The National Broadband Scheme may end up costing substantially more than previously estimated because of poor uptake among internet users, according to the Comptroller and Auditor General's annual report.
The State's average contribution per subscriber is expected to rise from €635 to €1,180 after the scheme failed to find favour with consumers.
The Comptroller said that in addition to a rise in the State's contribution per subscriber, there is also a risk that the projected socio-economic benefits of the scheme will not be achieved.
The scheme is intended to provide broadband access for those who would not be able to access a service. Completion of the project last December saw broadband coverage in the Republic rise from 85 to 90 per cent of properties.
However, while it was envisaged that as many as 126,000 subscribers would sign up for the scheme, just 35,500 consumers have availed of it.
The projected customer uptake of 126,000 subscribers by 2014 was initially reduced to 107,000 subscribers, in recognition of a lack of interest by other broadband service providers in entering into wholesale arrangements with 3 Ireland.
A revised take-up target of 68,000 customers by 2014 has now been set which would be equivalent to 34 per cent of homes in the target area and which would require an estimated State subsidy of €1,180 per subscriber.
"In retrospect, the original projected uptake rates appear to have been pitched too high. It could have been expected that there would be a reasonable level of initial sales to satisfy demand from those that had no broadband service at all and that, once that demand had been satisfied, growth could be expected to level out," the report said.
The report also acknowledged that some areas in which the scheme operate are also partially served by other providers.
The national scheme was delivered by communications group 3 Ireland and cost €220 million.
Some €44 million of funding for the project was provided by the exchequer and €36 million came from the European Union Regional Development Fund 2007-2013, with 3 Ireland providing the remainder.
The telecoms firm has a contract to provide the service until August 2014. But it has faced criticism over its running of the scheme, with a fifth of customers expressing dissatisfaction with the download speed and service coverage offered.
The comptroller called on the Department of Communications and 3 Ireland to consider additional steps to address consumer concerns and ensure that business and other customers have a resilient and high-quality broadband service.
"Negative consumer sentiment could damage the prospects of reaching even the reduced take-up forecasts for the scheme," the report warned.
Market analysis shows that because of uncertainty about employment and reduced disposable income, more customers are choosing to opt for prepay packages. The comptroller suggest that a change in the choice of contract available to customers could improve the attractiveness of the product and increase subscriber take-up.
The report shows that almost all scheme locations tested by 3 Ireland have download speeds over the required minimum of 1.6 Mbps. The overall average speed was 3.5 Mbps with 11 per cent of the locations tested having download speeds greater than 5 Mbps.
