TIF: demand, not supply, at issue with broadband

8 Aug 2006

Ireland’s ongoing problems in terms of broadband penetration are less to do with the supply of broadband and more to do with actual consumer demand and Ireland’s static PC penetration, the chairman of IBEC’s Telecommunications and Internet Federation (TIF) Gerry Fahy (pictured) told siliconrepublic.com.

Fahy, who is also director of strategy at Vodafone, said there was a need for urgent debate on the matter between all the stakeholders: the Government, the Commission for Communications Regulation (ComReg) and the industry.

Ireland has continuously over the past two years appeared at the bottom of various league tables such as the OECD’s, which ranks Ireland as 19th in the world in terms of broadband penetration. An EU report out earlier this year indicated that Ireland had only 5pc broadband penetration of population, compared with the European average of 11pc.

Fahy told siliconrepublic.com: “The industry has put together a committee to look at the broadband issue and to see what we can do to drive broadband harder. It was a supply issue for a long time but now there’s a lot of broadband choice for a large number of people and this is increasing all the time.

“Eircom is at present collaborating fully with ComReg as part of a process to work through the local loop unbundling (LLU) issues and this demonstrates a new maturity about dealing with the broadband question.

“Ireland can hardly logistically go any faster. The problem that I see, however, is that not enough people that can access broadband are taking it up,” Fahy said.

He agreed that while lots of people have PCs, penetration of PCs in the Irish market has been more or less static for the past three years. PC penetration in Ireland stands at roughly five out of every 10 households, despite the fact that one third of all PCs sold in Europe are manufactured in Ireland.

Fahy said: “If you haven’t got a PC then you’re not in the market for broadband. If you have a PC that’s over three years old, chances are it can’t handle broadband. From the industry’s perspective, it’s a demand issue and that’s what’s holding things up.”

Asked about the role of Government in stimulating demand for PCs, and in turn broadband, Fahy said that tax breaks were an obvious incentive that have yet to be tried out. “The Government can play a strong role in stimulating the purchase of upgraded PCs and community service. Another area would be education and encouraging people not to be afraid of technology.”

If tax breaks were to work, Fahy said that the Government should look at making it easier for individuals, families and businesses to get a rebate on the strength of receipts as opposed to getting an accountant to file returns.

Another area in which Fahy said there was much debate in industry was the plans by Government to award greater powers to ComReg, such as fining telcos. “The question industry has is what is the justification for those increased powers. We are wondering why there was no study or analysis into whether the regulator has used its existing powers properly.

“The Government is responding to pressure from ComReg saying they need more powers. We’re asking where and why have your powers failed you to date?”

In terms of increasing broadband in regional areas where telecom firms would argue it wouldn’t be financially viable for them to invest, Fahy agrees Government intervention and investment is necessary. However, he says that the Government needs to indicate whether the Group Broadband Scheme has yielded any fruit.

“It appears the Group Broadband Scheme is grinding to a halt and is not delivering the intended benefits. What this demonstrates to me is that there are certain mechanisms that work better than others and at the end of the day the market is the answer. If the Government were to put up a pot of money for rolling out broadband to a region, businesses would bid for it. That would be economically realistic.

“Capitalism, for all its faults, is highly effective. A firm that offers a keener price and more coverage than a competitor could win the business.”

Two years ago TIF member companies committed to investing €15m toward ensuring that every primary and secondary school in the country would have access to broadband. The Department of Communications, Marine and Natural Resources agreed to provide €3m towards the project.

Fahy said he was satisfied that by the start of this school year every school would have broadband but said it was only part of the answer. “There’s no point in building a road to someone’s door if they can’t drive or don’t own a car. We’re helping to build a road to the door of making sure that teachers are trained and confident in technology. We are trusting that the Government will do the rest of the job in ensuring that the schools have adequate PCs and networking and that the curriculum is built around the use of IT.

“Providing broadband to the schools is only 2pc of the solution; it is up to the Department of Education and Science to do the remaining 98pc,” Fahy said.

By John Kennedy