Sanctions of €157,300 imposed on National Broadband Ireland over delays

The Government has imposed €157,300 in sanctions on National Broadband Ireland (NBI) because of building delays and performance issues on the €2.7 billion project, the State’s financial watchdog has said.

Further penalties are set to be applied retrospectively by the Department of Communications because sanctions for “remaining performance level breaches” are on hold pending a key performance indicator (KPI) review, which ended in July. That review came after NBI raised concerns over the proportionality of penalties likely to accrue under the current regime.

The seven-year programme to deploy rural broadband in areas not covered by commercial providers was supposed to be completed by January 2027 but work was delayed by Covid shutdowns.

In its latest report on State spending, the Comptroller and Auditor General (C&AG) said the project was 12 months behind schedule with a “final” revised roll-out plan to be settled by the end of the year.

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The target for the number of premises to be passed by end January 2022 was originally 115,000, but NBI proposed a reduction to 60,000 premises. The actual number of premises passed at that date was 34,456 — 30 per cent of the original target, and 58 per cent of the revised target.

However, the take-up rate for the service by those premises passed is higher than was originally anticipated.

“While the actual take-up [by number] to end January 2022 is lower than estimated, the rate of take-up — the proportion of premises connected relative to premises passed — exceeds the original estimates. By the end of August 2022 over 18,400 premises had been connected — a 24 per cent take-up rate,” said the C&AG said.

The Government set aside €371.3 million for broadband roll-out in 2020 and 2021 but delays meant the actual amount paid out to end 2021 was €177.2 million — 48 per cent of the original subsidy target.

Delay sanctions were applicable under the contract from February and penalties totalling €134,800 had been imposed for delays in passing deployment areas by August. The department imposed the delay sanction for “issues within NBI’s control” that held the project back 3½ months after blaming Covid issues for 8½ months of delay, which was not penalised.

“However, this [sanction] is refundable if (or when) NBI achieves other build milestones in advance of its target. In addition, a performance credit sanction of €22,500 has been applied under the [key performance indicators] regime,” the C&AG report said.

Delivery milestones had already been revised downwards in 2021 and again this year. “In April 2022, the milestone deliverable for premises passed by January 2023 was reduced to almost 102,000 — just under half the original target,” said the report.

“At the end of January 2022, the number of premises passed was 34,456, representing a shortfall of almost 43 per cent on the target level for that milestone. By the end of August 2022, 75,590 premises had been passed. This has reduced the gap between the [revised] target and the out-turn.”

The Government subsidy is capped at €2.7 billion, comprising a €2.1 billion base amount in addition to a €500 million contingency for specific purposes and €100 million for VAT.