Eir risks losing ‘at least €125m’ in broadband scheme revenues

Eir stands to lose out on at least €125 million in revenues from the National Broadband Plan, and potentially much more, if ComReg proceeds with plans to cut wholesale rates for fixed-line telecommunications.

The company had been forecast to make €1 billion over the lifetime of the plan by leasing equipment to National Broadband Ireland, which won the multibillion euro State contract to roll-out broadband to 540,000 homes and businesses after Eir and Siro withdraw from the competition.

However, the European Commission recently urged the communications regulator to cut the rates that Eir charges other operators as a matter of urgency. It is expected Comreg will act, with the result that the incumbent will see a lower revenue stream from the plan. It will also mean that National Broadband Ireland requires a lower subsidy leading to a cost saving for the Exchequer.

ComReg has said it intends to amend the weighted average cost of capital rate, which essentially compensates Eir for its investment in infrastructure – from 8.18 per cent to 5.61 per cent – but has delayed carrying it out so far. Eir’s rivals have long argued that such delays have allowed the incumbent to enjoy “excessive returns”.

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Eir stands to lose out €125 million from reductions in leasing poles alone if the reductions proceed. In addition, it will also earn less from renting ducts .

The price Eir charges for access to its poles and ducts was a major sticking point in the early part of the negotiations on the scheme.

An Oireachtas joint committee last year noted that renting equipment from Eir would account for a third of the National Broadband Plan's total budget.

“Concern was expressed that a major element of the subsidy was a public reinvestment in Eir’s private pole and duct network,” the committee said in a report.

Eir has previously insisted its wholesale prices accurately reflect the costs involved and were agreed with the regulator Comreg.

The company had originally been favourite to win the State contract but controversially dropped out of the procurement process last year, citing commercial issues and complexities around the tender. Before it exited, it successfully convinced the Government to remove 300,000 homes originally earmarked for the plan, undertaking to service them itself as part of its own commercial rollout.

Both the Department of Communications and National Broadband Ireland told The Irish Times they were aware of the European Commission’s comments on rate reductions. However they declined to comment ahead of any decision being made.