Esat BT has agreed to pay CIÉ almost €2 million to settle a long-running dispute over the fees that it owes the State company for internet traffic carried over a fibre network along the railway.
This payment will act as a benchmark for future payments by Esat BT to CIÉ over the next decade, which could amount to more than €5 million if the rate of internet traffic growth continues.
The level of performance fees owed by Esat BT to CIÉ is decided by the amount of telecoms traffic carried by the fibre network along the railway lines.
A British arbitrator, Mr Robert Bruce, was appointed to arbitrate the dispute in proceedings organised by the International Chambers of Commerce. The period under arbitration covered the year 2000 but has set a precedent for the deal going forward.
Both CIÉ and Esat BT said they were happy with the arbitrated settlement yesterday, which is believed to include payments worth €650,000 to cover the three years to 2000 and €1.3 million for the next three years.
Before the arbitration process began Esat BT wanted to pay just €150,000 fees for the years to 2000. In contrast, CIÉ claimed it was owed €1.6 million by Esat BT.
The dispute over the level of performance fees due to CIÉ under the contract with Esat BT is just one of a series of problems which CIÉ has had with this deal.
As well as enabling Esat BT to create a national telecoms fibre network to rival Eircom's, the CIÉ/Esat BT deal was also supposed to create a new rail signalling system. But this system, which was originally forecast to cost about €15 million, is still not complete. Following a series of lengthy delays in the project and the collapse of a firm contracted to lay the signalling system, CIÉ decided to complete the project in-house. The final cost of the signalling project will now total at least €66 million and will not be completed until 2005.
The most important factor that caused the delays and cost overruns was a decision to allow Esat BT's fibre to be laid mechanically before the signalling system was installed. Once Esat BT's fibre-optic line had been laid mechanically, Iarnród Éireann's signalling lines had to be laid by hand for safety reasons.
Several other significant issues came to light during a subsequent investigation into the contract and the cost overruns by an Oireachtas committee. These include the fact that Esat BT was allowed to start laying lines long before a proper contract had been signed.
In addition, some of the people who were involved in Modern Networks Limited, the company given the contract for both the Esat and rail signalling systems, moved to it from CIÉ.
A number of performance and penalty clauses were also removed from the contract before it was signed.
The Oireachtas Committee appointed to investigate the cost overruns on the CIÉ signalling system was prematurely halted following a High Court ruling on a similar Oireachtas examination of the Abbeylara shooting incident. The ruling constrained the scope of all Oireachtas inquiries.
