The Friday Interview: Mike Maloney, BT Ireland

12 Aug 2005

For anyone in Mike Maloney’s (pictured) position this year could prove to be both the most challenging and possibly the most exhilarating time to be in the Irish communications business since the heady days of the late Nineties. Maloney has inherited a company with a strong base to offer the latest telecoms and broadband services but has yet to face down the daunting, but age-old issue of local loop unbundling (LLU).

Maloney is not a man impressed by milestones, but more likely to be moved by results. This is how he describes the process of getting his feet under the table at BT Ireland.

Although he has inherited an organisation made financially viable and strong by Bill Murphy, who left in recent months to take up position as head of BT Business in the UK, Maloney shares Murphy’s conviction that without full and proper LLU the Irish market is not going to be served with competitive broadband and next-generation products. At the end of May, BT Ireland reported turnover grew 29pc year on year to €372m, compared with €289m for the same period last year. The company reduced losses from €15m more than a year ago to breaking even this year and plans to generate operating profits in the year ahead. The company’s 900 Irish staff each received a bonus of between 8pc and 13pc to reflect the strong results.

As the business plan unfolds, former army officer Maloney said the company has earmarked €200m in investment for the next three years to bring BT Ireland’s network to a comparable quality to the 21st-century network the company is constructing in the UK. He explained the company is planning to deploy the same technology it is using in Northern Ireland and the UK to boost the range of broadband access from the local loop to beyond 6km — adding 33pc coverage within an average local loop.

“The real question, however, is how do we get to 100pc broadband coverage in Ireland?” This whole question, he said, pivots on overcoming “LLU inertia” because unless that happens broadband service providers cannot offer the range of services and products that will attract Irish consumers.

“The ongoing LLU issue is slowing everybody down, the whole industry knows this. This is the major problem.

“140,000 people have signed up for broadband in this country. The early adopters have moved and therefore the most pressing problem facing the industry and the economy as a whole is how do we get this to a mass-market stage? Proper LLU would help create multiple price points and tailored products to suit a homogeneous, multifaceted consumer market and that would bring about a mass market.”

Maloney elaborated: “Only 42pc of the Irish population have PCs. But what about the kids using gaming consoles? They just want a broadband connection to do online gaming. Now there’s a segment of the market that’s not prepared to pay €30 a month for a broadband connection but would rather pay €5.99 a month.

“These are the things that would happen once there’s more competition in the marketplace. Full and proper LLU will create more features and price points to allow penetration into different segments. This is what will create a mass market for broadband,” Maloney argued. “This is a market with plenty of opportunity for every business to succeed as long as we introduce competition and give fair access to all players in the marketplace.”

For this to happen, Maloney argued, the Commission for Communications Regulation (ComReg) needs more power to regulate. Under the original Communications Bill 2001, ComReg should have had powers to fine a licensed operator up to 10pc of its annual turnover if it failed to comply. However, this failed to come to pass in subsequent legislation and the maximum fine for breaches of regulations is currently €3,000. Eircom, Vodafone and O2 are currently among the companies challenging ComReg’s decisions on market dominance.

It is understood the Electronic Communications (Miscellaneous Provisions) Bill, which will be published later this year, will give ComReg back its original power to fine companies up to 10pc of turnover.

“The regulator is actually doing a fantastic job if you look at the progress that we’ve made here relative to how long it took for things to happen in other countries. We have one of the most progressive regulators, but it doesn’t have enough teeth to enforce decisions.

“It’s a classical Irish situation, it’s all caught up in legalities, appeals and the whole process is moribund now and the Government needs to make sure ComReg has the right powers to force Eircom to the table to provide equal access for everybody on a fair basis. When that happens, the market will innovate.”

In recent weeks, ComReg lost its long-running court battle against Eircom over a directive to enable automatic migration for operators from bitstream to LLU. The High Court held ComReg could not use an enforcement order to compel Eircom to implement the decision in January that Eircom was in the process of appealing to an appeal panel. Critics warn that this could potentially hold up the onset of proper automatic LLU migration by at least a year.

Maloney’s colleague Peter Evans explained at present operators are unable to automatically migrate their customers that are on a bitstream line – a wholesale product provided to operators by Eircom – to a newly unbundled phone line. Instead the only way this can be achieved is by getting customers to disconnect for several weeks before placing a LLU order or otherwise must opt for a new telephone number. “Basically this knocks our plans back. We have no choice but to look at bitstream and wholesale products rather than build our own services. For the consumer that means little innovation or price-quality improvements for the near future. ComReg needs to be given powers to ensure its decisions are followed without having to go to court every time,” Evans said, echoing Maloney’s thoughts on the matter.

But Maloney believes there are other ways that the Government could enable real competition in the telecoms sector and expressed shock and surprise at the decision by the Government to award Eircom another year of a €60m a year contract to supply fixed-line and internet services to the public sector. His predecessor Murphy had been lobbying the Government for years to open up some of this business to other licensed telecom players.

Maloney explained: “I don’t think we should be given any part of the Government business, we have to earn it. And we are happy to go and earn that business.

“The big issue is that the Government is not bringing that business out to tender and this is a Government that supports free enterprise and competition in the market. Yet, its own contract doesn’t welcome it and it is inexplicable and inexcusable. At the same time we listen very intently to the direction the Government is giving about industry participating and doing its bit — we are prepared to do that — but at the same time we expect to Request for Quote for Government business and to me it was inexplicable. Nobody has come back and given a logical reason why the Government’s virtual private network contract was not put out to tender.”

In conclusion, Maloney has one of the most interesting jobs in this country and in the face of a country slow to embrace change, any success in the unfolding of a business plan in the Irish telecoms business is likely to be a resounding one.

By John Kennedy

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