Eircom will be awarded €3.5 million public funding to build telecommunications infrastructure outside Dublin more than a year after it pulled out of a similar scheme due to cash constraints.

The firm has agreed to invest a further €11 million in the project which will be supported by the Government under the National Development Plan. It will enable Eircom to extend its roll-out of new high-speed internet technologies to the south east region, and the Border, midlands and west.

It is understood Eircom will extend its new internet service i-stream to an extra 14 telephone exchanges under the plan. It will also build fibre-optic rings, microwave radio infrastructure and internet points of presence in areas where it is not considered commercially viable for firms to invest without Government subsidies.

The availability of high-speed internet services and other communications technologies are vital to enable firms to locate outside Dublin and encourage decentralisation. But business lobby groups and many technology firms have consistently argued that infrastructure in the regions is not adequate.

The project, which is in the final stages of drafting between the Department of Public Enterprise and Eircom, represents a U-turn for the telecoms firm which pulled out of a similar State project in February 2001. At that time, Eircom's board of directors would not sanction a €37 million project despite its prior announcement by the Government. This was largely due to a major retrenchment at the firm which culminated with its sale to the Valentia consortia.

Although the level of investment in the new project is less than half of what was originally planned in 2001, telecoms experts yesterday welcomed the project as a way to boost the State's competitiveness for inward investment.

Several telecoms projects backed by the Government under the National Development Plan have been stalled or cancelled over the past year.

Last year Formus Broadband, which was awarded funding under the National Development Plan, went out of business, and last month Chorus, the cable television and communications firm, said it might not be able to complete another three telecoms projects.

It is expected the Minister for Communications, the Marine and Natural Resources, Mr Dermot Ahern, will announce the Eircom project shortly.