Failure to meet broadband targets an ‘abysmal failure’ – Matt Carthy TD

 

Cavan Monaghan TD Matt Carthy has said that the track record of National Broadband Ireland (NBI) to reach ‘any targets to-date represent an abysmal failure and inspires little confidence.’

 

Carthy was questioning senior officials from the company which secured the €2.7 billion contract to rollout high-speed fibre broadband to 544,000 rural homes and businesses when the appeared before the Oireachtas Public Accounts Committee to account for slow progress to-date.

 

In advance of the hearing, Carthy said:

 

“The original target for 2021 was 115,000 homes passed, later revised to 60,000 in April.

 

“Minister Ryan announced it would be at least 130,000 by the end of 2022, while as late as last October NBI were assuring the Committee that they would reach 60,000 by that years end.

 

“This never materialised, and we are now we now have wildly varying potential targets for 2022, with little reason for confidence.

 

“It was welcome that the Minister of State recently confirmed to me that he intends to levy penalties where targets are missed.  NBI are in receipt of significant state subsidy, and this Committee intends to both ensure that people in rural Ireland receive the broadband service they are entitled to and that the state recoups the maximum funds for failure to do so”.

 

The exchange at the Public Accounts Committee went as follows:

 

Deputy Matt Carthy: “I want to clarify where we are. How many homes and businesses have been passed?”

 

Mr. T.J. Malone: “We have passed or constructed about 38,000 to 38,500 premises as of today.”

 

Matt Carthy: “What was the figure at the end of the 2021?”

 

T.J. Malone: “It was about 34,000.”

 

Matt Carthy: “Is it correct that the target for the end of March is 60,000?”

 

T.J. Malone: “Yes. That is the figure for premises constructed and built to walk off. When our contractors are finished and walk off site for built connections, the target is 60,000. We believe we will have 47,000 completed by the end of February. We are nearly halfway through February so we are tidying those up and doing the final bits and pieces. That would be 47,000 and the additional 13,000 will be finalised and under construction by the end of March.”

 

Matt Carthy: “That is a substantial acceleration considering NBI has moved from 34,000 at the end of December to 38,500 now if that will double within the next month or so.”

 

T.J. Malone: “It is understandable to see it that way but the vast majority of this work for the remaining 25,000 from December was completed so we would be at anything between 70% and 90%, or a little over it, of the work completed in those areas. It was just a matter of finalising and finishing the smaller pieces that were left to be done, albeit those small pieces stopped homes being categorised as being constructed or passed. The end of February and March will involve finishing out those bits and pieces. That is where a major jump will be seen, as is the case from the end of January to the end of February, which brought the target to 47,000.”

 

Peter Hendrick: “That is why we can start to allow homes to pre-order. We can do so because we get certainty at least 12 weeks in advance of when the construction will finish. When Mr. Malone’s team finishes on site and the 60,000 premises are constructed, we then have to inform industry, which is the retail operators and we give them a notification period where they can go and sell to consumers. At that point they can give consumers exact dates on when we will install but the installations do not happen for anything between two and four weeks after that. The definition under the contract is that is when they are contractually passed, even though the construction and all the work will have been done by the end of March.”

 

Matt Carthy: “Of those 60,000, does NBI have an estimate for who it expects to be connected? How many people or dwellings among those 60,000 will contract up to be part of it?”

 

Peter Hendrick: “We are approaching pre-orders from 9,000 premises and we are about to connect 7,000 premises over the course of the next week to ten days. On average we are installing 150 premises per day and we are doing installation seven days per week. The demand is there, the orders are coming in and we are meeting that demand in the volume of connections on a daily basis. That rate of 150 will increase.”

 

Matt Carthy: “What proportion of those that are passed lead to connections? That is what I am trying to get to.”

 

Peter Hendrick: “We have measured it over time. In advance of completing the build we take pre-orders for the three months in advance of completion. We have measured Cavan, Carrigaline and areas like that and we are seeing take-up of above 30% and growing. There is a demand but equally there are consumers who may be in contract with an existing operator and so they may be coming to the end of a contract. As we build across all Twenty-six Counties and as more retailers are actively selling, we are noticing that retailers are starting to migrate their customers onto our network, even if they are in contract, because they see the opportunity to get them on board with this fibre network. To keep that customer for the long term they have to migrate them while they are already in a contract.”

 

Matt Carthy: “Is there a turning point where NBI becomes profitable or unprofitable in terms of the number of connections?”

 

Peter Hendrick: “After the network is built the subsidy reduces significantly so we have to ensure that our income from the retailers connecting their customers meets our operational costs. Within our financial model there is a timeline for our operational profitability.”

 

Matt Carthy: “What is that?”

 

Peter Hendrick: “There is a date in the model. I cannot give that to the Deputy off the top of my head but I would expect, based on the demand we are seeing, that it will probably be earlier than we originally envisaged.”

 

Matt Carthy: “Can Mr. Hendrick even give me some ballpark figures on how many passes and connections NBI needs?”

 

Peter Hendrick: “I will put it like this. We would assume we will get to an overall take-up of approximately 85%. Originally, when we looked at historical data cross Europe, and we were not comparing against fibre networks because at the time there was not a significant level of them being built, we assumed that it could be up to eight years after work was completed in a deployment area before that threshold of 85% take-up would be reached. We are seeing that the demand for high-speed broadband is greater, that the capacity requirements are greater and that Eir is committed to switching off the copper network, notwithstanding other retailers in the market that have TV or mobile services that are driving their customers onto this network. The achievement of 85% should happen significantly faster. If I go by Eir’s switch off of copper, Eir has committed that it wants to switch off that copper network within five years of NBI finishing in a deployment area. That brings the period down from eight years to maybe five years after completing in a deployment area.”

 

Matt Carthy: “Five years from passing?”

 

Peter Hendrick: “Correct.”

 

Deputy Carthy later pressed officials from the NBI as to the targeted number of homes passed by years end:

 

Matt Carthy: “Is the target still to have 130,000 homes passed by the end of the year?”

 

T.J. Malone: “We are finalising those targets at the moment. They will be finalised with the Department in March. We have built our unit around a target, from construction to walking off site, of between 100,000 and 130,000 premises.”

 

Matt Carthy: “There is a big difference between those two numbers.”

 

T.J. Malone: “There is a big difference. There are still many unknowns so we need some sort of bandwidth in that estimate. Delivery will fall between those two numbers.”

 

Matt Carthy: “What is Mr. Malone contemplating the milestone for the end of the year to be?”

 

T.J. Malone: “Does the Deputy mean the amount that will be completed?”

 

Matt Carthy: “What will be passed by the end of the year? I presume a milestone is set out in the wider contract.”

 

T.J. Malone: “We are targeting between 100,000 and 130,000 premises. We will finalise that with the Department over the next number of weeks. By March, we will have finalised a figure with the Department but we will aim to have completed on-site construction for between 100,000 and 130,000 premises.”

 

Matt Carthy: “How will those negotiations with the Department work? I presume NBI will bring to the Department its forecast for what it has the capacity to deliver. What would happen if the Department was to say it expected NBI to achieve a greater number?”

 

T.J. Malone: “When we sit down to go through and agree that, we will take into account all the learnings we have had, the understandings we have put into it, etc. We can see a lot of what is on the ground at the moment. We will explain all of that and go through it with the Department. The Department lives with us pretty much every day of the week. We have interaction with the Department and all of its advisers and people on an ongoing, daily basis. The Department is familiar with what is out there. Ms Fisher might give the Deputy an understanding on that. We are not only updating the figure for what will be constructed or passed by the end of the year. There are a number of other things within that contract, including an updated intermediate remediation plan. Perhaps Ms Fisher will respond to the Deputy.”

 

Ms Jenny Fisher: “Because we have incurred delays, there is a process under the contract whereby we must go to the Department and show a root cause analysis as to why those delays occurred, what plans we are putting in place to mitigate their impact and how we are going to bring things back on track. We have been engaged in that process with the Department for the past three months or so. It is an involved process that looks at how the milestones will be recalibrated in order to adjust the delivery, recognising the impact of Covid-19 on the programme and other challenges in the mobilisation phase. That is all evidence based, which gives the Department appropriate assurance that we are taking all the steps we should be taking to ensure we are managing this in the best way possible.”

 

Matt Carthy: “On the recalibration of the milestones, are our guests satisfied that despite whatever delays NBI has encountered or might encounter in the future, it has sufficient evidence that it will be in a position to satisfy the Department—–”

(Interruptions).

 

Jenny Fisher: “The connection with the Deputy broke up a little but I think he was asking whether we have satisfactory evidence to be able to complete that exercise with the Department. The answer is “Yes”. We are going through that. Our technical advisers are reviewing it. We have a number of different working groups with the Department whereby it interrogates the information we are giving to them to make sure they have the assurances they require.”

 

Matt Carthy: “We are dealing with a situation whereby we have a possible target that differs by almost 30% at its lowest and highest points. It is a broad target. If delivery is on the lower end of that scale or if other targets need to be amended, are our guests satisfied that, whatever the circumstances, they will be in a position to convince the Department to recalibrate the milestones?”

 

Jenny Fisher: “The target would be the baseline from which we would measure the impact of any other issues that arise in the contract. We must always demonstrate whether it is the result of something within our control or outside our control. The important thing is that we do not get paid until we actually deliver the milestones so we still have to go through the test strategy with the independent certifier, demonstrate how the network has been delivered and confirm that we have all the financial evidence in place before we receive any of the subsidies. The subsidies are only paid when we deliver.”

ENDS

Failure to meet broadband targets an ‘abysmal failure’
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