On the threshold of great things?


17 Dec 2007

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The battlefield that is the Irish telecoms market is crisscrossed with dashed hopes and unmet expectations.

A much-lamented sector of the battlefield, a virtual no man’s land, is the thorny subject of broadband and the conundrum of why a strong economy like Ireland has in the past 10 years performed so pathetically in this area.

Amid the shell-pocked landscape where the occasional thud of blame is occasionally interrupted by the rattle of rhetoric, green shoots begin to emerge.

John Doherty of the Commission for Communications Regulation is a veteran in the campaign for Ireland’s 21st century infrastructure; prior to joining the telecoms regulator he helped sow the seeds of our e-commerce industry with IDA Ireland. Despite having to referee and negotiate the local telecoms industry, he is feeling optimistic.

“We passed the 700,000 threshold for broadband subscriptions in June and we will be reaching 800,000 by the end of December this year. On top of that we have around 100,000 people subscribing to HSDPA (high speed downlink packet access) mobile broadband services,” Doherty says.

“It is really beginning to take off, especially on the mobile side – our nation’s love of the mobile phone is very strong. We’ve a young population that is very adaptable when it comes to technology and we’re seeing strong competition and choice in the market.

“Vodafone’s acquisition of Perlico shows that large mobile companies are keen to enter the fixed line space and O2 has stated its intent to go in this direction also. Broadband is moving to a point where we’re going to swiftly catch up with the European average. Key to this is choice in terms of wireless, fixed line, cable and all other forms of broadband access,” he adds.

Doherty admits valuable time has been lost as a result of skirmishes over local loop unbundling (LLU). “But the industry has got its act together and a lot of things are coming into play. The Irish telecoms customer can look forward to an application-rich environment enabled by higher speeds. The next piece in the puzzle is preparing the market for the onset of next-generation networks (NGNs).

Like a dog with a bone, the telecoms industry in Ireland has seized the NGN debate with relish – long before any form of NGN has actually been deployed.

Doherty describes NGN as a euphemism for a much more detailed set of work that has to be carried out before Irish telecoms customers can enjoy future services.

“The first piece to this is the NGN core – this is the transport level that aggregates data and moves IP traffic. Telecoms operators view this as a way of reducing operational costs – BT for example will save €1bn a year as a result of deploying its 21st Century Network (21CN). This will come about because there will be fewer exchanges compared with the traditional system.

“This will drive a range of products that include everything from IPTV to video-on-demand and high-definition TV over internet on connections that exceed 10Mbps. It is an exciting business paradigm that is moving in an unstoppable way.

“The other thing that is happening and that needs to be studied is how we can ensure a fair and competitive landscape for everyone. The key hurdle here will be the economics of the industry. If you go to a traditional exchange, it is likely to be serving 20,000 homes.

“However, an NGN cabinet on the kerb may only be able to serve about 1,000 homes. That changes the economics substantially for an alternative operator. It will need to win a major share of those homes in order to get its economics to tally.

“The fundamental challenge for ComReg is to ensure that there is no disruption to customers and that they can all benefit from enhanced services. And at the same time ensuring that alternative operators can offer products and services on an equal basis.”

He agrees the NGN debate creates a tantalising opportunity for the market to put behind it the trauma of LLU. “It is an opportunity to not only catch up but leap ahead. But in order to do so it requires all sides co-operating and being transparent.”

In recent weeks the European Commission put forward its plans to create a single European telecoms market. Doherty says it is too early to be alarmed if it means any significant problems in regulating the Irish market.

“There are many good things contained in the European Commission’s proposals such as policies that enshrine customer care and protection. Whilst deregulation is welcomed, however, not all countries are the same and national regulators are needed to stay in place.

“Our concern would be whether it would mean additional layers of bureaucracy or a central body that is far removed from a particular market to understand specific complexities. For example, the UK telecoms market has been deregulated for 20 years, but markets like Latvia are only getting into place. So the main thing we want is for national regulators to have flexibility in their decision-making. One size does not fit all.

“National regulators will continue to be in place and the overall body is intended to be purely advisory, but we would be adamant about there being no overlaid level of bureaucracy. It is still early days.”

Another thorny subject on the horizon for the Irish market is the issue of Eircom preparing to split its wholesale and retail divisions. The incumbent has already submitted a proposal on a structural splitting of the divisions into separate companies. Another possibility is the functional splitting of the divisions into two groups within the same company, in a similar fashion to what BT did in the UK almost three years ago.

“The EU has brought in functional separation as a remedy of last resort for regulators and countries like Sweden are pushing for it. The UK is the only live model in the world of functional separation and there is no actual precedent in the world for structural separation.

“We’re studying all the options and we’re doing so in the context of Irish consumers and businesses. It is a complex issue and will take time to resolve,” Doherty concludes.

By John Kennedy

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