Broadband fever promises much for 2004

29 Jan 2004

Eircom will cut wholesale broadband prices to alternative operators from €27 to €23, the company revealed earlier this month. According to the incumbent player, its decision to introduce a low-cost 512Kbps broadband product at €39.99 per month will make it the cheapest out of 14 countries for this type of product.

The moves follow more than two years of bitter wrangling between Eircom, ComReg and alternative operators such as Esat BT over the high wholesale rates charged by Eircom, which Esat BT and others regarded as severely anti-competitive. While the plans to reduce the rate to €23 is some improvement, it is still higher than the circa-€15 rate proposed 18 months ago by former ComReg chairperson Etain Doyle.

The commercial director of Eircom, David McRedmond, commented: “We set a target of 100,000 broadband users by the end of 2004 and with approximately 34,000 broadband customers in Ireland today, we are well on the way to achieving this. With the introduction of this new broadband price, coupled with our plan to roll out broadband to every town in Ireland by March 2005, the country is set to reach the average EU penetration for broadband, which is at 6-7pc, by the end of this year.”

Cathal Magee, managing director of Eircom Retail, added: “Based on these wholesale prices Eircom Retail will be able to launch a product at €39.99 and we will be announcing plans soon for a range of new retail products to maintain Eircom Retail’s leadership in broadband.”

The announcement follows on from an Information Society Commission report that called for acceleration of broadband connectivity. The Minister for Communications, Marine and Natural Resources, Dermot Ahern TD, pledged to invest €35m per year between now and 2007 to broadband-enable 88 towns with populations in excess of 1,500 people.

Not to be outdone, national carrier Eircom revealed its own plans to provide 100pc of all towns with broadband connectivity by 2005, two years ahead of the Government’s plan. The former state carrier urged the Government to spend its money instead on towns populated by fewer than 1,500 people. Eircom also claimed to have 30,000 broadband customers in Ireland and 50,000 customers using flat-rate internet access. In addition, the company said that broadband penetration was up from 1pc to 2pc of the population in the past three months and claimed that “Ireland has the fastest growth curve in Europe for broadband takeup.”

User groups and telecoms industry players have reacted with dismay to Eircom’s decision to raise its line rental charges for the third time in less than a year. The telecoms provider confirmed this month that it is to increase its fees by 7.5pc to €24.18.

“I’m horrified at this decision,” says Nickey Brennan, communications manager at food processing giant Glanbia. “As an organisation that has a big investment in landlines because of the large of number of locations we have, this will have a major impact on our cost of doing business.”

He adds that the price increase is “indefensible” at a time when industry had been through rough times and felt it is a clear abuse of market power. “Eircom has such a dominant position. You can buy your voice minutes from another provider but you can’t get a landline from any other than Eircom,” he continues.

Others are condemning the timing of the announcement, which came just a day after Eircom announced applications for cuts in its broadband charges. “It does seem contradictory that it is announcing a decrease on the broadband side but on the other hand it is increasing line rental changes affecting PSTN and ISDN users,” remarks Siobhan Masterson, spokeswoman for the Telecom Users Group within IBEC.

She predicts that small business would be worst hit by the price rise. “Small businesses are already struggling with enormous business costs. Now they’re having to deal with another big cost increase,” she says.

Defending the price rise, an Eircom spokesperson says that in overall terms residential and business phone bills had fallen significantly since 1997 and were among the lowest in Europe.

He adds that Ireland’s low population density was the reason why rental charges were among the highest in the EU and that the money accrued from the price increases would be reinvested in telecoms infrastructure, including broadband.

By John Kennedy