State paying for misconceived rural broadband process

Why has the telecoms industry here cold-shouldered the Government’s national broadband process? It’s a reasonable question considering the contract will come with a State subsidy worth hundreds of millions of euro and a potential new customer base of 540,000.

ESB-Vodafone joint venture Siro was first the pull the plug on its involvement last September, suggesting there was no longer a "business case" for its continued participation.

Eir, the pre-race favourite, followed suit a few months later, citing similar concerns, and just last month UK utility SSE, a lynchpin of the last remaining consortium led by Enet, jumped ship.

While the cost of rolling out fibre-optic cable is relatively easy to calculate, the big imponderable and the one that seems to be spooking potential bidders is the likely take-up of the new technology once the infrastructure is in place.

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Despite the very public clamour for better broadband services, when companies such as Eir and Siro have actually built out into the countryside, the take-up hasn’t been as great as might have been expected. In some cases only 10 per cent of households passed by the new fibre technologies have actually opted to take up contracts with providers.

Hard to predict

Typically, telcos target a 30 per cent take-up after 24 months, but there’s no guarantee. However, many of the 540,000 houses covered by the Government’s plan may be vacant or derelict or holiday homes, while many older residents may have little interest in paying for high-speed broadband. All of which makes predicting future revenue from the project difficult.

By allowing Eir in 2017 to nab the low-hanging fruit, the 300,000 quasi-commercial households originally included in the plan but later removed, the Government lessened the attractiveness of the project and almost certainly triggered the exit of Siro and Eir.

It has become increasingly evident that the Government should have opted for some sort of State ownership model as a matter of social necessity, rather than leaving it up to the private sector to weigh up whether its players can make the project commercially viable with a State subsidy.

Either way it will next month try to make the best of a bad lot by announcing the outcome of its bid process and insisting an increasingly faltering project is still on track.