Magnet to unbundle 40 exchanges by year’s end


20 Oct 2006

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The owner of Irish broadband player Magnet Networks, Ken Peterson (pictured), told siliconrepublic.com that the company aims to have unbundled 40 local exchanges across Ireland by the end of this year, giving the company access to a significant portion of the country’s population for broadband services.

Magnet Networks is making an ongoing investment of €65m in its network rollout and now has more than 30 exchanges unbundled across the country, of which 12 are now enabled for synchronous SDSL. The operator’s national fibre optic network links Dublin, Cork, Galway, Limerick, Portlaoise and Waterford and interconnects with the Government’s metropolitan area networks.

Symmetric broadband services offers the same upload and download speeds, unlike standard ADSL which has faster download than upload. SDSL is pitched at businesses that typically need to send very large files, host a website from their premises or use applications such as voice over internet protocol (VoIP) where business-class call quality is required.

In an interview with siliconrepublic.com prior to yesterday’s Telecommunications and Internet Federation (TIF) annual conference where he was a speaker, Peterson said that the company is now reaching the end of its existing capital expenditure path.

“The majority of our capital expenditure is behind us. We have built out our national network and so far have unbundled over three dozen exchanges and by the end of the year we will be at 40 exchanges,” he said.

Magnet Networks came into being in December 2004 when Peterson’s investment firm Columbia Ventures Corporation (CVC) bought Leap Broadband, which was set up by brothers Charlie and Rory Ardagh.

CVC owns extensive telecoms assets in the US, Europe, and Australia. CVC’s other Irish interests include the ownership of Hibernia Atlantic, owner and operator of Ireland’s only direct fibre optic with North America and the UK in the form of a 12,200km submarine cable system.

Peterson made his fortune in the US by buying aluminium plants while at the bottom of an economic cycle and later selling them on when prices recovered. He describes CVC’s style of buying businesses at the bottom of an ebb as “contrarian”, focusing on opportunities that the investment world tends to overlook.

An example of this would be the acquisition of a smelting plant in Iceland. Peterson, as a result of his investment in broadband services in Iceland is also credited with helping position that country at the top of OECD league tables.

He displayed similar prowess in Ireland in recent months when he sold the former 360 Networks data centre in Clonshaugh to US real estate firm Digital Realty, which in turn has secured Amazon.com as its anchor tenant.

The data centre that Peterson has sold to Digital Realty was acquired by CVC four years ago along with a 12,200km transatlantic network for US$18m. The data centre and the trans-Atlantic cable system was originally built in Dublin at a cost of €900m and was sold for the €18m when 360 Networks filed for Chapter 11 bankruptcy.

Peterson said that he felt strongly that the regulatory environment in Ireland needs to improve if the country is to make serious headway. Another factor is Eircom and the industry working faster to speed up the transfer of customers between networks.

“You need to have a regulator that has the authority and the will to do what is necessary,” he said. “That means creating a competitive market out of a former State-owned monopoly. You’ve got to remember that the Irish nation created the network now owned by the incumbent. Such a network will never be built again because the costs of running services to every home are prohibitive.”

“To have a competitive environment in Ireland, competitors to Eircom need to be able to access that network. That is what is not fully mature in Ireland. However, I think that while Ireland is behind in these issues, it is not unique. Incumbents act in their best interests. We saw this in the US in the late Nineties and it was only three or four years ago that the competitive landscape began working.”

Peterson said that at present the current method of transferring a newly acquired customer from Eircom’s network to Magnet’s network was complicated for customers. “If at present you want to switch provider there are a lot of hoops you have to jump through that are pretty daunting such as signing termination orders and waiting to be connected.

“It should be instant and simultaneous. For a customer to change network in the present environment you would have to be pretty determined to change provider,” Peterson said.

By John Kennedy