NBP area could cost extra 60% because of Eircom deal say officials.

On April 5th last, a third party FOI request (journalist) was made to the Department of Communications concerning the department’s analysis of the impact of removing 300,575 premises from the National Broadband Plan state intervention and further forbearing to compete with Eircom in the supply of broadband to those premises for a given period.

Following a query to the Department from IrelandOffline seeking a copy of their response to the FOI request, the Department published their response on their website on 31st August.

Of the 83 records in scope all but one were refused, in the process using up to 7 different exemptions in the FOI Act. The only document even partially released was a heavily redacted internal memo seeking ministerial approval to conclude the agreement with Eircom.

However we received the text of an un-redacted  version.

The  text of the leaked memo have been reproduced here

https://drive.google.com/open?id=0B-OmFxqpFPAcMkpONWRnYWE3cWM

The main points that emerge are firstly that the Department believe that the net State funding for the National Broadband Plan will now increase as a result of the agreement with Eircom. Secondly the Department now fears the loss of competitive tension and potentially one bidder from the bidding process. Lastly the Department believed it had ‘little alternative’ but to accept Eircom’s proposal under the EC State Aid Guidelines. The Department referenced legal advice from lawyers Mason Hayes & Curran to support that view.

Leaving aside whether the Department had an alternative (we believe that they had), it is not clear in the first instance whether Eircom chose to re-submit their previously rejected proposal on their own initiative or whether they were invited to do so by the Government.

Questions

IrelandOffline has previously submitted to both the European Commission and ComReg in opposition to this deal. With the publication of this memo we now have a number of additional questions to ask which we include below.

We use the following terms:

The memo: the leaked departmental submission to Minister Naughten

Eircom: the legal entity Eircom Ltd.

eir: The retail brand of Eircom Ltd.

openeir: The wholesale and networks brand of Eircom Ltd.

The Eircom 300K Network: The proposal by Eircom (now underway) to deploy eVDSL and FTTP technology to 300,575 premises in rural Ireland.

The Agreement: aka the ‘Commitment Contract’, aka the ‘Commercial Deployment Commitment’, made by Eircom Ltd. with the Minister concerning the Eircom 300K Network

SAG: The State Aid Guidelines. EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks (2013/C 25/01)

Questions for Minister Naughten and Minister Donohoe

1. What date did negotiations begin on the Agreement with Eircom?
2. If the government advisers/officials had already rejected the proposal, did they initiate the new discussions on it and if so why?
3. What was discussed between DPER Secretary General Robert Watt and Eircom’s Padraig McManus on 23rd of November 2016 in the Department of Public Expenditure? (see diary – Robert Watt)
4. Why are there no notes from this meeting? 
5. What was discussed between Ministers Naughten and Donohoe in the DPER on the same day. (23rd November 2016)?
6. Who initiated this meeting and why?
7. Were any others present at these meetings?

Questions for ComReg

1. When was ComReg asked to look at the costs of shared/wholesale infrastructure in relation to the Eircom 300K Network?
2. When will ComReg complete its review in relation to access to the Eircom 300K Network by other operators?

Questions on the Deployment and Eircom

1. What was materially different between the Eircom 300K Network announced in June 2015 – rejected at that time by the Department – and the same deployment re-submitted in November 2016, which was subsequently accepted?
2. What was different in the financial analysis between the two proposals?
3. Eircom and the Department estimate the Eircom investment at €200M i.e. €666 per home passed. What is the modelled cost of passing the 542,000 remaining premises?
4. Have eircom submitted Long Range VDSL (LR-VDSL) to ComReg for approval as a technology?
5. Does Eircom contemplate using LR-VDSL in the the Eircom 300K Network?

Questions on the Agreement

1. What is the actual term of the Agreement?
2. Why does the memo indicate that the contract term is 25 years while the Agreement indicates it is three years, extendable yearly thereafter (see Article 2.2 of the Commitment Contract)?
3. How are Eircom incentivised to upgrade current eVDSL/VDSL deployments during the 25 year term (see 2 above)?
4. Is any allowance made for new build premises on otherwise served boreens
5. Is Long Range VDSL (LR-VDSL) envisaged/permitted as a technology option within the Agreement?
6. Are eircom entitled to bid to for supplementary work that is undertaken subsequent to a shortfall in meeting their own commitments under the contract?
7. Why is the maximum non performance fine only 10% of the nominal investment (€200M)?
8. In the case of non-completed eircodes, is the Minister only allowed claim compensation from Eircom on the basis of Eircom’s modeled costs rather than the full price of remediation (see Article 9.4.3 of the Agreement)?
9. Why does the department have to issue a new tender to appoint another operator (in addition to the National Broadband Plan operator) before it even collects the shortfall fine?
10. Has the department informed the Comptroller and Auditor General (see Article 11.5.6 – of the Agreement) that the net effect of their accepting the Eircom 300K Network will cost the exchequer more overall? The 542,000 remainder in the national broadband plan, at 60% more per premises, or possibly in total, will cost the exchequer more than the originally envisaged 750,000 premises.

Questions for the European Commission

1. On what date was the European Commission advised of the negotiations regarding the Agreement?
2. What was the disposition of the EC (DG Competition) towards the Eircom 300K Network? Favourable or not?
3. Was the Commission advised of the net additional State Aid that would be required as a result of the Eircom 300K Network (possibly greater than 60%)?
4. Was the Commission advised that the Eircom 300K Network did not cover areas but only specified eircodes?
5. Was the Commission advised that the proportion of copper technologies (eVDSL/VDSL) in the Eircom 300K Network was not specified in the Agreement?
6. Did EC officials offer any opinion as to the DCCAE’s legal obligations to accept the Eircom’s proposal under the SAG or the general advisability of the Eircom 300K Network and Agreement?

Questions for the other bidders SIRO and enet

1. Have either SIRO or enet lodged a complaint to the EC?
2. Which of SIRO or enet sought underbidder compensation?
3. Is underbidder compensation (lack of) still a deal-breaker (see para 28)?
4. Has there been any progress notified by Comreg in modifying regulated wholesale access to shared infrastructure in the contract area?
5. Does the use of Eircom infrastructure roll-out require that other bidders see the completed Eircom 300K Network (potentially 30/06/2019) before submitting a bid.? (see para 23)