Oireachtas report: Broadband market needs restructuring

24 Mar 2004

The broadband market in Ireland in its present structure is not competitive and the pure market-driven approach has failed to deliver universally available broadband at affordable prices, a long-awaited report out today from the Oireachtas Joint Committee on Communications has warned.

The report defines broadband as at least 512Kb per second and sets a target of 5Mb per second services to be widely available by 2006, upgraded to 10Mb per second by 2008.

The report declares the delivery of broadband services in Ireland to be a “market failure” that must be addressed in 2004 if Ireland is to catch up with other nations. “The problem, in a nutshell, is that Ireland is operating in a narrowband environment while Ireland’s business trading partners, clients and customers are operating in broadband environments and expect everyone else to be doing likewise.

“There is no doubt that the pure market driven approach has failed to deliver universally available broadband at affordable prices for Ireland. The reality is that Ireland has now fallen behind our main competitor nations in the area of broadband and as a direct result Irish businesses have been placed at a competitive disadvantage. Irish consumers are paying more for broadband than consumers elsewhere and the Government itself may be limited in its ability to rollout new Government applications and services”, the report says.

The Joint Committee on Communications, which is chaired by Cork Fianna Fail TD Noel O’Flynn, is a cross-party committee that includes TDs and senators from most of the key political parties, including Fianna Fail, Fine Gael, Labour, the Green Party and Sinn Fein. The 200-page report is the result of six Oireachtas Committee meetings held last year that saw presentations from 47 community, industry and State groups including the Atlantic Technology Corridor, the Southern Health Board, ComReg, Microsoft, HP, IBEC and Cisco, to name but a few.

The Oireachtas Committe makes 12 key recommendations aimed at resolving the frustrating position that businesses, educators, Government and overseas investors have found themselves in. The first objective is to define broadband as a service that provides at least 512Kb per second connectivity and set as a target 5Mb per second by 2006 with widely available 10Mb per second connectivity in 2008 as a further target. To make this happen, the Department of Communications, Marine and Natural Resources must develop a National Broadband Infrastructure Plan in 2004.

Another key recommendation is the appointment of a single Minister of State with cross-departmental responsibility for the rollout of national broadband infrastructure and the development of e-government services. As well as this the Oireachtas report recommends closer co-operation between the Government, the telecoms industry and the end-users of broadband services.

The report calls for a mandate that all national, regional, county and city development plans incorporate the provision of broadband infrastructure with such plans and that all new developments, housing and office, are future-proofed for broadband.

On the issue of local loop unbundling, the report found that local loop unbundling (LLU) on its own may not deliver real competition in the broadband market. “In Ireland, as elsewhere, the reality following the process of LLU has been a disappointment and competition over the last mile has not increased significantly.” In its list of recommendations the Joint Committee discards the term “last mile” and calls for a focus on “bridging the first mile” as the first key policy issue.

The report acknowledges that with the failure of the market, LLU and poorly thought-out investment in projects that have failed to deliver,”the availability, price and choice of broadband services and service providers in Ireland is significantly more limited than in other countries.”

The report described as “unsustainable” the fact that market failure has resulted in the business and residential markets having access to a smaller range of broadband access platforms from an even smaller range of providers at prices that are higher than both our European neighbours and international competitors.

“The obvious conclusion the Joint Committee draws from this condition of market failure is that the market, as presently structured, is not competitive. In the absence of broadband, cable and mass-market wireless services, there is no true cross platform competition to shake up the incumbent. This ‘platform competition’ has been the stimulus required to drive the adoption of broadband in other countries and its absence in Ireland is marked both by its fact and by its effect”, the report said.

It continued: “It seems clear, however, that lowering wholesale rates rather than simple relying on the process of LLU is likely to continue to be the primary means for increasing broadband take-up in Ireland. The incumbent in the Irish market is now a private entity and is entitled to act as such. The question that remains is whether in the current environment, costly investments in broadband with a long pay-back timeframe are going to be favoured, especially if, as has been speculated, such investments have a negative impact on existing revenues from ISDN and leased line businesses.

“On the flip-side, the Joint Committee believes that no telecoms company, especially an incumbent, can afford to be in the market in 2004 with an insubstantial broadband business. This would seem to be strongly reflected in the moves by Eircom in late 2003 to significantly increase the number of towns where DSL would be available and recent initiatives to reduce the wholesale cost of broadband and aggressively promote broadband adoption”, the Joint Committee said.

In its conclusions, the Joint Committee warned that unless prices decrease, further availability of broadband is only going to appeal to a few and its cost will only serve to generate or reinforce a digital divide. Those left on the far side of this divide will miss out on the potential to improve their quality of life via teleworking as well as educational, health, community and entertainment services enjoyed by consumers worldwide.

“It is not just citizens and businesses that are suffering in this fashion. Government is also suffering from the absence of a pervasive high-speed broadband network. Government is suffering directly in that as a large-scale user of broadband there are numerous areas where broadband cannot be accessed or can only be accessed via expensive leased lines. Equally it is suffering indirectly because existing services, which could be more efficiently provided in a broadband environment, are being hamstrung and new services that can only be provided in a broadband environment cannot be introduced”, the report said.

By John Kennedy