Going flat out for ISP market share

20 May 2003

Scott Taunton believes that the Republic’s internet access market is ripe for development. As managing director of UTV Internet, which holds third spot in the Irish ISP market behind Eircom.net and Esat BT (Ocean Free and IOL), Taunton would be expected to say that but his claim is supported by compelling reasoning.

Belfast-based UTV Internet has grown rapidly since it entered the Southern Irish market two years ago. The Republic now accounts for 40pc of its customers and 55pc of revenue. Last September it launched the country’s first off-peak flat-rate internet access product – between 6pm and 8am users could surf the Net for Eur29.99 per month.

Now that ComReg has negotiated a pricing structure that would support a competitive market for flat-rate internet access (FRIACO) and set 25 June as the launch date for such services, UTV Internet is preparing to launch its first 24×7 flat rate internet service on that date at a price less than Eur30 a month, according to Taunton.

Taunton firmly believes FRIACO will be the catalyst to spur the growth of internet usage. “I believe that flat-rate internet services are absolutely critical in demonstrating to consumers the benefit of an internet connection that they can use when they want to do use it without the penalty of a pay as you go service. I think e-commerce will flourish as a result and what we’ll see on the back of flat-rate access is much more substantial growth of broadband services.”

He adds: “Once people are paying say €30 a month for their flat-rate internet service, if they could get broadband for another 10 or 15 euro a month, so long as they felt they would get benefit from it, then they’ll take that product up.”

UTV Internet is developing its own DSL product for launch in the Republic, he says, although there are still some regulatory issues to be worked out with regard to wholesale pricing of capacity from Eircom. The firm has already launched a DSL service in the North – Clicksilver – which Taunton describes as “very successful for us”.

A former civil servant who worked as a computer programmer and IT trainer in his native Australia, Taunton wound up in Northern Ireland while on a two-year travelling stint. Spotting a good business opportunity he and some friends set up one of the first ISPs in Northern Ireland in 1995 – DNA Internet – which was subsequently acquired the UTV group in 2000. As well as heading up its internet operation, Taunton is also the business development director for the UTV group which also covers TV and radio stations.

UTV Internet runs hosting facilities in Coolock, Dublin and Belfast and shifts capacity between the two as required to meet traffic demands. This creates what service providers call ‘resilience’ in that it reduces the chances of service glitches or black-outs. “These days the internet is a key part of people’s communications [armoury] and they can’t afford to be without it either on the residential or business side,” notes Taunton.

Working in the ISP market on both sides of the border, he sees striking differences between the two locations. “In the South, there has always been an association in people’s mind that in order to be an ISP you had to be a telecoms provider, which is because Eircom and Esat have always controlled the internet services market.

“In the UK, the companies that started internet access services were companies like Demon, Easynet and later Freeserve and AOL. Because they’re not telecoms companies they have been able to put more pressure on the telcos to allow more innovative products to be available wholesale for example. I think that’s a large part of the reason why there were these flat-rate and broadband services available in the UK sooner that we’ve had them here.”

Taunton believes that large telcos in any marketplace will want to protect their voice revenues and will see innovative new internet services, such as flat rate products, as potentially cannibalising this core business. ISPs that are not part of a larger telcoms group do not have to grapple with any such conflicts and thus are free, he argues, to focus on launching products that customers want.

The other distinctive characteristic of the Irish market is the small number of ISPs in the market. Taunton contrasts this with the UK where there are literally hundreds of ISPs touting for business. The concentration of business in the hands of just two operators has a serious impact on the variety of services and pricing in the Irish marketplace but it also makes it an attractive market to new players.

“I’d be very surprised if you don’t see some new entrants to the marketplace,” says Taunton. “I’ve heard AOL and MSN, to name just two, mentioned as possible new players in the Irish market and I think that’s a great thing for everybody. The more people that we have in the market drawing attention to the fact that we need to drive innovation the better.”