IDA to fund INEX expansion

18 Feb 2005

In an unprecedented move, IDA Ireland is to underwrite the provision of key telecoms infrastructure that is seen as important in attracting inward investment to Ireland.

The development agency is to make a loan available to the Internet Neutral Exchange (INEX) that can be drawn down over a three-year period. INEX is the Irish internet hub where internet protocol (IP) traffic is exchanged between carriers, internet service providers (ISPs) and digital content providers. The size of the loan was not disclosed but sources close to the deal put it at “the upper end of six figures” – or pushing €1m.

The money will be used to fund the expansion of INEX from being a national to an international facility. Specifically, the money will be used to create new server capacity as its Telecity data centre in Citywest Business Campus, Co Dublin, light up fibre between Citywest and its sister facility at Data Electronics in Clondalkin and establish marketing offices that will be used to secure new business from a range of international ISPs, telcos and digital content firms.

Additionally, IDA Ireland will sell the INEX facility to prospect companies around the world through its overseas office network.

Underlining the unique nature of the deal, Kevin McCarthy, manager of telecoms infrastructure within the IDA’s strategic business group, described it as “new territory” for the IDA.

“It’s an infrastructural deficit and for us as an industrial development agency there are obvious benefits to addressing this issue,” he said.

Inex is not for profit company owned by its members, the telcos and ISPs that use its facilities. It is limited by guarantee, meaning that if it ever went bankrupt the members would only be liable to the amount equivalent to the nominal value of their shareholding, ie €1.27 each. Raising money from banks was thus never an option, which is why the IDA agreed to fund the enterprise.

McCarthy acknowledged that the investment was partly being driven by Ireland’s growing reputation as Europe’s digital content hub. A growing number of US-based dotcoms are choosing Ireland as their European HQ – the latest being Yahoo! earlier this week – and these companies expect Ireland to have an international quality IP traffic hub as part of its telecoms infrastructure. McCarthy insisted that having such a facility in Ireland was not a condition for those firms to invest in Ireland but it provided “an extra tool in the kitbox, an extra leverage.” He added: “We’ve discussed our plans with them and they see it as a positive step.”

McCarthy was convinced that the facility would attract new investment. “We definitely reckon we will attract more investment, there’s no doubt it. We are already talking to a number of [potential candidates].”

Every other European country has an international internet exchange and the Forfás Digital Content Report in 2002 recommended that Ireland also acquire such a facility in order to attract dotcoms such as digital content firms.

“We’re following rather than leading on this one and it’s about time we got cracking on this,” said McCarthy.

Eileen Gallagher, recently appointed head of marketing at INEX, said that the deal would allow the exchange to accelerate its growth strategy. “It will enable the exchange to jump up a full level. Previously it’s grown number by number. This will allow us to grow exponentially.”

The number of customers using Inex has grown from 10 to 17 in the last quarter and Gallagher expected that this number to exceed 40 by the year end.

The opening of the new Telecity facility represents the next phase of development for the exchange. Final equipment tests are currently being conducted and dark fibre between the facility and Citywest – provided via the T50 fibre ring – is expected to be lit by the end of the month, according to Gallagher. Initial customers include Microsoft, Internet Ireland and Strencom. Membership costs €2,000 a year, plus an additional port charge that ranges from €5,000 for a 100Mbps connection to €9,000 for a 1GB per second link.

Barry Rhodes, managing director of INEX, said that INEX’s ultimate success would depend on attracting in enough members to encourage more members to join in turn. The model was based on generating a community of members who would all see the benefit of membership, he said. “The more members we have the better it is for everyone. When someone joins in, it makes it more likely someone else will join. We also want to keep cost down for members.”

INEX members already include a range of ISPs, telcos and digital content firms, such as WiMax provider Cleanwire, Cork ISP Strencom and broadband provider Digiweb as well as established names such as Esat BT, Eircom and Cable & Wireless. Rhodes said that he would now be lobbying Ireland’s raft of newly arrived dotcoms such as Google, Overture and Yahoo! as well as a range of international tier 2 telcos including Tiscali, Level 3 and Belgacom, to join the exchange.

Welcoming the INEX expansion, Minister for Enterprise, Trade and Employment Micheál Martin TD, said, “This international internet hub is a critical part of Ireland’s infrastructure, as highlighted by the Forfás report. The development of the INEX internet exchange will enhance the attractiveness of Ireland to companies looking for an international location for their operations. This will be world-class infrastructure attracting world-class companies.”

By Brian Skelly