CIE executives are considering selling parts of Iarnrod Eireann's new signalling system as a high-speed telecoms network, it has emerged.

The system is being investigated by an Oireachtas committee because of significant cost overruns, but is much more advanced than previously thought. Its uses could extend far beyond the requirements of a pure signalling system. If modified, it could meet a significant proportion of the State's growing demand for high-speed telecommunications at a time when the Government has prioritised the development of such networks outside Dublin.

The sophistication of the network may have been a contributory factor in the budget overruns, although Iarnrod Eireann sources have claimed the fibre-optics cost only a small fraction of the total expenditure.

The signalling system should have cost £14 million (#18 million) under the terms of a 1995 construction contract with Modern Networks Ltd, but a study last year by consulting group PricewaterhouseCoopers found it had already cost £25-£40 million.

Many elements of that contract were questioned by the consultants, including the departure of four Iarnrod Eireann figures to join Modern Networks.

A further investment of up to £15 million is needed to complete the system, it is understood. It requires an additional 130 km of cable-laying and physical connection in each station on the railway network.

However, senior CIE executives are understood to have claimed there is real potential to recoup this investment and turn a profit by selling or leasing the network or by spinning it off as a separate company within CIE. It is understood, however, that no formal valuation has been put on the system.

The system is understood to comprise four "dark fibre" pairs, without switches or routers required to manage it - telecoms sources have claimed more than £10 million of such equipment is being stored by CIE.

Broadband, a term used for the system that delivers high-speed data along telecoms lines, is seen as crucial to entice investment outside Dublin.

The 900 km signalling network encircles Dublin and has separate connections to Sligo, Galway, Tralee, Waterford and Wicklow. If sold, it is believed CIE would use part of the Esat Telecom 1,800 km fibre-optic network on its railway for signalling purposes. Under the terms of its deal with Esat, the State-owned transport company had access to a pair of optical fibres for its exclusive use and access to an additional five pairs. Its agreement with Esat was reached in 1998, three years after the signalling project was begun.

Telecoms industry sources have claimed the system was not suited to signalling, although this was strongly denied by Iarnrod Eireann sources.