The Department of Communications has controversially rejected a proposal by telecoms firm Eir to supply fibre broadband to 300,000 homes originally earmarked for the rural broadband scheme.

At the launch of the formal tender process, Minister for Communications Alex White signalled he intended to press ahead with the Government's original intervention strategy, which involves the roll out of State-subsidised broadband to 757,000 homes in rural Ireland by 2020.

Eir, the State’s largest broadband provider, had submitted a revised business plan to Government offering to connect 300,000 of these homes on a commercial basis, potentially reducing the size of the State intervention .

However, Minister White indicated Eir’s plan failed to meet the department’s evaluation criteria, which assess proposals on technical, financial and deployment grounds.

“After a detailed assessment of the plan, we have drawn the conclusion that it is not appropriate for us to alter the mapping that we currently have,” Mr White said.

“An assertion of a plan cannot be taken entirely at face value. We have a responsibility to assess and to scrutinise what we’re being told in terms of its credibility,” he said.

Eir’s proposal was one of six separate business plans rejected by the department.

Under EU state-aid rules, the Government cannot subsidise an intervention if existing private operators say they will supply services to the same areas.

Minister White said, however, he did not believe the department’s decision would delay the process, while acknowledging commercial operators were within their rights to lodge a complaint with Brussels.

In a statement, Eir told The Irish Times it had no plans to take legal action, while noting the tendering process could yet accommodate its investment plans.

“Eir remains fully committed to its own commercial investment plans to provide high speed broadband to 1.9 million premises by 2020,” a spokesman said.

Estimates for the potential cost of the rural broadband scheme range from €500 million to €1 billion, making it the single largest rural project undertaken since electrification in the 1950s.

The Government is likely to stump up half the cost in some form of public private partnership and has set aside an initial tranch of €275 million.

As well as launching the pre-qualification process for the tender, Minister White announced several revisions to the original strategy on foot of a public consultation.

The State is to be broken into two regional lots - north and south - instead of three, with private operators able to bid for one or both of the regions. The contract is also to be extended from 20 to 25 years to allow the winning bidder or bidders more time to recoup their investments.

The list of potential ownership models has also been shortlisted to just two. The department will either chose the full concession model, with the network reverting to the State at the end of the contract, or the gap-funded model, involving a once-off stimulus with the operator maintaining ownership of the grid.

The department said it was on schedule to award contracts to winning bidders at the end of 2016 with the first homes likely to be connected from the start of 2017.

Likely Bidders for the Government’s National Broadband Plan:

Eir (formerly Eircom)- as the largest provider of broadband in the State and the operator of the existing telecommunications grid, the company tops the lists of potential bidders.

Siro ( Vodafone/ESB's joint venture) - the company is investing €450 million in a fibre-to-the-building network along the electricity network, primarily aimed at 50 regional towns.

Imagine - the company, whose shareholders include NTR and Kilsaran Concrete, recently secured the backing of a consortium of French investors.

Gigabit Fibre - the market's newest entrant, fronted by former O2 Ireland boss Danuta Gray.

Enet - The firm that manages the State's broadband Metropolitan Area Networks (MANs) was recently acquired by US investment group Granahan McCourt and other investors

BT - British telecoms giant has exited the domestic market here but maintains a foothold in the corporate market.

Axione - As a subsidiary of the French energy giant Bouygues, the firm has already bid and won similiar contracts in France.