Esat BT chief frustrated by state offer

3 Nov 2004

“There has to be a better way,” was Esat BT boss Bill Murphy’s (pictured) tired reaction to revelations at the weekend that the Government offered Eircom a lucrative €1.8bn deal that included price increases on phone charges, tax breaks and debt guarantees, if the incumbent operator was to roll out universal broadband across Ireland.

Murphy was out to dinner late on Saturday night last when he first learned of a report in the next morning’s Sunday Business Post on leaked cabinet papers that revealed the Government had allegedly offered Eircom €1.8bn-worth “carrots” in terms of price increases on phone calls, tax breaks and debt guarantees to assist in the funding of an ambitious programme to drive 100pc broadband across Ireland.

The report alleged that the Government – reacting to a detailed report in summer 2003 by former e-commerce advisor to US President Clinton, Ira Magaziner, that put Ireland “near the bottom” of the OECD in terms of broadband rollout – followed advice from Magaziner’s agency SJS to conduct discreet discussions with Eircom in order to achieve an ambitious goal to have Ireland top in the world for broadband within three years.

According to the report, Eircom declined the offer to invest in broadband, opting instead to pursue an initial public offering strategy to unlock hundreds of millions of euro to repay venture capitalists who funded the takeover of the telecoms company in 2001. The offer was understood to have been made when the then Minister for Communications, Dermot Ahern TD, was frustrated at Ireland’s poor broadband infrastructure.

Recalling the summer of 2003, Murphy said that the resultant offer to Eircom was far from what the industry envisaged when it collaborated with Magaziner in compiling the report.

“We had worked very hard with Magaziner to come up with a solution that was deliverable in Ireland as a result of the industry working together in a similar fashion to trends that were beginning in Northern Ireland [NI] and Europe at that time. We felt we could deliver broadband, leverage demand and investment and get Ireland to 100pc coverage. But suddenly everything went quiet and we heard no more on the matter. We found Magaziner to be a bright, forward-looking man and felt good about the discussions and dialogue on what was possible.”

Murphy said he would be very dismayed if the Government’s €1.8bn offer to Eircom was true. “Broadband is a national issue, not a parochial issue for one company to dominate. If the report was true then the only conclusion I could hope to make was that a potential purchase of Eircom’s fixed-line infrastructure. The Government must have been concerned with a state of affairs that has subsequently been borne out in public.”

Murphy said that he could propose at least five different models that the Government could pursue to ensure proper broadband rollout. “The best solution for Ireland is for the Government to work in public private partnership within a very tight timescale to get 100pc broadband coverage in Ireland. It has to work nationally, county by county, with towns, universities, schools and technology manufacturers. What we need is innovative lateral thinking that includes everyone in the telecoms industry, especially Eircom. The industry needs the Government to help because it won’t invest otherwise.”

He cited the ambitious 100pc broadband plan in NI as an ideal template for the Government to pursue. “NI was nowhere a year ago in the broadband stakes. If current trends continue, in terms of broadband per head of population, NI will be ahead of Germany next year and currently is almost on a par with Spain. For every pound that the NI Government put into broadband, we have put in five. There are now 55 broadband service providers in NI, in addition to BT. And people are buying the services at a healthy rate.”

Murphy continued: “I believe we can use last weekend’s revelation as a tipping point. We know it went on, but where can we go from here? The industry needs answers. There is pent-up demand for broadband across the country and national frustration about the issue. The incumbent isn’t delivering, this is frustrating the wholesale market and it is hard to get service competition.”

He said he was encouraged by developments such as the Government’s decision to put all of its telecoms contracts out for tender next summer. Up until now, the Government has had some 90pc of its telecoms expenditure directly with Eircom.

“I wasn’t in the best of moods on Saturday night, but I woke up on Sunday morning with the view to rising above this situation. My anger and frustration have turned into a resolve to drive change. We need a groundswell of support in Ireland to say ‘we’ve had enough!’ The topology of the State is no different to that of NI.”

By John Kennedy