Meeting the national telecoms challenge

30 Mar 2005

A recent report from IDC found that Ireland needs to improve the rate of public access to the internet, particularly to broadband, if it is to improve its position relative to other European nations adopting e-government. This is the latest in a string of reports that shows Ireland as being behind our neighbours in the telecommunications space.

“I agree we need to catch up,” says David McRedmond, Eircom’s commercial director. “We need to pull out the stops and Eircom has made three very significant moves in that direction. The first is we have set a target of having 500,000 users by the end of December 2007. Now we are a public limited company we do not set our targets lightly. By our estimates, and we are supported in this by various analysts, this will put us above average European penetration levels, even taking into account growth by other European operators. We can’t go much further than that because that’s the number of homes that have PCs at the moment.

“Secondly, we have said when we hit our target to bring broadband to towns with a population of more than 1,500 we will bring broadband to the next 200 communities. This will mean it will be available to 90pc of the population. But we’ve also said let’s not stop there. Let’s go for 100pc with help from the Government.”

The third development, he says, was the recently announced doubling of speeds for the company’s broadband products. “We are doing this at a wholesale level,” he says. This means the 30,000 to 40,000 broadband users who get their service from another provider will also benefit. “Our strategy is to get broadband to as many people as possible as inexpensively as possible and this is part of that strategy. We will be at the vanguard of speed across the country.”

Oisín Fanning, CEO of Smart Telecom, has a simple answer to the question of what needs to be done: “Allow access to Eircom exchanges for local loop unbundling [LLU] in a more expedient manner.” Fanning, whose company is in the news with its offer of 2Mbps residential broadband service with free voice calls for €35 per month, is aggrieved that from the time he applies to unbundle an exchange, it can take anywhere from between five to eight months to gain access to that exchange. “I can get access to a corporate customer from a metropolitan area network [MAN] by digging up the road and laying fibre within six weeks. While Eircom can’t allow just anyone to walk into its exchanges, the time frame has to match European standards where eight weeks is the average. It will only be players such as ourselves that fully unbundle the loop that will drive innovative products to end users.”

McRedmond responds that it is unfair to compare Irish exchanges to European ones. “Every network is different so you are not comparing like with like. Until last month we had no complaints from operators; we had no delays and we had no backlog. Now I accept we had very few orders but that was because our wholesale offering was attractive.”

According to Tony Barrett, higher executive officer at the Department of Communications, Marine and Natural Resources, part of the problem arises from the fact that the government sold off the telecommunications infrastructure when Eircom was sold. “The wisdom now is we should have kept a measure of control over exchanges. But seven years ago there was a boom under way and people were making a lot of money in telecommunications. The feeling was that it would be in the national interest if we took the shackles off the company. Unfortunately, a short time later, the bubble burst and there was nothing done for three years. It was only in March 2002 when we looked at the playing field and saw we were behind that we set targets.”

Barrett has some good news. “We’re not as far behind as one might think. User growth from 2002-2005 has been 68.3pc.” In addition, he says, the Government is investing in the MANs that will deliver broadband to 120 towns and cities in the country. In addition, the Government is funding group broadband schemes. “Some 31 schemes have been approved so far and there are a further six in the pipeline,” he says. “New technologies such as WiMax will push out the range of broadband even further. In the end, whatever mistakes have been made in the past will be undone by the provision of broadband at reasonable prices everywhere.”

Last June E-Net was selected by the Government to act as the managed service entity running the State’s €70m investment in MANs. “Our objective is to encourage all interested carriers to come and offer services on networks,” explains John Lawlor, marketing director at E-Net.

“We are offering open access infrastructure. Infrastructure owned by private operators tends to be restrictive when it comes to competitors. However, all licensed carriers can have services on MANs. We already have a whole range of operators from large fixed-line to small wireless operators.”

There has been criticism that MANs are similar to motorways without any on-off ramps and that they can be hard to access. “The MANs are a big piece of the national broadband jigsaw puzzle,” says Lawlor. “What we have started to do is link them together. We have backhaul providers such as ESB and Esat BT that are delivering service into our co-location centres. They are connecting Dublin to Cork, Cork to Limerick and so on. Some are linking to INEX for access to the world.

“There are fibre drops inside the towns, for example in Limerick there are fibre drops all along O’Connell Street. These would be the equivalent of the on-off ramps. In some towns, such as Letterkenny, we are bringing fibre directly from a drop point into a business. In other areas, the wireless operators put a mast on the edge of the MAN to reach the hinterland and use our backhaul. Then you have other operators that unbundled the local loop and bring those connections back to the drop point.”

Bill Murphy, CEO of Esat BT, believes there is still a lot to do and LLU is part of it. “There are two things holding Ireland back,” he says. “The first is the slow roll out of wholesale broadband, the enablement of exchanges and price. The wholesale price of broadband is far too high so retail prices are far too high. We need mass market broadband at €20. The second is slow LLU. Eircom has to wake up and smell the coffee and embrace LLU. It should have confidence to take on the competition. It initially fought broadband but now it’s part of its strategy. Two years from now it will ask itself why it opposed unbundling.”

“That’s unfair,” counters McRedmond. “We have the confidence to take on the competition. The issue of the price of broadband, wholesale or retail, is always going to be debatable. We’d like to have price as low as possible but we have to roll out the service and price and investment are two sides of the same coin. We are obliged to recover costs and as it happens we are selling wholesale broadband at a loss. We are doing so only because we believe we can recover our cost in the long term. Having said that, we would love to be in a position to bring down price.”

Not everyone is blaming Eircom, however. Paul Doody, CEO of Irish Broadband, which provides wireless broadband internet access, is sympathetic to the incumbent’s position. “We can’t be blaming Eircom for the fact we have no broadband. The people in Eircom probably made the right strategic decision at the time in that there probably wasn’t capital available for investment in new technologies and no one could have foreseen how it could have grown. The problem with the copper infrastructure is it’s there, it’s 100 years old. It made strategic sense at the time to split lines and put in bridge taps but they act as a barrier now to DSL.”

Nor is he in favour of dropping prices. What is needed now is greater investment in the local loop. “The greatest danger at the moment is there is a body of opinion that says we should be dropping prices and forcing everyone to try to deliver services. If we drop prices to the floor we are going to get people propagating a resellers’ market and it will be hard to find companies able to justify investment in the last mile because the return would not be there. That’s the quandary we are in.

“One of my frustrations is that you hear people proclaiming that broadband prices must come down. If you look at how broadband can transform a business it is an inconsequential cost. So what we should stop doing is trying to convince people that broadband should be €20 per month. Your broadband connection is going to be much more valuable than your phone line. It’s just going to transform your business.”

According to Doody, higher prices will mean higher margins for operators, which will encourage greater investment and ultimately better products. However, the Government also has a role to play. “The Government has to encourage people to become more broadband savvy,” he says. “In the UK, there are subsidised training courses and connections.

“To date the emphasis has been on supporting the MAN investment. Any sort of investment in broadband is good. But there has been too much emphasis on the MAN strategy. The MANs are going around the towns but it’s similar to building a motorway with no on-off ramps. If you want to provide service to homes you are going to go out and stop traffic and dig up the road. It’s not going to happen. Digging up the road to provide connectivity is massively expensive and hugely problematic. That’s where wireless will come into its own. We can feed off a MAN and provide service. But it is wireless connectivity into the last mile that is the most economic way of providing a service.”

Murphy is of a similar mind. “MANs are an investment for the future,” he says. “But we need people using PCs and connecting to broadband today. The MANs address capacity around towns but not the local loop.”

Murphy also agrees with Doody that people need to become more broadband savvy. “We need a bold vision to say we will get into the top three in terms of PC use and internet connectivity,” he says. “Look at Sweden where PC use has approached 90pc. People in Ireland are not using PCs. The workforce coming through is not PC literate. We need to get the Government and the industry and education sectors together to say we need to train, stimulate and make people aware that this is important to our economic survival. If you give someone who is unemployed the ability to type and use a PC he or she becomes employable. Give a child the idea of how a PC works he or she will eventually be employable. The Government should be applauded for taking the right step with the Broadband for Schools initiative. It’s a good first step.”

By David Stewart