E-Net promises ‘disruptive pricing’

29 Jul 2004

The announcement last month that the Government contract to manage the state’s €70m investment in Metropolitan Area Networks (MANs) around the country had been won by the tender from the relatively unknown Limerick company E-Net caused something of a silly season stir. Set up by local property developer Michael Tiernan, the 15-year contract to act as the Managed Service Entity (MSE) for the state MANs is actually the company’s first piece of business.

In another and pre-Tribunal era, the political suspicions and accusations would probably be flying. But in fact the company was set up nearly four years ago, before the notion of a network of Government-sponsored MANs had any substance. The full company name is E-Nasc Eireann Teoranta, trading as E-Net.

“Quite simply, Michael Tiernan found out that incoming investment – the kinds of business his developments were targeting – baulked at the lack of telecoms infrastructure in the Mid-West and Western regions. E-Net was formed with the aim of building business through bridging the technology gap, bringing state-of-the-art technology to the regions – in part by exploiting the opportunities opened up by the Western Digital Corridor and looking at the Limerick-Galway axis,” explains George McGrath (pictured), chief operations officer of E-Net and former head of Ocean Communications, the BT-ESB joint venture.

The MSE contract now in place will see E-Net take over 20 MANs around the country by the end of November. It is currently occupied with building up its personnel and other resources and investing in test and control equipment. For engineering and logistical reasons, the existing networks are being formally taken over on a phased basis and E-Net expects to have 25 under its wing by the end of its first year in operation next summer.

This is expected to expand to 41 MANs by October 2005, representing another €55m or so investment by Government (90pc) and local authorities. Employment is forecast to reach about 120 ultimately, but in the first year is not expected to reach more than a couple of dozen.

The role of E-Net, as McGrath explains, is to maintain and provide access to the MAN infrastructure for any service provider licensed by ComReg. “We are a wholesaler, in effect, dealing only with authorised operators. We are also taking the commercial risk – the State continues to own the networks and is entitled to share our revenues as a return on its substantial investment.” He points out also that E-Net is committed to ‘lighting the fibre’ in every MAN regardless of the potential customer base or demand. Although the company has no doubts about the success of the project, he concedes that there is no way to predict the speed or level of take-up.

So what about pricing? There have already been rows in the telecoms market about wholesale rates, notably those charged to its competitors by Eircom for the use of its infrastructure. “Our bid and revenue-sharing agreement includes maximum rates – and in fact we are discussing and refining those rates with the Government right now,” says McGrath. “But when we announce prices next month I am positive our pricing structure will be disruptive in the current market. It will drive down prices and stimulate demand and competition as well as opening up opportunities for smaller or regional operators.”

E-Net will offer authorised operators a full range of technical opportunities across each of the MANs, from simple duct and sub-duct space (customers would then lay their own optical fibre) to the use of the fibre already laid. It is anticipated that large customers will opt for ‘dark fibre’ – a totally new service in the Irish market – where the operator leases un-used fibre circuits and then carries out the rest of the technical work itself.

But the simplest and probably commonest level of business will be in leasing the use of MAN circuits on a managed basis from E-Net, just as all telecoms companies routinely exchange the use of their circuits. E-Net will be responsible for 24/365 availability of the network infrastructure but will have no involvement in the services provided to the end-customers over the fibre.

‘Co-location’ is another facility expected to be widely availed of, where customers locate their own equipment alongside E-Net’s to facilitate interconnection to MANs or other networks. McGrath explains that this is in a sense today’s version of ‘an exchange’. Since call or circuit routing can be controlled by software from anywhere, it is only the physical points of inter-connection that are required to be geographically dispersed. E-Net is equipping a state-of-the-art Network Operations Centre in Limerick, which will be focused solely on the infrastructure management and will not be a data centre.

E-Net as an infrastructure provider will work in partnership with its telecoms customers and will also be itself a customer of some of them, since it has to put in place alternative routing arrangements to ensure that MAN users have available the high standards of network resilience that today’s market demands, as well as the internet backhaul facilities that will be required. “We have already talked in some detail to Esat BT and ESB Telecom and expect to be talking to Eircom also in the near future,” says McGrath.

Although E-Net is essentially neutral in regard to the services that may be provided over its networks, it expects broadband internet access from ISPs and data WAN services to account for most of its initial traffic. “Although there is still a lot of work to be done in educating the market and promoting broadband around the country, today’s market is increasingly demanding true broadband at 2Mbps,” says McGrath, with the implication that ADSL solutions at 512Kbps or even 1Mbps have been overtaken for serious applications, especially in business.

“Newer technologies like voice-over IP are certainly seen as the way of the future by the telcos while video, for example, which has a multitude of potential applications, demands the network speeds that are only attainable over fibre.” Other major areas for development he sees are education and medical/health services, where video or the exchange of high quality images offer exciting new possibilities.

The MAN routes have been or are being planned according to the topography of the individual towns with the expert knowledge of the local authorities. Expansion in response to demand is possible, however, according to E-Net, with the creation of sub-rings for lease. The company is even looking at spurs of up to 3kms in order to expand the reach of fibre-based broadband where required.

With an anticipated useful life span of 40-50 years, MANs are a long-term infrastructural investment. “Naturally, their range and diversity will be extended continuously,” McGrath points out. “Fibre is becoming easier and cheaper to roll out – including the new technology of blowing fibre into pre-installed duct – so that we can begin to see a day when fibre optic might actually replace cable in most infrastructure.”

E-Net has been building up its technical team since late last year when it was short-listed for the MANs contract, with the expertise of Tom Savage, chief technical officer, who had been working on this and other projects for over two years. The recruitment of an industry expert of the stature of McGrath as COO was clearly a coup for this fledgling company, while on the financial side a €12m funding package has been put in place by venture capital company ACT, Anglo Irish Bank and Bank of Ireland. Financial director is Gerry Boland, a former partner in PwC.

By Leslie Faughnan