From top: Minister for Communications Richard Bruton (right) and Taoiseach Leo Varadkar announcing the cabinet go-ahead for National Broadband Plan; RTÉ’s Seán O’Rourke; economist David McWilliams
This morning.
Economist David McWilliams spoke to Sean O’Rourke on RTÉ Radio One about the €3billion National Broadband Plan and his concerns about the project.
It follows yesterday’s announcement by the Government that it has agreed a €3billion plan to roll out the infrastructure – a project that will be overseen by the sole bidder for the project, a consortium led by Irish American billionaire businessman David McCourt and including Denis O’Brien.
The contract reportedly requires the company to build and operate the network for 25 years, with an option to extend this contract for another 10 years.
Once the contract is complete, the State won’t own the network.
The interview also came ahead of the release of documents which reportedly outline concerns raised by officials in the Department of Finance and Public Expenditure and Reform on the plan.
From the interview…
Sean O’Rourke: “If this [National Broadband Plan] was such a great State asset that was being given away, how come, at the end of the process, only one company or one consortium is interested in acquiring it? Others have walked away.”
David McWilliams: “Well others have walked away because the actual prize is much more than was initially suggested. And that’s the role of Eir in all this. There was supposed to be 750,000 customers and then Eir realised, or came to the table, and said ‘we have about 300,000 customers, so the actual asset itself, the size of the asset changed and that’s why a lot of the bidders fell away because they were actually bidding for a much bigger prize and it is a prize…”
O’Rourke: “Yes but it also, as things stand, Eir can still get another billion out of providing the infrastructure for this, be it the telephone poles and cable, and so forth.”
McWilliams: “Well it’s funny you mention Eir cause you know, of course, that Eir is the offspring of the original Eircom which itself was, when it was privatised, has been a lesson in how not to privatise State infrastructure, given that it was flipped I think it was four or five times, Seán, before its the eventual owner? Every single time it was flipped, or sold on, a little bit of the asset was gouged out and given to the new owners, ok?
“But the Eir lesson for us is that when you give public infrastructure to a small consortium of private investors who are in the business of maximising their own profit, which is absolutely legal and absolutely straightforward, you tend to get an outcome whereby the asset is sold and sold and sold on again.
“And every time it’s sold, the only way you can actually generate profit from an asset being sold is you actually take a little bit away from it all the time.
“The alternative is, I would say, is that we go back to the State companies: ESB, maybe Bord Gáis, and say ‘make a bid for this?’, ‘get involved’. So we stop the process and we go back and at least begin the notion of having second and third bidders. At the moment, we have a PPP, a public private partnership, which was set up under the assumption that we would have many bidders and PPP now has only got one bidder and ultimately taxpayers say ‘hold on a second am I going to actually end up footing a massive bill for something I know we have to do but ultimately I’m not too sure whether we’re going to get value for money’.
“And let’s go back to the Department of Finance. The role of the Department of Finance is to be objective, civil servant, in the centre, saying ‘hold on a second, does this make sense for our country?’.”
O’Rourke: “Yes and has been pointed out repeatedly this is the guys, or these are the guys, this is the department who wouldn’t have agreed to free education in the late 1960s, they would have had reservations…”
McWilliams: “Seán, Seán, Seán, Seán, Seán, this is spin. You’re giving me the spin, you’re supposed to do the opposite.”
O’Rourke: “I’m just saying that advisors advise. I suppose people are still smarting from bad decisions or remaining silent ten or 15 years ago at the height of the Celtic Tiger boom and they don’t want the file to be got wrong this time.”
McWilliams: “I understand and I understand that it makes great imagery to say electrification, free education and the Department of Finance were against that, etc. But I think…”
O’Rourke: “And that’s fact.”
McWilliams: “It’s florid, it’s florid, it’s more poetry than…”
O’Rourke: “And it’s factual.”
McWilliams: “It’s, well, it’s counterfactual. Because you don’t know what would have happened the next year. OK? It’s counterfactual, actually. So…”
O’Rourke: “No, but I remember interviewing Charlie Haughey who told me that [Fianna Fail Minister for Eduction from 1966 to 1968] Donogh O’ Mahony made the announcement about free education and Jack Lynch, the then Finance Minister, was absolutely shocked by it. I mean he was not agreeable to that but they had to go along with it because it was so popular.”
McWilliams: “Seán, I think you’re now sounding like a member of the Fine Gael frontbench, if the truth be known. Let’s get to the…there is politics in this and the politics, as you and I know, is that there’s an election in ten days’ time, 15 days’ time. And wrapping yourself as the saviour of rural Ireland never lost a vote, as you and I know, in an election, ok?
“But it strikes me, it’s just common sense here. And I started with the point Seaán, that nobody disputes that broadband in rural Ireland is essential – not just for rural Ireland but for urban Ireland to take away some of the enormous pressure, the commuting pressure, the congestion pressure on urban Ireland, right?
“So everybody wins with good broadband – there’s no question. The issue is: are we going about things the right way? Are we going about things the right way given where we started? And are we going about things the right way given the need to have value for money? That’s it.”
O’Rourke: “But it’s a decision that has to be taken on the balance of advice. That’s the argument that Paschal Donohoe has been making, the Taoiseach as well, Richard Bruton this morning saying the benefits will be substantially in excess of the cost.”
McWilliams: “Seán, again, as of today, nobody is disputing that this is a decision that we need to take for the infrastructural development of the country over a 25 or 30-year period. The issue is the way in which the tender has turned out. The way which a single bidder has emerged. The way in which that bidder has been opaque, what I’m interested in is: what are these guys bringing to the table? What are these dudes bringing to the table? I don’t know.”
O’Rourke: “They’re bringing, presumably, access to more funding that will be needed, they’re putting a consortium together, obviously there are questions still unanswered about how much they’re pitching into the pot, so to speak.
Again, to quote Government sources last week, they’re saying they looked at all the options which presumably going back to base and one by one they were ruled out, maybe this is the least worst option. Because if they were to say, look, try to pull the ESB back into the proceedings or the process they’re running up against European law and State aid rules and so forth.
“So this thing has dragged on for long enough.”
McWilliams: “No, look, I’m with you. But..what they’re bringing is money, right? We’re in a world of zero interest rates, there’s money everywhere. Money is the least of our problems when it comes to infrastructure. The entire financial markets worldwide are bashing down the door of infrastructural projects which are State-backed which is – this is going to be one – because when the €3billion comes in, there’s a subsidy of €3billion coming in, raising the money is the simplest thing to do at the moment.”
O’Rourke: “Well if it’s that simple, if it was that appealing to the financiers and potential consortia, how did we end up with just the one?”
McWilliams: “Because first of all the original plan disintegrated, OK, because of the Eir move. Secondly, they were so far down the road with this and thirdly, don’t underestimate how politicians are blindsided by financiers and the alchemy of easy money. And the guys come in and say ‘we’ve got the money, we’re the only people with the money, take it now’. And suddenly all the politicians and the civil servants say ‘oh my god they’ve got the money’.
“Look around the world, interest rates worth zero, infrastructural projects are the easiest things to finance. This is what they would call in finance and I’ve worked in this for years, it’s not only low-hanging fruit, this is fruit that is almost at ground level.”
O’Rourke: “Well by that logic, they should have got the NTMA to go and fund the thing and we should have built it ourselves.”
McWilliams: “Well maybe. Maybe. Maybe. But the point is: I’m intrigued by what the consortium is bringing to the table. OK. I know the ESB, for example, has public infrastructure. I know that Bord Gáis has it. I also know that we’re going to be renting this stuff off Eir, I think the figure you quoted me there is €1billion. Up to €3billion is going to go to Eir on a rental bid. Wouldn’t it seem more logical to go back to ESB, go back to Bord Gáis and say ‘we need the second bid or a third bid in this procedure’. Stop the procedure, start again, fast-track it and come back again.”
O’Rourke: “David McWilliams, thank you very much indeed.”
Listen back in full here
