Giving small firms what they need

26 Oct 2002

Access to communications technology is now accepted as one of the cornerstones of success for any business, but are Irish SMEs getting access to the telecommunications services they really need or are they being sold products that the telecoms providers want to offload irrespective of their usefulness?

According to Karen Hynes, manager of e-business services at the Chambers of Commerce of Ireland (CCI), the needs of small businesses are becoming more sophisticated and advanced. She says this is evidenced by the growing number of businesses using ISDN and the more widespread use of the internet as a standard business channel.

Jim Curran, head of research at the Irish Small and Medium Enterprises Association (ISME) feels that those needs aren’t fully understood.

“What we established is that those promoting information and communications technology haven’t a clue as to what SMEs want,” he says.

He cites the use of the world wide web as one example, pointing out that while it was sold to many small businesses as a sales platform, many owner managers are using it more as a marketing/research tool. He rejects, however, the notion that Irish SMEs are laggards when it comes to adopting new technologies, a view that is shared widely.

Pat Delaney, head of the Small Firms Association, for instance, describes Irish SMEs as very pro-active, being only reactive in that they tend to wait for industry to invent new products. “But if you look at the way most businesses develop, they are driven by customers,” he says. “Bigger businesses will impose new concepts on smaller business such as paperless invoicing, centralised distribution and so on, all of which are technology driven. Small companies are not laggards. They are in fact more innovative than big companies because flexibility is the key to success in small business.”

Nuala Buttner of Eircom is also dismissive of the laggards label, although she feels that it might have been justified in the past. “Perhaps, historically the take up of some new technology was slower than in some other countries,” she says. “But there is always a tendency to compare with Germany, UK or France where the business communities are so much larger and more geographically dispersed, meaning that the take up of some communications solutions to allow for more flexible working was more necessary. The demand in Ireland for communications solutions has certainly sped up over the last 12 months.”

According to Buttner, Irish telecoms companies, especially Eircom, are able to meet the demands of the sector. “Eircom is certainly up to speed,” she adds. “We offer a myriad of communications solutions to all customers, whether residential, SME or corporate. But there is no room for complacency and we in Eircom are constantly looking at new ways in which communications solutions can help SMEs run their businesses better.”

Not everyone, however, is so complimentary towards Eircom. Jim Curran is critical about what he sees as the lack of competition in the telecoms sector. “Competition has helped reduce the costs of making telephone calls but there is still room for further improvement,” he says. “I know from talking to [ISME] members that costs are still prohibitive and there is still a need for more serious competition. For instance, getting an ISDN line installed is not as bad as it was, but international comparisons are quite different. If you are trying to promote a first world country, then you have to have a first world telecoms service.”

The one topic that is almost guaranteed to generate criticism of Eircom, however, is flat-rate or unmetered access to the internet.

A few years ago, Ireland On-Line (IOL), now part of Esat BT, launched the IOL No Limits service that gave subscribers unlimited access to the internet during off-peak hours and at weekends for a fixed monthly payment. Unfortunately, it proved uneconomic and had to be withdrawn. In response to the withdrawal a group calling itself Ireland Offline was formed to lobby for its reinstatement.

This month both UTV Internet and Esat BT have announced new initiatives. According to David Long, interim chairman of Ireland Offline, unmetered access is about more than dissatisfied web surfers. The fear of running up massive telephone bills is deterring businesses from exploiting the full potential of the internet and it is this issue, rather than speed, that is to the forefront.

ISDN, he pointed out, is fairly speedy when compared to a dial-up connection but not by much unless you use both channels, in which case you have to pay for two phone calls.

Eircom does offer a flat-rate service but only as part of its i-Stream ADSL (asymmetric digital subscriber line) product. Prices start at €89 per month for a single user and go up to €169 per month for unlimited users on a network. Even then, only the top range package is completely unmetered with users of the other packages charged per megabyte if they exceed a monthly allowance.

According to Karen Hynes, this has left a gap in the market for the likes of UTV Internet. “We welcomed i-Stream when it was introduced,” she says. “However, the rollout is limited and there will still be limitations for businesses that are not located near an exchange. So businesses still need alternative packages that use existing telephone lines. These would stimulate the need for broadband products when they become available.”

Una McGirr, director of communications at Esat BT, supports this thesis. “Internet penetration in Ireland is now stagnant at around 35-38pc, whereas our counterparts in northern Europe are seeing ever increasing rates of 70-80pc,” she says.

“This in itself speaks volumes. Cost is a huge issue. Internet users simply won’t stay online and linger as long as the meter is ticking away but flat-rate access addresses these issues. Flat-rate access is good for everyone. Consumers get an internet service with a flat-rate cost, which in turn removes the traditional fear of staying online and racking up phone charges.

“Companies doing business or selling services over the internet, like 24-hour banking, or online shopping, stand a far better chance of getting their customers to use the web if the cost of that transaction is capped,” McGirr continues. “Hardware and software companies will find their software and hardware products will be more in demand by companies such as Esat BT and all the time consumers ask for faster speeds that can better support their internet usage. This is the virtuous circle that will stimulate demand for broadband, which for the consumer market is nothing other than high-speed internet services.”

As UTV Internet can testify, getting flat-rate access isn’t easy. At the moment Eircom holds all the cards and the company is not inclined to give up a lucrative revenue stream. While it might be fashionable to bash the incumbent operator, the company does have to manage its own bookkeeping.

“It makes no sense to say that Eircom should make investment in infrastructure without a return on its investment,” says Pat Delaney in its defence. “The people in the industry are clear: this isn’t a social issue. If the Government is serious about making Ireland an electronic hub, it will have to pay. No one else will. We don’t have the economies of scale they would have in the UK and most of our population lives on the east coast and most of our industry is concentrated in five urban areas.”

“Our entire population is about the same as that of a medium-sized European city,” says Prendergast of the IIA. “Scale is a particular problem. Our market is small and operators are not interested. And because we are a sovereign state, we have tricky issues of deregulation.”

He points out that while there are over six million digital subscriber lines in place in Europe, there are less than 1,000 here in Ireland. In competitive terms, he says this leaves us with a real liability particularly in the SME sector.

“Multinationals will complain about the cost, but they have deep pockets and they will have budgeted for incumbent infrastructure as they move into Ireland,” he explains. “But for the SME sector, which is a huge proportion of business — 98pc of companies have less than 50 employees and 90pc have fewer than ten — it’s a real problem. Because SMEs are indigenous, they can’t just up and go to, say, Bulgaria. They need to be serviced and they need to be in the forefront of the Government’s mind when it comes to strategy.”

Prendergast compares the rollout of telecommunications infrastructure to an earlier national achievement. “If you look at electrification, the government pushed out electricity. It recognised the need for electrification for the sake of competitiveness,” he says.

The news is not all bad, however. According to Buttner, Eircom continues to monitor market conditions and now there are two new flat rate initiatives under way.