Bridging the divide


23 Feb 2006

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Policy makers and pundits love to acclaim Ireland’s status as the Silicon Valley of Europe with almost 100,000 people employed in the ICT industry and seven out of 10 of the world’s biggest technology companies having a substantial base here. But if the pessimists are to be believed we are the sick man of Europe when it comes to low broadband and internet penetration and static PC penetration.

Commentators have been warning of a growing digital divide between the technology haves and the technology have-nots, a situation that could degenerate into a social and economic chasm if it isn’t stemmed soon. We asked the various stakeholders for their opinions on broadband penetration, PC penetration and offsetting the threat of a digital divide.

The Minister
Name: Noel Dempsey TD
Position: Minister for Communications, Marine and Natural Resources

It was estimated that almost half of Irish households possessed a PC by 2005. A US Census Bureau report late last year estimated that the comparable figure for the US was 62pc. Indeed, recent market research has indicated that Irish households are expected to spend €45m on PCs in 2006 and that 74pc of 17-25 year olds have access to a home PC. Roughly five out of 10 households have a PC and two out of 10 households have broadband. In terms of international competitiveness, it is important to note that almost all SMEs have a PC.

The broadband penetration rate now stands at 6.4pc of the population, compared to 1.6pc in mid-2004. The current rate of new take-up for broadband is in the region of 10,000 per month and continues to grow. The low take-up of broadband in Ireland reflects the late launch of competitive, affordable broadband by private broadband service providers in Ireland and the weak nature of broadband infrastructure competition.

The situation, however, is improving rapidly. The broadband industry in Ireland is experiencing particularly strong growth and the launch of new services indicates it is an attractive market from an investor’s perspective.

In late 2004, the Government set a target for industry of 400,000 broadband subscribers to be achieved by the end of 2006. Subsequently, broadband subscriber numbers have almost doubled. The latest Quarterly Data Report from the Commission for Communications Regulation on broadband delivery rates indicate that broadband subscriptions have grown by 19pc over three months as of September 2005 and stand at 208,000. The estimated end-December 2005 figure for broadband subscribers is approximately 250,000.

We are the lowest cost country in the OECD for international connectivity; our regional broadband pricing is now on a par with the best in Europe and the price of basic broadband access is at the EU average. Furthermore, Ireland is now one of the cheapest locations in the world for international leased lines.

We do not believe that anything in Ireland exists that could be termed a digital divide. Naturally, infrastructural development tends to occur in urban areas before it spreads to rural areas. The Government deemed this delay suffered by rural areas was unacceptable and developed the County & Group Broadband Scheme (GBS). To date, more than 150 projects have been approved for funding covering 450 communities.

The Telco
Name: David McRedmond
Position: Commercial director, Eircom

Ireland must look at proven demand stimulation initiatives successfully applied by other countries. Measures introduced by other governments to stimulate PC and broadband penetration include tax relief on PCs, training programmes, expanded e-government services and promotional campaigns.

The UK’s Salary Sacrifice campaign allowed the cost of a PC to be deducted from employee’s gross salary, thereby passing the tax savings on to the employee. It resulted in PC penetration increasing from 33pc to 62pc between 1998 and 2004. Sweden, which has the highest PC penetration in Europe, operated a similar scheme called PC Privé. More than 550,000 Swedes purchased computers and penetration increased to 80pc. In addition to tax breaks, training, equipment provision and PC promotion have been used in some countries to great effect. In Denmark, 650,000 PCs were added in 18 months as the Government promoted teleworking.

The Eurostat data [on broadband] dates from July 2004 and broadband penetration rates have grown significantly since that time. Last December, Eircom announced that there are now more than 200,000 DSL broadband connections in Ireland. Using the industry-recognised ECTA methodology, this means broadband penetration in Ireland at the end of 2005 now exceeds 15pc.

By the end of next month, nearly 90pc of all telephone lines across Ireland will be connected to a broadband-enabled exchange. The question is how we address the remaining 10pc. Ribbon development and the proliferation of one-off housing exacerbate an already challenging population distribution. Eircom has rolled out broadband where commercially viable, but if Eircom was to fund the remaining 10pc of lines broadband prices would have to increase sharply. We have recommended to the Government that the Group Broadband Scheme be modified so that a single tender be issued for all the remaining exchanges, rather than the current community-based piecemeal approach.

The Citizen
Name: Damien Mulley
Position: Spokesman for Ireland Offline and Digital Rights Ireland

In every other developed nation a PC is a multi-use product. It is there for doing administrative tasks, entertainment and most importantly communicating. What is the point in buying a PC in Ireland if all it becomes is an expensive word processor or aid to doing your accounts?

As a result of broadband, PCs are used for tuning into radio and TV stations from all over the world, for talking to people in America or China using voice over internet protocol, for updating blogs, for downloading software that will make you do your work more efficiently, for connecting to the office from home and accessing all your documents and working on them over the net.

It isn’t like Irish people are luddites or are afraid of technology. In Ireland X-Box and PlayStation ownership per head of population is one of the highest in the world. We love our mobiles and are addicted to texting. We’d love our computers too and use them a lot more if we could make full use of them but we can’t because of connectivity.

The Government needs to make internet access affordable and available so that people can get value for money out of their PCs. At this stage too the Government should consider creating incentives for purchasing PCs but unless connectivity is also resolved they will only be used to gather dust.

The Search King
Name: John O’Herlihy
Position: European operations director, Google

If we want to realise the full potential of the knowledge economy Ireland needs to incentivise PC ownership, perhaps through a tax concession. Because of the size of the country, there could be a partnership approach; encouraging employees to purchase a PC for the home environment with fiscal support or incentivisation from the Government and their employer. It will ultimately benefit not only the economy but also society as a whole.

It is unlikely that there is a company out there that has not selected Ireland as a location because of its broadband infrastructure, but low PC and broadband penetration may make the country appear less competitive. Certainly, broadband is one factor that can support innovation and competitiveness.

Without a high level of either PC penetration or broadband penetration, the other suffers. If Ireland does not encourage higher PC penetration and enable more broadband access, with 100pc support, naturally a digital divide at some level will occur. There is an opportunity to encourage initiatives such as community projects, especially in education, to encourage higher rates of PC penetration and broadband access.

The Software Giant
Name: Joe Macri
Position: Country manager, Microsoft Ireland

Ireland has consistently lagged behind its European neighbours on the issue of PC penetration — moving forward; unless the issue is addressed it is likely we will also fall behind some developing economies. It is my view that we need to start with the basics and ensure measures are put in place that will help increase access to PCs amongst children of school-going age — both at home and in school.

Ireland’s continuing economic success is dependent on increasing our overall productivity. Technology in general — and PC access and broadband penetration specifically — have a critical role to play in helping individuals and businesses increase overall productivity gains. Ireland needs to address these fundamentals if it is to be in a position to maintain its competitiveness in the future.

It is clear that a digital divide does exist and that it breaks down along economic, urban/rural and educational lines. In addition, a fact that is often missed is that many people with disabilities often find themselves on the wrong side of the digital divide when arguably they are the ones who could benefit most from access to technology.

The Services Player
Name: Martin Murphy
Position: General manager, HP Ireland

In order to drive PC penetration we need to create demand by putting incentives in place. The cost of PCs is continually being driven downwards, but that alone is not enough. Incentives must be put in place to help achieve the 80pc+ penetration rates we can aspire to. For example, incentives could take the form of tax credits on PC purchases for households or employers. Such a scheme is already operating successfully in the UK.

The Government has done some good work by making sure every school has access to broadband, which is a leap forward, but it doesn’t go far enough. At the root, I don’t feel the market has grasped the benefits of broadband and this is a major barrier to success.

Low PC and broadband penetration would be very damaging for Ireland’s long-term competitiveness. Unless we aspire to get a PC in every Irish home, business and school — from primary school up — our graduates will be entering the workforce inadequately equipped and where they will be competing with graduates where PCs are part of the DNA.

The Manufacturer
Name: Tim McCarthy
Position: General manager, Dell Ireland

The availability of high-quality low-cost PCs has been a feature of this market for quite some time. Despite this fact, penetration has stayed relatively static and we still have not reached the 50pc penetration mark. It is clear that further measures are required to stimulate demand.

As an industry we have long campaigned for the introduction of fiscal measures which would help to incentivise employees to purchase PCs for home use through their place of work. Initiatives such as these have been used effectively in Sweden for many years and the results can be seen in that country’s penetration rates.

A digital divide is present in Ireland with a gap existing between the haves and have nots. This is true of all sectors of society and amongst all age groups. Those that are in particular danger of being left behind are those on lower incomes and the elderly. There is a need to address the issue of IT access at schools because if we do not give our children the basics at school they might never catch up.

By John Kennedy