Esat deals cost CIE and Garda too dearly

Nearly four years ago The Irish Times, in common with every other Irish newspaper, wrote glowingly of a new deal between CIE and Esat Digifone, allowing the thrusting new telecoms company to lay its fibre-optic cables along railway lines. The report in this newspaper pointed out that the deal was a good one for CIE because it meant it would get a new signalling system for virtually nothing, plus an advanced communications system.

At the time, of course, Esat's Denis O'Brien could do no wrong. Everyone wanted to see competition in the telecommunications market place. Denis O'Brien - young, charming and talented - was a brilliant salesman, not just of mobile phones, but of the whole myth of the dashing private entrepreneur. And here was incontrovertible evidence that the entrepreneurs' private pursuit of profit was good for us all. A vital and long underfunded public service, CIE, was getting something for virtually nothing, merely by being smart enough to hitch its wagon to a star of private enterprise.

There is no such thing as a free lunch - or private enterprise. Behind the myth of the entrepreneur is the simple fact that it was the State that turned Denis O'Brien from a businessman on the edge of bankruptcy to a vastly wealthy man. In all the fawning media coverage after his sale of Esat to British Telecom, it was forgotten that the £230 million profit he made when he sold the company was the fruit of a licence the State had granted him for just £15 million. Instead of CIE getting a new signalling system cheaply, meanwhile, its costs have spiralled out of control, from £15 million to at least £40 million, and its completion has been dreadfully delayed. The most important factor in both the delays and the cost overruns is the Esat deal. Once Esat's fibre-optic line had been laid mechanically, Iarnrod Eireann's subsequent signalling lines had to be laid by hand for safety reasons. Though it is difficult to disentangle the different elements, so far the arrangement with Esat has cost CIE, and thus the Irish public, about £10 million. That arrangement is, by any standards, extraordinary. Esat was allowed to start laying lines long before a proper contract had been signed. Some of the people who later became involved in the company given the contract for both the Esat and rail signalling systems, MNL, moved to it from CIE itself. A number of performance and penalty clauses were removed from the contract before it was signed. So much for private enterprise.

The Garda Siochana has also been compromised by its deal with Esat. An agreement between Esat and the Department of Justice allowed the company to put its masts on Garda stations. This deal did not cost the Garda money, but it paid the price in a much more precious commodity - public trust. With individual Garda officers getting free mobile phone services as part of the deal, with Garda management urging senior officers to lobby local authorities in favour of Esat, and with warnings that the Commissioner would have difficulty recommending the continued existence of a rural station where efforts to improve the communications system were thwarted, the force acquired a stake in the success of a commercial company. When the Garda had to police protests against the erection of Esat masts, the appearance of impartiality so crucial to law enforcement was dangerously clouded. None of this means that Denis O'Brien is not a very clever, talented and energetic businessman, who brought his own skills to bear in the creation of a successful competitor to Eircom. But the three things that were most crucial to his success - the licence, the cables and the masts - were supplied or facilitated by the State at great cost to the public.

This is why the Sunday Tribune's revelations about a secret $50,000 donation to Fine Gael from Esat and/or its partner Telenor matter. Though there is no evidence of any improper motive in that donation, or in Denis O'Brien's subsequent generosity to the major parties last year, the problem with private funding of the political system could not be illustrated more starkly.

The public interest was at stake when CIE did its disastrous deal with Esat and when the Garda was compromised. The political system as a whole failed to defend that public interest. Why? This time, rather than merely investigating the past, the system has a chance to look to the immediate future. The next generation of mobile phone licences are about to awarded. One of the lessons of the current controversy is that the granting of valuable licences should be absolutely transparent. Yet the most open way of protecting the public interest - an auction in which the licences go the highest bidder - is being eschewed in favour of a beauty contest. There is no reason to believe that this process, which will be under the direction of the independent telecoms regulator, will be anything other than honest. But the sight of hard cash going from the pockets of telecoms companies into the public purse, rather than the other way round, would do much to dispel the anxieties that continue to swirl around the relationship between business and politics.