The Government’s National Broadband Plan (NBP), which is supposed to deliver 30 Mbs of fibre broadband to all homes and business premises in rural Ireland is “seriously flawed”.
This is the conclusion of John McDonnell, chairman of a group of 36 wireless broadband companies (Wireless Broadband Ireland), which has been engaged in dialogue with the NBP team in the Department of Communications, Energy and Natural Resources (DCENR) over the past year, and which recently commissioned UCD economist, Colm McCarthy, to undertake a detailed economic analysis of the Government’s proposals.
“The NBP does not address market design, monopoly regulation and competition issues. These are critical components for the development of a competitive marketplace which will give consumers the choice they deserve at the best possible price. There is no evidence of market failure in the so-called Intervention Area (IA) which is the central argument for the application of State Aid of up to half a billion Euro by the Minister.
“The recent investment announcement by Open Eir (to provide service to 300,000 homes formerly designated as being in the Intervention Area) is evidence that the private sector will invest without State Aid if conditions are right. Our view is that active and effective regulation will deliver a competitive and cost efficient solution for the consumer and the State, and this is where the Minister’s focus should be”, Mr. McDonnell added.
In his report, Colm McCarthy points out that “a cost benefit analysis needs a clear estimate of expected costs, a quantification of benefits and a counterfactual (that is the course of events likely to play out should no policy action take place), and a consideration of alternatives”. Under the Public Spending Code of the Department of Public Expenditure and Reform, a comprehensive CBA is mandatory for all projects costing €20 million and more. It is not clear if this requirement has been complied with.
In his study of the NBP proposals, including the seven expert reports published by the NBP team last July, McCarthy finds a total absence of real information on either costs or benefits flowing from the delivery of the NBP. And, he says, that while the Department has claimed commercial sensitivity as the basis for withholding information on project costs, “there can be no ‘commercial sensitivity’ arguments for withholding information about project benefits…… It is important to know what will be the benefit profile before any conclusions can be drawn about the merits of any public spending proposal” (McCarthy Report).
Analysing one of the Department’s NBP reports (carried out by PwC on the benefits of the NBP) McCarthy notes there is “no attempt to place monetary values on any of the identified benefits as in a conventional CBA” and, he adds, there has been nothing published in the NBP documentation “which quantifies the benefits of increased broadband delivery”.
Citing the findings from a recent OECD report on the impact of computers in schools and at home on student performance across the developed world, which found there was no appreciable improvement in student achievements in reading, mathematics or science in countries that had invested heavily in ICT for education, McCarthy said this and a related ESRI study, “are cautionary, and illustrate that benefits need to be measured rather than asserted”.
He also says that “these reports show that evidence-based analysis of technology benefits is possible in the education area, and similar studies have been undertaken internationally or are feasible in connection with claimed benefits under other headings”.
Mr. McDonnell stresses that his organisation, Wireless Broadband Ireland, fully supports the objective of the NBP to ensure that every household in the country can access 30 Mbs of broadband. Companies in his organisation have invested heavily in providing broadband services to over 70,000 customers in the IA during the past 15 years. However these same companies who provide valuable services to the proposed IA are being frozen out of the process.
“Apart from market design issues, the lack of coordination between ComReg (the Communications Regulator) and the DCENR regarding the allocation of appropriate spectrum to allow Wireless Operators offer next generation speeds in excess of 30 Mbps is very worrying. In our view, companies providing services over fibre are being favoured by the NBP to subsidise their network rollout, while wireless companies will be required to participate in spectrum auctions to provide the same services over wireless networks. We are finding it increasingly difficult to raise funds to grow and expand our business because there is a fear that the NBP, as promised by the Government, may drive wireless operators out of business”, he said.
“As current broadband providers in the Intervention Area, it is imperative that these wireless companies are given the opportunity to participate in the roll-out of Next Generation Access (NGA) networks and services and they should not be excluded on the basis of a Government-backed investment in other technologies”, Mr. McDonnell added.
The National Broadband Plan Strategy Intervention Expert Reports (including the PwC paper on benefits of the NBP) are available here.