Ahern draws broadband battle lines

29 Oct 2003

At last year’s TIF conference, Minister for Communications Dermot Ahern TD, announced he was going to mandate the introduction of flat-rate internet access (FRIACO) to accelerate the adoption of the internet in Ireland. This year, the minister dropped no such bombshells but left no one in any doubt that he would take whatever action was needed to deliver broadband nationwide.

Noting that 80 large towns were losing out because the market was not providing the necessary telecoms infrastructure, the Minister tersely commented: “It is simply unsustainable that this infrastructural deficit is not being met. I want that deficit addressed in a pro-competition, pro-choice and low-cost fashion.”

In Churchillian fashion he continued: “I certainly will not stand idly by while towns such as Newbridge, Maynooth, Ardee, Mitchelstown, Roscrea and Cobh do not even have a basic DSL broadband service. Plainly, Ireland cannot preside over a culture of regional broadband indifference. The case for broadband is as strong now as the case for providing digital exchanges 20 years ago and the rewards are potentially more promising.”

The Minister took the edge off his implicit criticism of the telecoms industry by praising its efforts in rolling out new communications technology. He noted that 39pc of Irish adults have internet access in the home, 80pc of small businesses are online (albeit mainly through dial-up services) and there are now 3.1 million mobiles in the State. “There is much to celebrate in how the sector has changed,” said the minister approvingly.

He also acknowledged the commercial reality that telcos will not build infrastructure where there was no return to be had. “There are parts of every European state where broadband is not economic to implement for return on capital reasons. In these cases, I think it’s perfectly reasonable for government to intervene.”

Government intervention – indeed invention – was also high on the agenda of Denis O’Brien, telecoms entrepreneur and tax exile. His presentation – a gripping analysis of the causes of the telecoms crash – began with a predictable reference to his tax affairs. “It’s nice to be back in Ireland … for a few hours,” he quipped. But the heavy armour was not long in coming. His fired his first salvo at the EU for creating the conditions for the telecoms bubble through its infatuation with 3G auctions. Next he took pot shots at telecoms equipment manufacturers for hyping 3G technology and at the Government for going along with it in order to maximise its licence revenue. But he saved his howitzer round for the technology itself: “Everyone knows 3G technology is unstable, difficult to roll out and, above all, lacking a killer application.”

O’Brien’s only real words of praise were directed at the Minister whose vision of a broadband Ireland he warmly welcomed. “Ahern really gets it,” he remarked, before urging the minister to extend his 19-town fibre network rollout to cover 150 towns around Ireland with 1,500 people or more.

For O’Brien the grand irony of the whole 3G debacle was that each party felt sure it was a winner whereas in fact everyone ended up a loser. But of course not everyone lost: O’Brien managed to exit the Irish telecoms industry at the height of the boom with €300m in his back pocket from the sale of Esat Telecom and is now at the helm of a successful mobile network operator in the Caribbean.

One of O’Brien’s biggest gripes was that incumbent telcos had emerged from the 3G debacle stronger than ever, with negative consequences for competition in the marketplace. Eircom was at pains to point out that it was not sitting back enjoying its impregnable market position but investing heavily in new services, particularly broadband. Eircom’s commercial director, David McRedmond, conceded that it had been slow to launch low-cost broadband but had since “moved on”. He described how the company had spent €1bn on its network over the last five years and a further €125m rolling out broadband. The result was, he said, a dramatic increase in the number of broadband subscribers, who were being added at a rate of 1,000 a week. “We will have connected 30,000 customers to broadband by the end of the year and are confident of having 100,000 broadband customers by the end of 2004,” he said.

Dismissing the arguments of those who insist that our broadband prices are still too high, McRedmond insisted that the cost of broadband here is on a par with other European countries and is one of the lowest in Europe if the high cost of living is taken into account. “The time for talking down broadband in Ireland is over,” he said dramatically.

With the Commission for Communications Regulation (ComReg) about to embark on a process that will decide what Eircom can charge for local-loop unbundling – the process of opening up its exchanges for use by other operators – McRedmond took the opportunity to fire a warning shots in the regulator’s direction. Welcoming what he called “progressive regulation” McRedmond made it clear that he felt ComReg’s efforts did not fall into this category. He sniped at the organisation for taking a piecemeal approach to managing the market and at the Government itself for looking to duplicate infrastructure that already exists. He questioned the need for the Government-backed 19-town metropolitan area network and advised the Government to put its resources into providing DSL in urban areas that were proving uneconomical for telcos to service.

Vodafone Ireland was similarly testy on ComReg’s role. CEO Paul Donovan felt that excessive regulation was counter-productive and could make the industry more risk-averse than at present. He also criticised the proposed levy on telecoms to provide broadband in schools as a “very negative development”.

If the Minister thought he was going to get an easy ride pushing through his broadband agenda, he will have come away from the TIF conference with plenty of food for thought.

By Brian Skelly

Communications Minister Dermot Ahern, TD speaking at last week’s TIF conference in Dublin