intervention Area by County

• *Approximate investment figures (also excludes VAT and contingency).

List of Broadband Connection Points (BCPs) to be rolled out in 2020