Minister for Communications Alex White recently added a new element to the Government's rural broadband initiative: "commitment contracts".
His stipulation that commercial providers underscore their business plans with written pledges appears to be in response to Eir’s recent manoeurvings.
The former semi-state threw something of a spanner in the works by offering to connect an additional 300,000 homes in the Government’s proposed intervention area to its new fibre broadband network.
These homes had previously been deemed uncommercial on cost grounds by all the providers, including Eir.
Rivals claim the company’s move was tactical, designed to reduce the Government’s tender to only the hardest-to-reach places, potentially forcing others out of the process. Eir insists its revised plan is based on the positive customer response to its new fibre programme and reduced input costs.
Either way, the Minister’s decision to effectively veto the proposal reflects an ongoing tension between the department and the State’s largest telco.
Under EU state-aid rules the Government cannot subsidise an intervention if existing private operators say they will supply services to the same areas.
However, it appears Eir is not intent on legal action at this stage, perhaps mindful that it is in pole position to win all or a significant portion of the Government’s tender.
Minister White also insists he is acting within the EU rules by demanding strict criteria be met before accepting fresh business proposals that may affect his intervention plan.
However, his insistance on commitment contracts reflects a diminishing level of trust in Eir and others.
The former has been flipped several times and loaded with debt since its controversial privatisation in the 1990s . It only exited examinership two years ago. The company is now being lined up for another IPO by its owners, a 150-strong group of banks and hedge funds, including Blackstone. Whether their interests chime with the Government’s remains to be seen.
Minister White has refined his broadband strategy somewhat since July, most notably by reducing the proposed ownership model to a shortlist of two.
The full concession arrangement involves a larger Government subsidy but would see the network reverting to the State at the end of the contract. The cheaper gap-funded model, involves a once-off stimulus with the operator maintaining ownership of the new grid.
The latter will prove contoversial but with Government coffers still convalescing from the crash, the Minister’s hands may be tied.
