Telecoms industry tries to shake off flat feeling

22 Mar 2004

Despite the presence of the telecoms regulator John Doherty of the Commission for Communications Regulation (ComReg) and John Hanrahan of Aurora, Bord Gais’ fibre optic networks, the gathering of heads of Irish telecoms companies to discuss the future of the industry at the recent First Tuesday meeting had a distinctly entrepreneurial feel.

This was because the remaining panellists were Oisín Fanning of Smart Telecom and Sean McVeigh of Ryanair Telecom, each the head of a relatively young telecommunications start-up and each evidently bristling with ambition.

The entrepreneurial edge was sharpened by the additional presence of a roomful of equally ambitious telecom types, representing a panoply of organisations whose destinies were inexorably tied to the health of the telecoms sector in Ireland. They ranged from representatives of Eircom’s nemesis, Esat BT, to early-stage cable and satellite firms eager to promote alternative connectivity. Even members of the construction business were present as the realisation dawns on that sector that it actually adds to the appeal of housing developments to guarantee state-of-the-art telecoms connectivity.

In the absence of any obvious representation from the incumbent, Eircom, many of the views expressed seemed oddly restrained, although the atmosphere seemed electric with the shared sense of frustration at lost opportunities and the perceived failure of deregulation in Ireland.

The general consensus amongst the panellists was that while the market in Ireland for the year ahead appeared to be flat, potential growth came in the form of internet telephony or voice over internet protocol (VoIP) services that allow carriers to offer phone calls at extremely low prices over DSL lines. Another major growth opportunity identified was the emergence of mobile virtual network operators (MVNOs) — operators that provide mobile services on the back of existing operators’ infrastructure.

McVeigh (pictured), whose company has licensed its brand from Ryanair, set the tone for the evening when asked why his company entered the telecoms industry. “It is one of the worst-served, highly regulated markets out there with dominant players that have a nice market share. We want to get in there and do some real business. We will take a share of the business where it suits. We see massive growth in VoIP.”

However, one of the overriding issues of the night was the frustration that many licensed operators feel at what they claim to be aggressive customer win-back strategies employed by Eircom. Fanning, whose company was established in 1999 and now has 35,000 customers and reported annual revenues of over €16m, cut to the chase. “The telecoms business in Ireland in general is flat. Growth in terms of what we can take off the incumbent is potentially enormous as Eircom has 90pc of the residential market. The problem I have is with Eircom’s win-back activity. We call on ComReg to move Eircom’s win-back moratorium from 90 days to 12 months,” he said.

Doherty acknowledged the situation but said that, with the launch in two weeks of its full carrier pre-select and single billing product for telecoms, matters should change radically. “I recognise the fact that there are serious challenges. ComReg intervened last year with a three-month moratorium on win-back strategies by Eircom when it became obvious that out of 500,000 customers that left Eircom, some 350,000 were won back. We believe that the introduction of proper single billing at the end of this month will influence matters. Another factor to bear in mind is that unlike the rest of Europe, Ireland does not have proper cable infrastructure that would compete against traditional fixed-line services.

“Our strategy is to keep stimulating infrastructural competition in order to move the game on,” the ComReg chairman added.

Another major theme to emerge on the night was the future MVNO market, with Smart and Ryanair Telecom saying they would both be anxious to enter the mobile sphere as MVNOs once ComReg helped to put in place the appropriate market structures. At the end of January, ComReg reported that O2 and Vodafone together have 95pc of the Irish mobile market and, therefore, had significant market power and began a consulting process with the view that the big two should be obliged to carry other service providers such as MVNOs and that measures be put in place to create a wholesale element to the Irish mobile market.

Both Smart and Ryanair Telecom join Esat BT as companies that have expressed an interest in entering the MVNO market. Another possible entrant is Eircom, whose moratorium on re-entering the mobile space following the sale of its Eircell mobile division to Vodafone three years ago ends in April.

McVeigh commented: “We are interested in entering the mobile space because we believe that prices in this space are enormously excessive. We are focusing on going into a number of European countries in this way with the lowest mobile rates possible. We are interested in pursuing the German model of blurring the lines of fixed and mobile billing. I would see that as a big trend going forward. We are waiting on ComReg to pave the way. An MVNO strategy is the next big thing for us.”

Doherty commented: “In terms of 3G Hutchison as a condition of having the A licence will be obliged to host an MVNO provider once it has reached a certain rollout point. Our proposition to the market is to intervene and provide for national roaming agreements between operators and pave the way for the introduction of MVNO services. That is the direction that ComReg is going in. The first MVNO services should be provided for within three to six months.”

Despite the advent of proper single billing in two weeks, it is clear that many telecom companies don’t hold out much hope for conventional growth in the telecoms market, and instead hope that new technologies such as VoIP and MVNO services are the way forward. If 2004 is going to be a flat year for telecoms, it will no doubt also be an interesting year.

By John Kennedy