Dear Ireland: put the €854.6m 4G windfall into broadband infrastructure

16 Nov 2012

Christmas came early for the Irish Government yesterday with the news that four telecoms companies committed to paying €854.6m – including €450m which will be paid this year – for their respective licences. Does this not represent a clear opportunity to finally get to grips with Ireland’s broadband problem?

The Budget is looming and that means every lobby and advocacy group will be sending proposals for what money should go where. None of these demands will be easily met because the State’s coffers are pretty empty for reasons we are all aware. And most of us are dreading where the fiscal axe will fall next upon our lives.

As we’ve pointed out before, the digital economy represents one of the clearest opportunities for Ireland to put its economy to rights.

There is an intrinsic link between broadband rollout and job creation, and a country with 14pc unemployment cannot continue to ignore this reality. Some 5,000 technology jobs were created this year alone and by investing in this infrastructure we are making it possible for ordinary businesses and private individuals to be part of the digital economy.

Yesterday, Vodafone, O2, Eircom and Hutchison 3G Ireland agreed to pay €854.6m for their 4G licences. Out of this, €450m will be paid upfront.

It is likely that the first 4G network services will be offered to Irish consumers as early as February or March of 2013.

Communications Minister Pat Rabbitte acknowledged that the proceeds of the auction were greater than people expected and took it as a statement of confidence in the Irish economy.

Now it’s the turn of the State to make a statement of confidence in the digital economy.

A statement of confidence

As well as the €450m paid up front, that leaves another €404m or so that will be paid in instalments of roughly €50m a year up until 2030 by the four telecoms companies.

The common lament about broadband infrastructure from the succession of communications ministers has been the lack of available funding for broadband infrastructure, including during the boom years.

The reason for this has been up until now digital infrastructure just wasn’t viewed as being as important as roads, water or electricity. But that is changing.

In August, Rabbitte launched Ireland’s National Broadband Plan, laying out targets to achieve:

·      70Mbps-100Mbps to more than half of population by 2015

·      At least 40Mbps (faster speeds in some cases) to a further 20pc, possibly up to 35pc, in smaller towns and villages

·      Minimum of 30Mbps for every remaining home and business, no matter how rural or remote

A State investment of €175m has been envisaged for the implementation of this plan, which is largely in light with the EU’s Digital Agenda targets.

At the time, the minister said the faster speeds will come from ongoing industry investment, the release of spectrum for 4G mobile services this year, and State investment.

When I spoke to Rabbitte, he pointed out that the task at hand isn’t just financial, it means getting buy-in from all the entities in the State to prevent red tape getting in the way of investments, such as 4G masts and making use of public buildings.

In term of how the National Broadband Strategy will be paid for, he said it will be a combination of EU State Aid and his department’s own capital programme, including a share of the disposal of State assets, such as Bord Gáis Energy.

Another issue he pointed out was how the State Aid process is labyrinthine and painstakingly slow.

An incredible opportunity for Ireland

Yet, when you look at the kind of money these companies are putting into this – as well as having spent €1bn and €900m respectively in the last decade on their networks, O2 and Vodafone plan to invest hundreds of millions in their networks in the next few years – it is incredible.

Vodafone says it plans to invest a further €500m over the next five years in its network and O2 says it plans to invest €200m over the next three years in its network.

They are taking an incredible punt on the future of the economy and on the Irish consumer’s ability to pay for services that will generate the cash to enable a return on investment. 

They are making a statement of confidence in the digital economy. So the State has to step up to the plate.

Stepping up to the plate

There are issues that need to be addressed: we need networks of dark fibre to join up existing investments in metropolitan area networks surrounding 94 towns; we need fibre to the homes and fibre to the base stations and all of this needs to be future proofed. Companies like E-net have warned that State intervention is unavoidable and a portion of the windfall should be directed at the national digital infrastructure deficit.

The 100Mbps to schools by 2014 sounds impressive. But what if these schools and nearby businesses need 1Gbps by 2020 to be barely relevant in the economy of that time? In the US, Google is rolling out 1Gbps broadband across the city of Kansas.

Vision is imperative here. We can’t afford to see a digital version of M50 debacle unfold.

Well, I’m not a minister or a civil servant, but from where I’m standing, €450m up front and €50m a year for 18 years thereafter looks like manna from heaven. OK, we need money for hospitals, schools, roads, public transport and we need to get people back to work. No one wants to see another cent in this economy wasted on exorbitant public service pensions or bankers’ salaries. This has to be put to work.

Speaking of getting people back to work, job opportunities are being lost due to poor quality broadband in people’s homes. Poor quality broadband is already hurting businesses.

So to my mind a line has been drawn in the sand. The telecoms industry has staked its bets on the digital economy delivering and has put €450m on the table with a further €404m to follow up to 2030, along with more than €1bn in capital expenditure in the next two to five years.

There is now no excuse. None whatsoever.

Only 3.4pc of GDP in Ireland comes from the internet economy, compared with 7pc of GDP from the UK’s internet economy, according to Boston Consulting. Some €3bn is spent online every year by Irish consumers and 70pc of this flows out of the country to overseas websites. Less than 70pc of Irish firms have websites, and of these only 22pc are capable of conducting e-commerce transactions.

Visionary leader Sean Lemass famously said a rising tide lifts all boats. We have a golden opportunity to raise all boats again, let’s take it.

High speed image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years