Eircom boss Philip Nolan said yesterday the Government's plan to spend €170 million on broadband networks would make no difference to the numbers of people taking the service.

The EU this week approved the plan which will see the State spending €170 million on developing broadband networks in 120 towns around the Republic. These will be known as metropolitan area networks (MANs).

The Government had to get backing for the plan as otherwise it could be an illegal state aid under EU law.

Addressing a Leinster Society of Chartered Accountants lunch in Dublin, Mr Nolan said that the EU has approved the plan on the basis that state investment in broadband was appropriate to deliver it in areas that would otherwise miss out.

"We would just like to point out that of the 120 towns, we provide it in 118," he said.

There is ongoing concern about broadband penetration and take-up, which is seen as vital to the State's economic development.

Mr Nolan conceded that the Republic was behind the EU, but said that this was because we began rolling out the high-speed internet and telecommunications network after many other states.

He called for a radical shake-up in the approach to developing the infrastructure for the new technology.

Mr Nolan said that in common with the rest of Europe, the State had adopted an approach that involved getting the incumbent - in this case Eircom - to open up the link between its exchanges and customers' homes and businesses to competition.

This connection is known as the "local loop" or the "last mile". He told the gathering that in the US and New Zealand, regulators had taken the approach of not forcing incumbent players to do this, on condition that they reinvested in their networks with the aim of developing broadband.

He said that EU countries were now looking at this approach. "It's interesting that Germany has already broken ranks on this," he said.

Mr Nolan also argued that the type of broadband was also relevant. He said that there was a big difference between a combined development of digital subscriber lines (DSL) and wireless broadband to cover most of the State, which was feasible, and a €4 billion investment in new fibre-optic lines to cover the country.

He also rejected that the link between economic development and broadband roll-out was as strong as many argued, and said that businesses already had good access to broadband.